BIOMASS HUB

Professor Patricia Guardabassi of CENBIO recently spoke at the Energy Biosciences Institute (EBI) in Berkeley against the backdrop of cries and demonstrations in opposition to US extension of the 54-cent ethanol tariff.

Here, Biomass Intel looks at the development of Brazil’s ethanol market apropos of economy, intra-national competition, harvesting, protection, and replication.  The analysis is based upon research conducted by Guardabassi and colleague Jose Goldemberg, EBI, the U.S. Environmental Protection Agency (EPA), International Energy Agency (IEA), and the Cane Resource Network for Southern Africa (CARENSA).

Economy

Incentivizing the Market

The Brazilian National Alcohol Program (PROALCOOL) for ethanol production was established in 1974, using public sector subsidies and tax incentives to stimulate feedstock production, market investment, and automotive ingenuity. As a result, sugarcane production has increased five-fold since the early 1980s, whereas ethanol production has increased seven-fold. Subsidies were gradually removed beginning in the 1990s, leading to an arguably free market in 2002. In the transition to free market, less than $5 billion of public investment yielded approximately $52 billion in avoided cost for oil imports.

Production

There are 427 current sugar and ethanol facilities in Brazil, constituting 2% of the GDP. During 2008-09, 27.7 billion litres of ethanol was produced, 4.9 billion of which was exported. A drop in 2009-10 production resulted in a 30% export reduction. Primary destinations for export this decade were India (23.1%), US (20.2%), South Korea (10.2%), Japan (9.2%), Sweden (8%), Jamaica (6.3%), The Netherlands (6.2%), Mexico (3.5%) and Cost Rica (3.2%).

Cane-based ethanol production is primarily first-generation: the stalks are crushed to extract the juice and the remaining bagasse is burned to originate heat or electricity needed to run the mill and export the electricity surplus. Second-generation technology (i.e., enzymatic hydrolysis of cellulose) theoretically yields a mere 8% enhanced GHG reduction compared to sugarcane ethanol; nevertheless, there is significant global promise for ethanol production independent of current crop limitations in fermentation. Still, Brazil remains the lowest cost producer of sugar; no other country could produce ethanol from cane below Brazilian levels with current technology (note: current cost production comparisons favor first-generation technology by a 1:6 ratio).

Intra-national Competition

The Center-South region is responsible for 85% of the country’s production of sugar. This region includes the state of Sao Paulo, which is responsible for 60% of the country’s production, has the highest sugarcane yields and hosts the most efficient industries. Among retailers, significant regional price differentiation exists. Center-South producing states offer greatly reduced ethanol-based fuel prices when compared to gasoline, thus offsetting the 25 to 30% lower fuel economy of ethanol. Consumers in Northern states can pay 50% more for ethanol fuels, though these fuels remain attractive options given heavy federal and state taxation of gasoline. The comparatively burdensome taxation of gasoline within the North is a major reason why critics contend that Brazil continues to subsidize ethanol production at pre-2002 levels.

Harvesting

Increased mechanization and the phase-out of cane field burning has further increased the energy balance of cane ethanol, with a current net energy return of 9 to 1. Energy balance is a measurement of the energy output in a liter of ethanol over the fossil fuel energy needed to produce it. By comparison, the energy balance remains 2:1 for sugar beet or wheat, and a mere 1.4 for corn. Productivity efforts have convinced the California Air Resources Board (CARB) that 90% holistic GHG reductions by sugarcane ethanol meet its Low Carbon Fuel Standard.

Protection

Complex environmental protection levels exist at both the federal and state levels.  Developmental zoning layers effectively indicate that Center-South degraded pastureland is best suited for sugarcane production. As pastureland is converted, cattle density has increased and looks to double upon ranching land, giving cause for concern; concurrently, forest land has remained constant. In Sao Paulo, 25 million hectares of degraded pastureland remain available for conversion; approximately 64 million hectares exist at the federal level. In 3 million acres, Brazil currently produces enough cane to supply 50% of national gas consumption. By comparison, the US modestly seeks to displace 30% of current gasoline consumption by 2030 on a sustainable basis with only modest changes in land use (note: the US currently uses 3x the land area to produce roughly equivalent amounts of ethanol).

Replication

Considering the recent 30% reduction in Brazilian ethanol exports, it is imperative to implement the Brazilian model in other tropical and sub-tropical climates. The potential for biomass energy is very high in developing countries, especially in the sub-Saharan African region.

More analysis of Brazil’s first-generation ethanol production (Goldemberg’s report).

For analysis of sustainable production of second-generation biofuels in developing countries (IEA report, PDF).

For an excellent case study of bioenergy for sustainable development in Brazil (CARENSA global report, PDF).