Energy Economics Group
THE PERFORMANCE OF BRAZILIAN BIOFUELS: AN ECONOMIC, ENVIRONMENTAL AND SOCIAL ANALYSIS
Edmar F. de ALMEIDA
Institute of Economics - IEFederal University of Rio de Janeiro – UFRJ
PARIS, JUNE 2007
RESEARCH ROUND TABLEBIOFUELS: LINKING SUPPORT TO PERFORMANCE
Energy Economics Group
OUTLINE OF THE PRESENTATIONEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter.
BiodieselEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter.
Biodiesel PerformanceEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
BRAZILIAN ETHANOL TIMELINE
1975 1980 1990 2003
Program begins:Increase of the blending to 20%
Blending +Dedicated cars (100% Hydrated ethanol use)
Blending – up to 25% - End of government support to dedicated cars
Blending + FFV’s
Energy Economics Group
ETHANOL CURRENT STATUSEthanol Production: 17.7 billion Liters in 2006
Sugarcane 6.5 millions hectares and 450 million tones half of sugarcane is converted to ethanol. 370 sugar and ethanol mills
17% of all vehicle fuel supply in Brazil
Ethanol rush since 2005! Oil price increaseFFVs in BrazilDevelopment of the international market
Energy Economics Group
ETHANOL: EVOLUTION OF PRODUCTION - 1
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Mill
ions
of l
iters
17,300
Energy Economics Group
ETHANOL: EVOLUTION OF PRODUCTION - 2
0
2000
4000
6000
8000
10000
12000
90/91
91/92
92/93
93/94
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
04/05
05/06
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
hydrous anydrous ethanol Total
total production'hyd
rous
/an
ydro
us p
rodu
ctio
n
Energy Economics Group
LIGHT VEHICLE SALES BY TYPE
17%
0%
78%
0%10%20%30%40%50%60%70%80%90%
100%
2003 2004 2005 2006
Gasolina
FFV
Alcool
Total Light Car's sales 2003 - 2006
Energy Economics Group
ETHANOL EXPORTS (million liters)
Main ImportersUSA = 52%CBI = 14%Netherlands = 10%Sweden = 6%Japan = 7%South Korea = 3%Others = 9%
3,427
-
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
2001 2002 2003 2004 2005 2006
Energy Economics Group
ETHANOL COMPETITIVENES AS COMPARED TO GASOLINE - 1
Until 1997: ethanol price was fixed at 60% of the gasoline price
2002 – Total price liberalizationRelative price varies according to market situationEthanol taxes and prices vary in different state
Ethanol pump prices have been competitive compared to gasoline price (less than 70%)
This competitiveness is explained by differences in taxation
Energy Economics Group
ETHANOL COMPETITIVENES AS COMPARED TO GASOLINE - 2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Jul-0
1Oct-
01Ja
n-02
Apr-02
Jul-0
2Oct-
02Ja
n-03
Apr-03
Jul-0
3Oct-
03Ja
n-04
Apr-04
Jul-0
4Oct-
04Ja
n-05
Apr-05
Jul-0
5Oct-
05Ja
n-06
Apr-06
Jul-0
6Oct-
06Ja
n-07
US$
/l
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
%
ethanol (US$/l) Gasoline (US$/l) ethanol/gasline relative price
Energy Economics Group
ETHANOL COMPETITIVENES AS COMPARED TO GASOLINE - 3
Mai-03
Jun-02April-04
Apr-06
Oct-02
Jun-05Mar-03
Dec-06Dec-05
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30gasoline prices US$/l
etha
nol p
rice
US$
/l
Below the line, ethanol is a cheaper source of motor fuell
Above the line, gasoline is a cheaper source of motor fuel
Energy Economics Group
EVOLUTION OF ETHANOL PRICES IN DIFFERENT REGIONS/STATES
0
0,2
0,4
0,6
0,8
1
1,2
jul/01
set/0
1no
v/01
jan/02
mar/02
mai/02
jul/02
set/0
2no
v/02
jan/03
mar/03
mai/03
jul/03
set/0
3no
v/03
jan/04
mar/04
mai/04
jul/04
set/0
4no
v/04
jan/05
mar/05
mai/05
jul/05
set/0
5no
v/05
jan/06
mar/06
mai/06
jul/06
set/0
6no
v/06
jan/07
US$
/l
Midwest Northeast North Southeast South São Paulo
Energy Economics Group
PRODUCTION COSTSMost of estimates of production cost does not consider sugarcane opportunity cost
US$ 0,23 /l ~US$ 0,29/ l
We estimated the production cost for new ethanol projects, including a fair remuneration for the capital, and sugarcane opportunity cost
Long run marginal cost: US$ 0,37 per liter
Current ethanol producer prices ~ US$ 0.40 per liter. ethanol prices are above marginal expansion cost
Brazilian competitiveness is sustained by the feedstock production cost
Energy Economics Group
ETHANOL PRODUCTION COSTS WITHOUT SUBSIDIES
0
10
20
30
40
50
60
Europe (
Wheat/B
eet)
Brazil (
Cane)
USA (Can
e)Austr
alia (
Cane)
Thailan
d (Can
e)China (
Cane)
Country (Feedstock)
Cos
ts (e
uroc
ents
per
lite
r)
Gross Production Costs Net Production Costs Feedstock Costs
HENNIGES, O. and ZEDDIES, J. (2006)
Energy Economics Group
EVOLUTION OF SUGARCANE PRODUCTION AND PRODUCTIVITY
0
50
100
150
200
250
300
350
400
450
500
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
mill
ions
of t
ons
0
10
20
30
40
50
60
70
80
tons
/ha
Sugarcane Production Productivity
Energy Economics Group
EVOLUTION OF ETHANOL PRICE
0
20
40
60
80
100
120
140
160
180
1978
1980
1982
1984
1986
1988
1990
1992
1994
1998
*20
00
2002
2004
2006
US$
/bar
rel
Price paid to producers
Energy Economics Group
PRODUCTION COSTS
US$ 0.37Total costs
US$ 0.13Capital costs
US$ 0.17Sugarcane Costs
US$ 0.07O&M Costs
US$ 36 millions Investment cost for sugarcane production
US$ 97 millions Investment cost in the mill
40 kWh/ton of sugarcane Surplus power produced
170,170,000 liters per yearEthanol production
85 liter per tonEthanol productivity
167Harvesting days
2,000,000 ton/ yearSugarcane consumption
71.5 t/haSugarcane productivity
Energy Economics Group
EVOLUTION OF SUGARCANE PRICE – US$/TON
0
5
10
15
20
25
30
Mai/20
01 Ago Nov FevMai/
2002 Ago Nov Fev
Mai/20
03 Ago Nov FevMai/
2004 Ago Nov Fev
Mai/20
05 Ago Nov FevMai/
2006 Ago Nov
Energy Economics Group
ELECTRICITY GENERATION USING BAGASSE AS FUEL IN BRAZIL
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
GW
h
Energy Economics Group
SUBSIDIES IN ETHANOL PRODUCTIONTax exemptions to ethanol:
Federal TaxesEthanol Total Federal Taxes = US$ 0,01/lGasoline Total Federal Taxes = US$ 0,26/l
State Tax:The difference in the VAT charged over gasoline and over ethanol in the different states. In São Paulo
VAT Ethanol = 12% compared to gasoline VAT = 25%
We estimated the amount of overall tax incentives to ethanol at US$ 977 million per year.
Energy Economics Group
EXPECTED PRODUCTIVITY GAINS
10,4008,2006,000Liters of ethanol per hectare
10910085Liters per ton of sugarcane
90.090.083.5Conversion efficiency (%)
17.315.914.5Pol (%) Sugarcane
968270Sugarcane
productivity (t/ha)
202520152005
Energy Economics Group
ETHANOL/GASOLINE PRICES EXCLUDING TAXES
30%
50%
70%
90%
110%
130%
150%
170%
190%
jan/02
mar/02
mai/02
jul/02
set/0
2no
v/02
jan/03
mar/03
mai/03
jul/03
set/0
3no
v/03
jan/04
mar/04
mai/04
jul/04
set/0
4no
v/04
jan/05
mar/05
mai/05
jul/05
set/0
5no
v/05
jan/06
mar/06
mai/06
jul/06
set/0
6no
v/06
jan/07
mar/07
%
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance;Social performance; Energy security performance; Brazil as a world-class ethanol exporter.
BiodieselEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
GHG EMISSIONS Sugarcane ethanol can reduce more than 80% of the GHG emissions, while ethanol generated from other feedstock can reach 50% in the best case.
Macedo et al. (2004) estimate that for each MJ of fossil fuel used in the process of growing collecting and processing sugar cane 8.3 to 10.2 MJ of ethanol are producedEthanol contribution to CO2 reduction: 12 millions tons
Concerns about indirect impacts on GHG emissions:About 75% of Brazilian emissions of CO2 are related to deforestation. Sugarcane expansion and its indirect deforestation impact is still inconclusive.
Energy Economics Group
GHG EMISSIONS – ETHANOL’S ENERGY BALANCE
Energy Economics Group
IMPACTS ON DEFORESTATIONDeforestation in Brazil
About 3 millions hectares per year (2000-2005)Cattle raising: 30 million hectares between 1990 and 2005Soybean: 3 million hectares Timber exploration
Direct impacts of sugarcane: Small since ethanol production area is far from amazon regionEthanol production needs distribution logistics
Indirect impact:Sugarcane is expanding to the Midwest replacing cattle breedingCattle breeding expands in forest zone Cattle breeding expansion is related to other factors: land availability and land costsResearch on ethanol X cattle breeding x deforestation are not conclusive so far30% of pasture are degraded sugarcane can recover these areas and result in positive GHG balance
Energy Economics Group
IMPACTS ON DEFORESTATION
ha % of total Amazon forest and protected areas 405 47% Farmland 275 31% - pasture 210 24% - agriculture 65 8% Cities, towns, lakes 20 2% Land available for agriculture 90 10% Land available for sugarcane 22 3% Other uses 60 7% total 851 100%
Energy Economics Group
EVOLUTION OF CROPLAND BY TYPE OF CROP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1988 2004
Other CropsOrangeCassavaCottonCoffeeWheatSugarcaneRiceBeanSoya Corn
Energy Economics Group
LOCAL IMPACTS: WATER MANAGEMENT:
Water consumption has been reduced from 5.6 m3/t cane in the 1990s to 1.83 m3/t in 2005 at São Paulo´s mills.
New technologies will allow a further reduction to less than 1 m3/t cane water collection and (close to) zero effluent release rates, through reuse of water. Cost of non treated water collected from major rivers = R$0.01 /m3.
total water cost would be US$ 4.5 millions per year. The water cost for a typical mill : US$ 40,000 per year. Tariff for polluted water discharges is R$0.07 and R$0.1 per kilo. It’s cheaper to treat the polluted water before discharge.
Energy Economics Group
IMPACTS OF BURNING BEFORE HARVESTING
Emission Grams per kg of dry straw
Kg/ton of sugarcane
Thousand tons per year
CH4 0.41 0.05 15
CO 25.48 3.19 917,280
Nox 1.4 0.18 50,400
SO2 0.62 0.08 22,320
Particulates 5.60 0.7 201,600
Particulates 10 5.4 0.69 194,400
Particulates 2,5 5 0.63 180,000
N2O 0.12 0.015 4,320
Legislation regarding Mechanization in São Paulo: - Flat areas, 100% by 2021. - Non-flat areas, 100% mechanization by 2031.
Energy Economics Group
ENVIRONMENTAL IMPACTS Environmental performance in Brazil is far from being a question of laws and business rules
Crucial question: Capacity of law enforcement Brazil has a very modern environmental regulatory frameworkGovernment has a weak enforcement capacityEnforcement capacity is asymmetry
Relatively strong for sectors organized and composed by large companiesWeak for small businesses (farmers, for instance)
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter.
Biodiesel PerformanceEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
SOCIAL IMPACTS - 1The social impacts are one of the main reasons behind government support to ethanol industry
Sugar and ethanol production represents about 3% of GDP
The ratio “jobs per energy unit” is estimated to be 100 times greater than in oil production
Jobs created:direct jobs 700 thousand indirect jobs 200 thousand
Low quality jobsis still in Brazil
Energy Economics Group
SOCIAL IMPACTS - 2Jobs quality:
Seasonal job employing migrant workers involve insalubrious activities (manual harvesting)Salaries depend on minimal productivity per day
Mechanization:Unemployment
But jobs tend to be of better qualityProduction expansion could partially
compensate unemployment related to mechanization
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter.
Biodiesel PerformanceEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
ENERGY SECURITYThe Pro-Alcohol: After 1980, ethanol production in Brazil was equivalent to 10% of all oil products consumed.
The annual value of the avoided imports fluctuated between US$ 500 million and one billion dollars in the 1980s and 1990s.
Today, macroeconomic restrictions related to oil imports are no so relevant.
In 2006, Brazil reached self-sufficiency in oil production. Biofuels are seeing as a secure path for guaranteeing long-term energy supply in a context of increasing environmental restrictions.
Energy Economics Group
VALUE OF THE AVOIDED IMPORTS OF OIL AND OIL PRODUCTSDUE TO ETHANOL CONSUMPTION
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Cur
rent
US$
mill
ions
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter
Biodiesel PerformanceEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
5) Brazil Future Exports
The role of Brazil in the world ethanol market will depend on:
the Brazilian ethanol production; the domestic ethanol demand; the development of an international ethanol market
Energy Economics Group
BRAZILIAN ETHANOL PRODUCTIONBrazil alone could produce 5% of all gasoline demand by2025
1.2 billion tons of sugarcane 104.5 billion liters of ethanol21.5 millions hectares5 million direct and indirect jobsEthanol export’s: US$ 31 billion
Current ethanol investment rush Capacity under construction or planned represents 20% of existing capacityAbout 25 new mills will come on stream in 2007 About 90 projects have been announced for the period of 2008-2014New international investment funds dedicated to ethanol
Energy Economics Group
PROJECTIONS OF ETHANOL PRODUCTION
-
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
mill
ions
lite
rs
Energy Economics Group
DOMESTIC ETHANOL DEMANDDomestic demand will depend basically on the following variables
FFV sales and fleet Ethanol prices in Brazil
We projected three scenarios for ethanol consumption: Scenario 1 ethanol prices in Brazil would be attractive (less than 70% of gasoline prices) Scenario 2 ethanol prices to be unattractive to FFVs and the all FFVs would run on gasoline Scenario 3 - part of the FFVs fleet will consume ethanol, despite the fact that ethanol prices in the international market tend to be higher than 70% (more likely)
Energy Economics Group
EVOLUTION OF THE COMPOSITION OF LIGHT VEHICLE FLEET IN BRAZIL
0% 2% 5%11% 16% 20% 24% 27% 31% 34% 37% 40% 43%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
FFV Ethanol dedicated CNG Gasoline
Energy Economics Group
PROJECTIONS OF ETHANOL CONSUMPTION
-
5.000
10.000
15.000
20.000
25.000
30.000
35.000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
mill
ions
lite
rs
Ethanol Maximum ConsumptionMinimum Ethanol ConsumptionMost probable scenario (SP fleet only)
Energy Economics Group
PROJECTIONS OF ETHANOL EXPORTS
-
5.000
10.000
15.000
20.000
25.000
30.000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
mill
ions
lite
rs
Maximum ExportsMinimum ExportsMost probable scenario
Energy Economics Group
DEVELOPMENT OF INTERNATIONAL ETHANOL MARKET
Obstacles :i) the high concentration of the export capacity in Brazil raises
security of supply issues; ii) trade barriers and subsidies to domestic production in Europe and the US; iii) doubts/questioning regarding the environmental impacts Brazilian ethanol.
A necessary condition: environmental certification process.
An important research effort is still to be done for subsidizing the market organization and the development of a certification process
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter
BiodieselEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
BRAZILIAN BIODIESEL2004, Brazilian government launched the National Program for Production and Use of Biodiesel - NPPUB.
In 2005, law 11.097 mandating a blend of 2% of biodieselin the mineral diesel for 2008 (B2) and 5% for 2013 (B5).
1 billion liters in 2008: 2.4 billion liters in 2013.
Main objectives: Fuel supply diversification Social development.
Energy Economics Group
ECONOMIC PERFORMANCE: SALES AND PRODUCTION
14 biodiesel plants in operation
Production capacity of 600,000 ton/year.
B2 diesel is offered by 2,000 gas stations
About 60 projects for new biodiesel plants have been announced.
Government and private agents expects to achieve the same technological and economic performance of ethanol production.
Energy Economics Group
ECONOMIC PERFORMANCE: FEEDSTOCKS
Lack of agronomic knowledge and experience
High oportunity cost of castor oil
Family Crop
Potential to increase production
Castorbeans
Large scale monoculture
Oil is a byproduct
Price volatility
Large availability Experience
Unused vegetal oil capacity
Soybeans
Main disadvantagesMain AdvantagesFeedstock
Energy Economics Group
ECONOMIC PERFORMANCE: FEEDSTOCKS
MAIN DISADVANTAGESMAIN ADVANTAGESFEEDSTOCK
Use in low-cost industrial food (soups)
Large availability
By-product from meat production
Tallow
No commercial use
Still in experimental phase
Low production cost
Suitable land in dry areas
Jatropha
Lack of agronomical research
Suitable lands in Amazon area
Largest oil productivity
Potential to increasing production
Palm Oil
Energy Economics Group
ECONOMIC CHARACTERISTICS OF MAIN SOURCE OF FEEDSTOCK FOR BIODIESEL IN
BRAZIL
Feedstock Current Availability
Level of agronomi
cal research
Potential
Social benefit
Oil content % of
dry weight
Biomass productivity (tons per
hec
Oil productivity (liters
per hec)
Brazilian production (1000 tons -
2005)
Soybean Assured High Low 20 2,230 440 51,182 Tallow Significant n. a. Low - - - 1,000 Palm Limited Low High 20 20,000 4,000 151 Jatropha Non existent Low High 30-40 n.a. n.a. 0 Castor Limited Low High 47 730 343 168 Cotton Significant High High 15 3,000 450 3,666 Sunflower Limited High Low 40 1,500 630 23
Energy Economics Group
EVOLUTION OF VEGETAL OIL PRICES
0
200
400
600
800
1000
1200
1400
jan/02
abr/0
2jul
/02ou
t/02
jan/03
abr/0
3jul
/03ou
t/03
jan/04
abr/0
4jul
/04ou
t/04
jan/05
abr/0
5jul
/05ou
t/05
jan/06
abr/0
6jul
/06ou
t/06
jan/07
Pric
e (U
S$/T
on )
sunflower
palm oil
soybean oil
canola oil
castor oil
Energy Economics GroupBiodiesel in Brazil, Horta Nogueira, 2005
Soybean harvesting in Mato Grosso Castor bean harvesting in theNortheast
IN SEARCH FOR A BIODIESEL ECONOMIC MODEL
Energy Economics Group
FEEDSTOCK DIVERSITY
Energy Economics Group
BIODIESEL TECHNOLOGY - 1Diversity in feedstock supply
Availability of ethanol
Uncertainty regarding biodiesel market and feedstock opportunity costs
Search for biodiesel plant flexibility in terms of feedstock useDiscontinuous productionSmall scale plants: average size of plants: 50 thousands tons/yearSearch for replacement of methanol by ethanol
Energy Economics Group
BIODIESEL TECHNOLOGY - 2
Another important technology: H-BioAnnounced by Petrobras, will be in place in 2008Production of diesel out of a mixture of mineral diesel and vegetal oil in Hydro treatment Units Use of installed refinery unit capacityReduction of Mineral diesel importsNo impact in exhaust emissions since diesel produced is equal tomineral diesel
Energy Economics Group
BIODIESEL PUBLIC AUCTIONS Objective: Organize market place and stimulate investments
Temporary incentive
Buyers: Petrobras
Sellers: biodiesel producers that fulfill social requirementsActual or future production
5 Auctions so far (February 2007)885 million liters Price paid to biodiesel producers: from US$ 0.83/litre and US$ 0.9/ liter. Mineral Diesel pump prices US$ 0.9/ litre
Energy Economics Group
EVOLUTION OF BIODIESEL PRICE IN THE ANP´SAUCTIONS
1,65
1,7
1,75
1,8
1,85
1,9
1,95
nov/0
5de
z/05
jan/06
fev/06
mar/06
abr/0
6mai/
06jun
/06
jul/06
ago/0
6se
t/06
out/0
6no
v/06
dez/0
6jan
/07fev
/07
R$/
liter Bid average price(R$/Liter)
Maximum reference price(R$/Liter)
Energy Economics Group
TOTAL INCENTIVES TO BIODIESEL Price paid in auctions
According to CEPEA, biodiesel production costs in Brazil vary from US$ 0.34 to US$ 0.85 (40,000 tons/year plant)
Different levels of federal tax exemptions – regional and social development
mineral diesel pays a total federal tax of approximately $0.10 par liter. 31% tax reduction to biodiesel produced from castor or palm oils and from agribusiness producers in North, Northeast or “Semi-arid” areas.Small farm producers in any country region with any oilseed are granted a 68% tax reduction. Small farmers that produce with castor/palm oils or are located in North, Northeast or “Semi-arid regions” are totally exempted from federal taxes.
Energy Economics Group
SUBSIDIES TO BIODIESEL PRODUCTION IN BRAZIL (US$ PER LITER)
0,54 0,54 0,54 0,54 0,54
0,10 0,10 0,10 0,10 0,10
0,26 0,240,19 0,18
0,24
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
1,00
1st Auction 2nd Auction 3rd auction 4th auction 5th auction
subsidyFederal Taxes (Cide + Pis/cofins)Average Diesel Producer's Price
0,91 0,89
0,84
0,89
0,83
Fiscal Exemption
Total Incentives to Biodiesel
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter
BiodieselEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
ENVIRONMENTAL PERFORMANCE
Energy Balance for Different type of Biodiesel Feedstock
3Sunflower
2-2.9Castor beans
5-6Jatropha
5 – 10Palm tree
1.5 – 3.2Soybean
Energy input/outputFeedstock
Source: Own Elaboration, base on the literature quoted above
Literature on other biodiesel environmental impacts requires further development
Energy Economics Group
ENVIRONMENTAL PERFORMANCEAccording to La Rovere (2006), each liter of mineral diesel in Brazil emits about 2.7 kg of CO2.
If we assume biodiesel contributint to 60% reduction in CO2 emissions, evoided emissions will be:
about 1.3 million tons of CO2 per year in 2008 (B2) about 3.9 million tons in 2011 (B5). as the share of other types of biodiesel feedstocks increases in the Brazilian production, further reduction in CO2 emissions can be obtained
Energy Economics Group
BIODIESEL IMPACTS ON DEFORESTATION
Biodiesel can have a direct impact on deforestationSoybean plantation in Amazon area is increasingPalm oil production
Indirect impact indirect association between deforestation and soybean production in Brazilsoybean producers prefer to use areas already deforested bycattle raising activity
Energy Economics Group
OUTLINEEthanol
Economic performance;Environmental performance; Social performance; Energy security performance; Brazil as a world-class ethanol exporter
BiodieselEconomic performance;Environmental performance; Brazil as a world-class biodiesel exporter
Energy Economics Group
OTHER ENVIRONMENTAL IMPACTS Local impacts of soybean plantation
Soil degradation Water pollution Decrease in biodiversity
Biodiesel has a positive impact on local emission Diesel consumption is the most important contributor to the poorair quality in Brazilian large citiesBiodiesel emissions reductions: Carbon Monoxide (CO) 50% Hydrocarbon (HC) 70%Sox emissions 100% NOx emissions increases by 10%.
Social avoided cost of B5 estimated at US$ 75 millions
Energy Economics Group
BRAZIL AS A WORLD-CLASS BIODIESEL EXPORTER
Investment requirement for creating an important biodiesel production capacity in Brazil is modest
important production of soybean. Significant available capacity for vegetal oil production Biodiesel plants costs are lower than ethanol plantsThe total investment in the 60 projects announced in Brazil was estimated in about US$ 800 millions
The mandatory biofuels standards in represent an important market potential for Brazil
Exports will depend on how production costs will evolve. Necessary to increase alternative feedstock production
Biodiesel specification is not yet on place for allowing the development of international market
Biodiesel environmental certification will be necessary
Energy Economics Group
BRAZILIAN BIODIESEL PRODUCTION – A SPECULATIVE SCENARIO
Area (million hectares)
Biodiesel Productivity (l
/ha)
Annual production
(million liters ) Castor beans 1.5 556 834 Palmtree 1.5 3,600 5,400 Jatropha 1.5 360 540 Sunflower 1.5 937 1,405 Soybean 4.4 662 2,913 Total 10.4 11,082