Why advanced sugarcane ethanol is a sweet deal for Brazil
Brazilian sugar mills have been facing difficult times: Sugar prices are low; ethanol prices are low; and productions costs have increased. Yet, there are shy signs of changes on the horizon. The return of the CIDE tax and increase in gasoline and, consequently, ethanol prices are good signs for a sweetening industry. Though the industry is in a complicated situation, we have reasons to remain positive.
The U.S. produced 58% of the world’s ethanol in 2014, and even though production there is focused on corn ethanol, sugarcane ethanol in Brazil is poised to make significant gains. In August 2015, the Brazilian Sugarcane Industry Association (UNICA) announced that sugarcane production jumped 37.35% during the second half of July, compared to last year. In light of the CIDE tax returning to the country, the industry itself is prioritizing ethanol production, as this increase in processing lead to a 37.07% increase in ethanol production over the same period last year.
Fast forward to 2015, when 68% of the Brazilian fleet of light commercial vehicles are flex fuel vehicles, and we start to see where all of this ethanol will go. Hydrous ethanol sales were up 50% when compared to 2014, reaching 1.61 billion liters in July, up from 1.09 billion liters last year (admittedly due largely to the gasoline prices). July sales of hydrous ethanol were just under the record volume set in July 2009. In fact, UNICA predicts that by 2020, flex fuel vehicles will make up 86% of Brazil’s fleet of light commercial vehicles.
On a brighter and broader scale, data from the Renewable Fuels Association shows that Brazil produced 25% of the world’s ethanol in 2014. Between 2012 and 2014, more than 1 billion gallons of sugarcane ethanol flowed from Brazil to the U.S. to help fulfill the Renewable Fuels Standard (RFS).
Compared to gasoline, sugarcane ethanol has been shown to reduce emissions by 61%-91%, as opposed to the 0% to 38% reduction of corn ethanol. Despite making up only 2% of all renewable fuel consumed by Americans in 2014, sugarcane ethanol provided nearly 15% of U.S. advanced biofuel supply.
In an Ethanol Producer Magazine article, Leticia Phillips, North America representative for UNICA, wrote, “Brazil and the U.S. have a responsibility to collaboratively build a global biofuels market providing clean, affordable, and sustainable solutions to the planet’s growing energy needs.”
The environmental implications are especially important, given December’s climate change negotiations in Paris. The World Energy Council reports fossil fuels currently represent 63% of all global emissions, with transportation fuel generating 28% of total U.S. emissions and 17% of total Brazilian emissions.
In Brazil alone, the combination of sugarcane ethanol and flex fuel vehicles has reduced Brazil’s emissions of carbon dioxide by more than 300 million tons since 2003 – that’s as good for the environment as planting and maintaining 2.1 billion trees for 20 years. When considered on a global scale, the implications of reducing transportation emissions by more than 60% through the use of sugarcane ethanol are incredible.
Plus, Brazil stands to gain economically from focusing on sugarcane ethanol production. As demand for ethanol increases domestically and around the world, ethanol production offers a way to keep the sugarcane industry strong. Sugarcane.org, a joint effort between UNICA and the Brazilian Trade and Investment Promotion Agency, reports that in 2012, the sugarcane sector contributed $43.8 billion to Brazil’s gross domestic product – equivalent to almost 2% of the entire Brazilian economy. The industry employs 1.09 million workers, according to 2011 data from the Ministry of Labor and Employment, and salaries for those workers are among the highest in Brazil’s agricultural sector.
Given the many layers of increased domestic and international demand, climate change and economic gains, it’s easy to understand the strategic role of Brazil’s sugarcane ethanol industry and its resiliency is admirable. This idea is exemplified by Brazil including ethanol in the country’s Intended Nationally Determined Contribution (INDC). The country aims to “increase the share of sustainable biofuels in the Brazilian energy mix to approximately 18% by 2030, by expanding biofuel consumption, increasing ethanol supply, including by increasing the share of advanced biofuels (second generation), and increasing the share of biodiesel in the diesel mix.”
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- Why advanced sugarcane ethanol is a sweet deal for Brazil - November 11, 2015