Ethanol - Can the Success of Brazil Be Replicated - Gold Em Berg 2010

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future science group 663ISSN 1759-726910.4155/BFS.10.45 © 2010 Future Science Ltd

Ethanol: can the success of Brazil be replicated?

Editorial

“...we seem to be on the road of converting biofuels into

a worldwide commodity.

”José Goldemberg†1 & Patricia Guardabassi1

Biofuels (2010) 1(5), 663–665

Brazil is the second largest producer of ethanol inthe world, with a production of 26.7 billion liters in2008/2009, using sugarcane as the raw agriculturalmaterial over an area of 5.05 million hectares [1]. Thecost of production, without any subsidies, has beenfalling steadily since 1980, and since 2004 has becomecompetitive with gasoline at international prices [2].Today, ethanol replaces one half of the gasoline that would otherwise be used in the country.

The use of ethanol as a replacement for gasoline hassignicant environmental advantages; even if used insmaller percentages, it eliminates the need for octaneenhancers such as methyl tert -butyl ether. In addition,it not only reduces emission of SO

2and particulates,

but also, over a life-cycle, emits considerably less carbondioxide than gasoline, considering the direct use of fossil

fuels in its preparation [3]. With the introduction of ‘ex-fuel’ motors, any blend of ethanol and gasolinecan be used in automobiles with Otto-cycle engines [4].

Even considering indirect effects such as the impactof land use changes involved in the growing of sugar-cane, ethanol from sugarcane in Brazil has a carbonfootprint at least 61% smaller than gasoline, as recog-nized recently by the US Environmental Protection Agency [101].

In contrast, ethanol from corn produced in the USA,the largest world producer with 34 billion liters in 2008,has a carbon footprint almost as big as gasoline and itsproduction requires substantial subsidies.

“...ethanol from sugarcane in Brazil has

a carbon footprint at least 61% smaller than

gasoline, as recognized recently by the

US Environmental Protection Agency.”

For this reason, the question is frequently asked, ‘why is the good example of Brazil not replicated and used inthe same scale in other countries?’

The reasons are well known; the main ones areas follows:

� The international trade of ethanol is small becausethere are few countries producing it;

� Most of the commercial transactions with ethanol are‘spot’ and long-term contracts are almost inexistent;

� Tariffs and trade-distorting measures abound. Thebest known is the tariff imposed by the USA on eth-anol imports from Brazil of US$ 0.54 per gallon, thepurpose of which is to protect local producers.

1University of São Paulo, Av. Prof. Luciano Gualberto, 1289, 05508-010 São Paulo, Brazil †Author for corresp ondence: Tel.: + 55 11 3091 5053; Fax: + 55 11 3091 5056; E-mail: [email protected]. br



Biofuels (2010) 1(5) future science group664

Editorial Goldemberg & Guardabassi

Similar tariffs exist in Europe where ethanol isproduced mainly from sugar beets and wheat;

� A number of countries in Africa that could produceethanol from sugarcane prefer to produce sugar andexport to Europe. Under the Everything But Arms

(EBA) agreement [102], they can sell their product atthe price of sugar produced in Europe, which is muchhigher than the cost of production in Africa;

� The proliferation of sustainability criteria, particularly in Europe [5].

Some of these criteria might, in reality, hide protec-tionist measures to favor local producers. The adop-tion of simple universal standards should of course beadopted to guarantee the quality of the fuel but othercriteria regarding the social and environmental impact

of ethanol production are controversial.

“Ethanol production from sugarcane is attractive

because the agricultural activity generates more jobs

than industrial activities.”

However, it is unlikely that these impediments willlast very long since a very large number of countries,and states inside countries (28 in the last count),adopted biofuels blending mandates (for ethanol andbiodiesel) ranging from 2 to 24%. In addition, the EUas a whole has adopted signicant biofuels mandatesfor 2020.

Total ethanol production in 2008 was 67.3 billionliters, of which 34 billion was in the USA, 26.7 bil-lion in Brazil, 2.3 billion in the EU and the rest fromanother ten countries [6]. Worldwide it represented7.1% of gasoline consumption in that year. If the man-dates adopted so far are fully implemented, ethanoldemand will reach 209.75 billion liters by 2022 dueto the US mandate, which includes, after 2015, a largeproduction of ethanol based on second-generationtechnologies. Ethanol will then represent 19.1% of the world’s gasoline consumption, which is estimated to be1100 billion liters in 2020.

If such technologies do not deliver what is mandated,the production of ethanol from sugarcane will have tobe increased in Brazil and other countries to meet thatdemand. The pressure to ease off trade barriers will thenbecome very strong.

On the basis of the present average productivity of eth-anol in Brazil of 6580 liters per hectare, the area needed tomeet the blending mandates with sugarcane ethanol willbe 35 million hectares. Furthermore, to replace all thegasoline currently used in the world, 150 million hect-ares would be necessary. However, if the productivity increases, smaller extensions of land would be needed.

The availability of land for such expansion is a con-troversial issue because of the possible inuence on foodproduction and deforestation [7]. In our view such con-cerns have been grossly exaggerated considering the rathermodest land requirements for the expected expansion of

ethanol production. In reality, the expansion in Brazil istaking place primarily on degraded pastures of which avast area is available in the country [8].

The world’s total arable area is approximately 1.5 bil-lion hectares [103]. Such expansion, which would require4% of the world’s arable area in the next 10 years or so,offers a guarantee of supply while second-generationtechnologies based on the use of cellulosic materialsreach an industrial scale.

An indication that this is a likely trend is given by the fact that global companies from a wide range of sectors are investing in the production of ethanol.

Examples include the investment of British Petroleum(BP) of approximately US$1 billion in Brazil, and Shellinvesting almost ten-times that amount in association with local enterprises. BP entered into a joint venture with a 50% share with Santaelisa, the second largestsugar ethanol group in Brazil and now part of DreyfusCommodities (25%) and Maeda (25%). BP’s nancialcontribution is approximately US$1 million.

Shell and Cosan – the largest Brazilian group in theethanol area – signed a memorandum of understandingto create a US$12 billion joint venture for the produc-tion of ethanol sugar and distribution of biofuels. Shell’sinitial investment is US$1.625 billion in 2 years.

There is also a growing interest in investments in Africa and the Caribbean, among the many sugar-pro-ducing countries from Africa and Latin America, suchas Colombia, Zimbabwe, Angola, Mozambique andothers. Ethanol production from sugarcane is attrac-tive because the agricultural activity generates more jobsthan industrial activities [9].

Thus, we seem to be on the road of converting bio-fuels into a worldwide commodity. As more countriesenter into the business of producing them and becomepotential exporters to the USA and Europe, competi-tion will begin to be felt and more enterprising compa-

nies will abandon the present strategy of ‘spot’ sales andsign contracts for long-term supply, which is one of thebasic characteristics of commodities.

Financial & competing interests disclosure

The authors have no relevant aliations or nancial involvement

with any organization or entity with a nancial intere st in or nan-

cial confict with the subject matter or materials discussed in the

manuscript. This includes employment, consultancies, honoraria,

stock ownership or options, expert t estimony, grants or patents

received or pending, or royalties. No writing assistance was utilized

in the production o this manuscript.



Ethanol: can the success of Brazil be replicated? Editorial

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� Websites

101 EPA Renewable Fuels: Regulations& Standards.

www.epa.gov/otaq/fuels/renewablefuels/

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Ethanol - Can the Success of Brazil Be Replicated - Gold Em Berg 2010