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Brazil’s Ethanol Experience & Accomplishments ‐‐ Towards the Geopolitics of Clean Energy Towards the Geopolitics of Clean Energy Dr. Plinio Nastari DATAGRO DATAGRO Governors Biofuels Coalition Meeting Governors Biofuels Coalition Meeting The National Press Club Washington, DC d Governors Biofuels Coalition, WDC February 2010 February 22 nd , 2010

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  • Brazil’s Ethanol Experience & Accomplishments ‐‐

    Towards the Geopolitics of Clean EnergyTowards the Geopolitics of Clean Energy Dr. Plinio Nastari

    DATAGRODATAGRO

    Governors Biofuels Coalition MeetingGovernors Biofuels Coalition MeetingThe National Press Club

    Washington, DC d

    Governors Biofuels Coalition, WDCFebruary 2010

    February 22nd, 2010

  • The History of Ethanol Use

    4

    The History of Ethanol Use Started in the US

    Henry Ford and hisHenry  Ford and his automobile using pure ethanol as fuel, in 1896,

    Governors Biofuels Coalition, WDCFebruary 2010

  • In Brazil, regular ethanol use as a blend component (E5) dates back to 1931;

    First tests using higher blends, up to E100, g g pwere made in 1925.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    • Blend levels raised to E12 (1976), E18 (1977), E23‐25 (1978), and since 2002 by Federal Law blend level is defined in the range E20‐25. 

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    • Blend levels raised to E12 (1976), E18 (1977), E23‐25 (1978), and since 2002 by Federal Law blend level is defined in the range E20‐25. 

    • Neat ethanol cars, capable of using hydrous ethanol (E100) are launched in Aug/1979.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    • Blend levels raised to E12 (1976), E18 (1977), E23‐25 (1978), and since 2002 by Federal Law blend level is defined in the range E20‐25. 

    • Neat ethanol cars, capable of using hydrous ethanol (E100) are launched in Aug/1979.

    • Brazil is the first country to completely ban tetra‐ethyl lead use asBrazil is the first country to completely ban tetra ethyl lead use as component in gasoline, due to the country‐wide use of anhydrous ethanol as a blend component, in 1983.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    • Blend levels raised to E12 (1976), E18 (1977), E23‐25 (1978), and since 2002 by Federal Law blend level is defined in the range E20‐25. 

    • Neat ethanol cars, capable of using hydrous ethanol (E100) are launched in Aug/1979.

    • Brazil is the first country to completely ban tetra‐ethyl lead use asBrazil is the first country to completely ban tetra ethyl lead use as component in gasoline, due to the country‐wide use of anhydrous ethanol as a blend component, in 1983.

    • Neat ethanol cars represent >88% of total car sales between 1983 88• Neat‐ethanol cars represent >88% of total car sales between 1983‐88. 

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • Ethanol is used as a blend component in gasoline starting 1931.• During IIWW, ethanol represents up to 43% of gasoline pool.• First oil crisis (1973) triggers creation of government plan to increase 

    ethanol use (Proalcool), in 1975.ethanol use (Proalcool), in 1975.

    • Blend levels raised to E12 (1976), E18 (1977), E23‐25 (1978), and since 2002 by Federal Law blend level is defined in the range E20‐25. 

    • Neat ethanol cars, capable of using hydrous ethanol (E100) are launched in Aug/1979.

    • Brazil is the first country to completely ban tetra‐ethyl lead use asBrazil is the first country to completely ban tetra ethyl lead use as component in gasoline, due to the country‐wide use of anhydrous ethanol as a blend component, in 1983.

    • Neat ethanol cars represent >88% of total car sales bet een 1983 88• Neat‐ethanol cars represent >88% of total car sales between 1983‐88. • Hydrous ethanol (E100) is distributed in all fueling stations in a 

    continental‐size country. 

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • In 1988, 56.9% of all gasoline is substituted by ethanol! In 2009, this proportion is 50 11% in gasoline equivalent and continues to rise againproportion is 50.11%, in gasoline equivalent, and continues to rise again.

    Governors Biofuels Coalition, WDCFebruary 2010

  • % OF ETHANOL IN OTTO CYCLE FUEL DEMAND% OF ETHANOL IN OTTO CYCLE FUEL DEMAND(in % of gasoline equivalent)

    52.60%

    60.00%

    45.20%

    37.80%

    23.00%

    30.40%

    Survey & Analysis: DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil

    • In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction of vehicle emissionsEthanol use enables drastic reduction of vehicle emissions.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Carbon Monoxide Historic Emissions

    54 CarbonMonoxide Historic Emissions/k

    42

    48

    54 Carbon Monoxide Historic Emissions      Light Duty Vehicles

    g/km

    0 81

    24

    30

    36

    00,20,40,60,8

    12

    18

    24 2003 2004 2005 2006 2007 2008

    0

    6

    Gasoline Ethanol Flex-Gasol.C Flex-EthanolSurvey & Analysis: DATAGROBasic Data: CETESB

    Governors Biofuels Coalition, WDCFebruary 2010

    Basic Data: CETESB

  • Hydrocarbon Historic Emissionsy

    4.8 HydrocarbonHistoric Emissions

    3.6

    4

    4.4

    4.8 Hydrocarbon Historic Emissions      Light Duty Vehiclesg/km

    0 15

    0.2

    2.4

    2.8

    3.2

    0

    0.050.1

    0.15

    1.2

    1.6

    2 2003 2004 2005 2006 2007 2008

    0

    0.4

    0.8

    Gasoline Ethanol Flex-Gasol. C Flex-EthanolSurvey & Analysis: DATAGROBasic Data: CETESB

    Governors Biofuels Coalition, WDCFebruary 2010

    Basic Data: CETESB

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    • Fuel specification is developed for ethanol to be used as a sole fuel in fuel injected cars, in 1990.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    • Fuel specification is developed for ethanol to be used as a sole fuel in fuel injected cars, in 1990.

    • Flex cars, capable of using any % of E100 and E25 are launched in Mar/2003.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    • Fuel specification is developed for ethanol to be used as a sole fuel in fuel injected cars, in 1990.

    • Flex cars, capable of using any % of E100 and E25 are launched in Mar/2003.• In Jan/2008, consumption of ethanol overcomes (again) pure gasoline (A) in 

    volume termsvolume terms.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Gasoline A Vs. Ethanol Consumption - Brazil2.0 

    p

    1 6

    1.8 

    iters

    1.3 

    1.6 

    Billion L

    1.1 

    0.9 

    Gasoline A (pure gasoline) Ethanol (Hydrous + Unhydros)Survey & Analysis: DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

  • Total Fuels Consumption in Brazilp

    2008 2009 % changemillion gallons per year

    Fuels 2008 2009 % changeDiesel oil 11,825      11,702       ‐1.0%

    Biodiesel 297            413             39.1%Gasohol 6 651 6 712 0 9%

    Fuels

    Gasohol 6,651       6,712        0.9%Pure gasoline (A) 4,988         5,034         0.9%Anhydrous ethanol fuel 1,663         1,678         0.9%

    Hydrous ethanol fuel 3 511 4 351 23 9%Hydrous ethanol fuel 3,511       4,351        23.9%Total Ethanol fuel 5,174         6,029         16.5%LPG 3,238         3,200         ‐1.2%Fuel oil 1 366 1 322 3 2%Fuel oil 1,366       1,322        ‐3.2%Jet fuel 1,381         1,434         3.8%Aviation gasoline 16               16               1.6%Kerosene 6 4 33 3%Kerosene 6               4                 ‐33.3%Total liquid fuels 27,995      28,743       2.7%CNG 1,752         1,666         ‐4.9%S & h DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

    Survey & research: DATAGRO

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    • Fuel specification is developed for ethanol to be used as a sole fuel in fuel injected cars, in 1990.

    • Flex cars, capable of using any % of E100 and E25 are launched in Mar/2003.• In Jan/2008, consumption of ethanol overcomes again gasoline in volume 

    termsterms.

    • 2009: flex cars represent 88.2% of total vehicle sales, and >35% of existing fleet. It is expected that by 2020, >90% of fleet will be flex.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Flex‐Fuel VehiclesAllows use of any blends of hydrous ethanol (E100) and gasoline with anhydrous ethanol(E25).

    January 2010: sales of flex fuel cars accounted for 85.3% of total vehicle sales in thecountry.

    Total ac m sales of fle f el cars (2003 2009) 9 60 million ehiclesTotal acum sales of flex-fuel cars (2003-2009): 9.60 million vehicles.

    Consumers opt for E100 io E25 whenever price of E100 is

  • Vehicle Sales by Type of FuelJanuary 2003 to December 2009

    260,000

    280,000

    300,000January 2003 to December 2009

    200,000

    220,000

    240,000

    140,000

    160,000

    180,000

    60 000

    80,000

    100,000

    120,000

    0

    20,000

    40,000

    60,000

    0

    Jan/

    03

    Apr

    /03

    Jul/0

    3

    Oct

    /03

    Jan/

    04

    Apr

    /04

    Jul/0

    4

    Oct

    /04

    Jan/

    05

    Apr

    /05

    Jul/0

    5

    Oct

    /05

    Jan/

    06

    Apr

    /06

    Jul/0

    6

    Oct

    /06

    Jan/

    07

    Apr

    /07

    Jul/0

    7

    Oct

    /07

    Jan/

    08

    Apr

    /08

    Jul/0

    8

    Oct

    /08

    Jan/

    09

    Apr

    /09

    Jul/0

    9

    Oct

    /09

    Flex Fuel Ethanol GasoolSurvey & Analysis: DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

    Flex Fuel Ethanol GasoolSurvey & Analysis: DATAGRO

  • All major Auto‐makers produce j pFlex Cars in Brazil

    Governors Biofuels Coalition, WDCFebruary 2010

  • Landmarks of Ethanol Development in Brazil• In 1988, 56.9% of all gasoline is substituted by ethanol. In 2009, this 

    proportion is 50.11%, in gasoline equivalent, and continues to rise again.

    • Ethanol use enables drastic reduction in vehicle emissions.• Local automotive engineering is created based on ethanol engine 

    developmentdevelopment.

    • Fuel specification is developed for ethanol to be used as a sole fuel in fuel injected cars, in 1990.

    • Flex cars, capable of using any % of E100 and E25 are launched in Mar/2003.• 2009: flex cars represent 88.2% of total vehicle sales, and >35% of existing 

    fleet It is expected that by 2020 >90% of fleet will be flexfleet. It is expected that by 2020, >90% of fleet will be flex.

    • Regulation/deregulation phases:– 1931‐1989: period of strong government intervention (production quotas, sales quotas, 

    t k t l t t l t f i t ll d b th t)stock controls, state monopoly on exports of sugar, prices controlled by the government).

    – 1989‐1999: deregulation phase, from Federal Constitution of 1988.– 1999 onwards: minimal government intervention (intervention left is definition of blend 

    level in the range of 20 25%; import/export tariffs)

    Governors Biofuels Coalition, WDCFebruary 2010

    level in the range of 20‐25%; import/export tariffs). 

  • Ethanol Production in BrazilMillion Gallons

    Deregulation  periodStrong government intervention Minimal govt intervention

    7,000

    8,000g pg g g

    Launching ofFlex cars

    7,867

    5,000

    6,000

    Golden days of neat‐ethanol cars sales (79‐93)

    3,000

    4,000

    1,000

    2,000

    0

    Anhydrous HydrousSource: DATAGRO in million gallons

    Governors Biofuels Coalition, WDCFebruary 2010

    Source: DATAGRO, in million gallons.

  • THE SUGAR & ETHANOL INDUSTRIES ARE FULLY INTEGRATEDARE FULLY INTEGRATED. 

    THIS SYNERGY ENABLEDBRAZIL TO BECOME THE LEASTBRAZIL TO BECOME THE LEAST

    COST PRODUCER IN THE WORLD.COST PRODUCER IN THE WORLD. 

    Governors Biofuels Coalition, WDCFebruary 2010

  • SUPPLY OF TOTAL SUGARS IN BRAZIL

    80.00 

    60.00 

    70.00 

    Sugar Anhydrous Hydrous

    40.00 

    50.00 

    Tonn

    es

    20.00 

    30.00 

    Million T

    10.00 

    Source: DATAGRO, in million tonnes of total reducing sugars equivalent.

    Governors Biofuels Coalition, WDCFebruary 2010

    , g g q

  • IN BRAZIL, ETHANOL IS CURRENTLY 55.4% OF TOTAL SUGARS –

    BUT IT REACHED AS MUCH ASBUT IT REACHED AS MUCH AS 72.7%, IN 89/90!

    Governors Biofuels Coalition, WDCFebruary 2010

  • % OF CANE GOING TO ETHANOL

    80.0% 72.7%

    60.0%

    70.0%

    55.4%

    40.0%

    50.0%

    20.0%

    30.0%% cane to ethanol

    0.0%

    10.0%

    Source: Datagro

    Governors Biofuels Coalition, WDCFebruary 2010

  • BRAZIL BUILT UP NOT ONLYA FLEX FLEETA FLEX FLEET

    BUT ALSO (UNDER SOME LIMITS) A FLEX INDUSTRY

    Governors Biofuels Coalition, WDCFebruary 2010

  • Sugarcane Production MixBrazilBrazil

    60%

    57%In 10/11, each 1% change in mix represents900 thousand tons of sugar or 135 million gallons of anhydrous ethanol 

    51%

    54%

    48%

    45%

    00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11e

    Cane for Ethanol Cane for SugarSurvey & Analysis: DATAGRO

    This flexibility has brought the possibility for producers to arbitrate pricesin the sugar and ethanol markets

    Governors Biofuels Coalition, WDCFebruary 2010

    in the sugar and ethanol markets.

  • FLEXIBILITY HAS ENABLED PRODUCERSTO ARBITRATE MARKETS DEPENDING

    ON THE RELATIVE PRICES OFON THE RELATIVE PRICES OF SUGAR & ETHANOLSUGAR & ETHANOL

    Governors Biofuels Coalition, WDCFebruary 2010

  • DATAGRO Price Equivalenciesh i i /lb i l

    33.0Center South Region – in USD cents/lb FOB Santos sugar equivalent

    23.0

    28.0

    /lb

    18.0

    us$ c/

    13.0

    8.0

    Sugar Domectic Market Anhydrous Hydrous Sugar NY #11Source : DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

  • ETHANOL PRODUCTION CANEXPAND IN A SUSTAINED WAYEXPAND IN A SUSTAINED WAY.

    SUGAR CANE (FOR SUGAR & ETHANOL) OCCUPIES 7 2 MILLION HAOCCUPIES 7.2 MILLION HAOUT OF 65.0 MILLION HA OU O 65.0 OPOSSIBLE AFTER THE 

    AGROECOLOGICAL ZONING.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Agroecological Zonningfor Sugar Cane Growth in Brazilfor  Sugar Cane Growth in Brazil 

    A l i l Z i f S C G h i B il 2009

    Legend Suitability Current occupation Area (million ha)High Pasture 11,302,343                  

    Medium Pasture 22,863,866                  

    Agroecological Zonning for Sugar Cane Growth in Brazil ‐ 2009Areas Considered Suitable for Sugar Cane

    Low Pasture 3,041,122                  High Cattle 600,767                        

    Medium Cattle 2,126,395                    Low Cattle 483,326                        High Agriculture 7,360,310                    

    Medium Agriculture 16,496,736                  Low Agriculture 731,077                        

    Total Area in Brazil (H+M+L) 65,005,941                  Source: MAPA, MCT. MME, MPOG, MMA, Casa  Civi l ,

    Embrapa, Conab, IBGE, CPRM, INPE, UNICAMP, PNUD.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Legend Suitability Current occupation Area (million ha)

    Agroecological Zonning for Sugar Cane Growth in Brazil ‐ 2009Areas Considered Suitable for Sugar Cane

    Legend Suitability Current occupation Area (million ha)High Pasture 11,302,343                  

    Medium Pasture 22,863,866                  Low Pasture 3,041,122                  High Cattle 600,767                        

    Medium Cattle 2,126,395                   , ,Low Cattle 483,326                        High Agriculture 7,360,310                    

    M di A i lt 16 496 736Medium Agriculture 16,496,736                Low Agriculture 731,077                        

    Total Area in Brazil (H+M+L) 65,005,941                ( )Source: MAPA, MCT. MME, MPOG, MMA, Casa  Civi l ,

    Embrapa, Conab, IBGE, CPRM, INPE, UNICAMP, PNUD.

    Governors Biofuels Coalition, WDCFebruary 2010

  • LAND USE IN BRAZIL ‐ 2008 (MILLION HECTARES)

    Brazil's territory 851Brazil s territory 851Forests & strategic biomas (Amazon, Atlantic, pantanal) 350Cultivated Forests 5Preservation areas 55Cities, rivers, lakes, roads 20Other areas (depleted, improper for agriculture) 38

    C t i f i lt & li t kCurrent in use for agriculture & livestockAnnual crops 60.6

    Soybeans 24.2 Corn 21 2Corn 21.2

    Permanent crops 16.1 Sugar cane 7.2

    Pastureland 220.0 Expected to be released to agriculture 70-90

    Without any current use 86.3 Source: MAPA, Casa Civil, Datagro.

    Governors Biofuels Coalition, WDCFebruary 2010

  • CATTLE RANCHING IS BECOMINGCATTLE RANCHING IS BECOMINGINCREASINGLY EFFICIENT, ,

    THUS RELEASING LAND FOR AGRICULTURE.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Cattle Ranching Efficiencyg yState of Sao Paulo, Brazil

    1 4

    1.5

    The State of Sao Paulo accounts for66 5% of all sugar cane grown in Brazil

    1.3

    1.4

    ttle

    / HA

    66.5% of all sugar cane grown in Brazil

    1.2

    ads

    of c

    at

    1.1

    Hea

    Between 1985 & 2008, while the cattle herd in SP grew 10.4%, pastureland reduced by 2 05 million hectares

    1.0

    1985

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    reduced by 2.05 million hectares.

    Governors Biofuels Coalition, WDCFebruary 2010

    1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2

  • Cattle Ranching Efficiencyg yin Brazil

    1.00 In 2006, there were 172.3 million hectaresoccupied with pastureland, by 169.9 million

    0.80

    0.90

    e/H

    A

    p p yheads of cattle. 

    0.70

    ds o

    f cat

    tle

    0.60 Hea

    d

    0.50 1970 1975 1980 1985 1995 2006

    Governors Biofuels Coalition, WDCFebruary 2010

  • Fuel Distribution (2009)( )

    • 457 sugar cane processing plants/mills;• 198 fuel distributors;198 fuel distributors;• 37,627 fuel retailers.

    – All gasoline contains 20‐25% anhydrous ethanol –gasohol. 

    – Hydrous ethanol is sold in all of them.

    Governors Biofuels Coalition, WDCFebruary 2010

  • The Industry is Becoming Rapidly y g p yInternationalized

    28 0%

    25.3%

    24.0%

    26.0%

    28.0%

    Top 5 companies crush 21.6% of cane,Top 25 companies crush 50 1% of cane

    20.0%

    22.0%

    24.0% Top 25 companies crush 50.1% of cane,4 out of Top 5 companies are multinationals. 

    18.4%16.0%

    18.0%

    12 1% 12 4%12.0%

    14.0%

    12.1% 11.9% 12.4%10.0%

    06/07 07/08 08/09 09/10 10/11Source: DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

    Source: DATAGRO

  • Energy Companies and Agrindustrial gy p gGiants are the new investors

    Governors Biofuels Coalition, WDCFebruary 2010

  • WHY ARE THESE COMPANIESWHY ARE THESE COMPANIESINVESTING IN BRAZIL?

    Governors Biofuels Coalition, WDCFebruary 2010

  • Likely reasons for investment…y

    • Even though already cost competitive with gasoline without any subsidy, its cost is not yet optimized.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Energy Contained in 1,000 tons of Sugar Canee gy Co ta ed ,000 to s o Suga Ca e(in tons of oil equivalent)

    Sucrose Bagasse Tops and Leaves

    51.11

    55.05 56.43

    Only sucrose part is used

    Source: Nastari, Lisbon, 2000

    Only sucrose part is usedefficiently today. Bagasse is used inefficiently andleaves are wasted.

    Governors Biofuels Coalition, WDCFebruary 2010

    leaves are wasted.

  • Likely reasons for investment…y

    • Even though already cost competitive with gasoline without any subsidy, its cost is not yet optimized.

    • Brazil has a growing domestic market.• Good industrial base for supply of equipments.Good industrial base for supply of equipments.• Dynamic agriculture research capacity.• Minimal government intervention• Minimal government intervention.• Sugarcane ethanol has been proven to be efficient for GHG mitigation.

    Governors Biofuels Coalition, WDCFebruary 2010

  • SUGAR CANE ETHANOL AS 

    1. EPA ruling on Feb 3rd, 2010 (40 CFR Part 30):

    • Sugarcane ethanol met the 50% GHG reduction requirement for unspecified advanced biofuel: 61.2% savings over gasoline baselinesavings over gasoline baseline.

    • This means that sugarcane ethanol qualifies as advanced biofuel for purposes of RFS2, in spite of land use change impact calculations.

    • Advanced biofuels target is 21 bi gallons by 2022 (79 5 bi liters) including celulosic ethanol biomass(79.5 bi liters), including celulosic ethanol, biomass diesel, and other advanced biofuels (15.1 bi liters).

    2. CARB in California had also concluded in favor of sugarcane ethanol for its environmental qualities.

    Governors Biofuels Coalition, WDCFebruary 2010

  • HOWEVER, IN THE WORLD OF FUELS, ETHANOL IS STILL A DROP IN THEETHANOL IS STILL A DROP IN THE 

    BUCKET!

    Governors Biofuels Coalition, WDCFebruary 2010

  • HOWEVER, IN THE WORLD, ETHANOL IS STILL A DROP IN THE BUCKET (1)

    >> Brazil stands out as the country where the use of biomass ethanol>> Brazil stands out as the country where the use of biomass  ethanol represents a large share of energy consumption:

    ‐ 50.11% (in gasoline equivalent) of the total consumption of Otto‐cycle fuels  in 2009 (this % reached 56.9% in 1988).

    >> In the US, where ethanol production is larger in volume than in Brazil, ethanol represents ~7.8% of Otto‐cycle fuel demand (2009).

    >> In the world: biomass ethanol still represents  only‐ 5.4% of consumption of gasoline, and5.4% of consumption of gasoline, and‐ 1.3% of oil demand, which explains why it is considered an exotic fuel  to many.

    Governors Biofuels Coalition, WDCFebruary 2010

  • HOWEVER, IN THE WORLD, ETHANOL IS STILL A DROP IN THE BUCKET (2)

    >> But, world fuels demand is expected to grow 40% until 2020.

    >>Considering that E10 is technically feasible (World Fuels Chart) in world´s gasoline today, potential market taking into account only E10 is:

    • = 117 billion liters • = 202 million tons of sugar • = 123% of current world sugar demand. 123% of current world sugar demand.

    >>Where most of gasoline is consumed today:US t f 46% f ld´ d d f li 540 billi•US accounts for 46% of world´s demand for gasoline: 540 billion liters, or 9.2 million barrels/day, or 46% of world demand, of 20.1 million b/d.

    Governors Biofuels Coalition, WDCFebruary 2010

  • THE EXPLOSIVE EXPANSION IN THE US

    20092009 

    Production of ~42.0 billion liters, from 6.5 billion liters in 2000.

    B 2013 ll li d i h US h ld b E10By 2013, all gasoline used in the US should be E10.

    Old target (2012): 28.4 billion liters.

    Governors Biofuels Coalition, WDCFebruary 2010

  • New Targets for Renewables in the USgPres. Bush (State of Union 2006)

    C ll d f 20% li b tit ti b 2017• Called for 20% gasoline substitution by 2017 =132 billion liters of renewables (AFS).

    US Congress approved RFS2 (HR6)US Congress approved RFS2 (HR6) defining target of 136 billion liters by 2022.

    Governors Biofuels Coalition, WDCFebruary 2010

  • DEMAND FOR RENEWABLE FUELS ‐ RFS1  & RFS2(IN BILLION LITERS)(IN BILLION LITERS)

    120

    140 136

    100

    60

    80

    40

    0

    20

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    2022

    Source: Datagro

    Governors Biofuels Coalition, WDCFebruary 2010

  • DEMAND OF RENEWABLE FUELS – RFS2 (HR 6)

    33

    36

    24

    27

    30

    33Undifferentiated Advanced Biofuel

    Biomass- based Diesel

    Cellulosic Biofuel

    18

    21

    24

    on G

    allo

    ns Conventional Biofuel

    9

    12

    15

    Bill

    io

    -

    3

    6

    2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

    Nota: Em tons de verde são indicados os "Advanced biofuels" (cell biofuel, und advanced biofuel, biomass diesel).

    Governors Biofuels Coalition, WDCFebruary 2010

  • THE POTENTIAL IS ENORMOUS BUTTHE POTENTIAL IS ENORMOUS, BUTETHANOL MARKET EXPANSION

    DEPENDS FUNDAMENTALLY ON:

    • COMPETITIVENESS WITH GASOLINE• OVERCOMING THE BLEND WALL

    •IMPROVING LOGISTICSIMPROVING LOGISTICS•A MORE OPEN MARKET

    Governors Biofuels Coalition, WDCFebruary 2010

  • Learning Curve – Anhydrous Ethanol100

    2002

    Learning Curve Anhydrous EthanolSource: Nastari, P.M. "Competitividade da Produção de Etanol de Cana-de-açúcar no Brasil: as três ondas de desenvolvimento", V Conferência Internacional da Datagro sobre Açúcar e Álcool, Grand Hyatt São Paulo, 20 de setembro de 2005, São Paulo, SP.

    10$ / G

    J út

    eis

    198620041980

    2005

    10

    (200

    4) U

    S$

    2002

    1999

    1990

    1995

    11

    0 50000 100000 150000 200000 250000 300000Produção Acumulada de Etanol (mil m3 )

    Ethanol prices in Brazil Rotterdam regular gasoline price

    trend (Rotterdam gasoline prices) trend (Ethanol prices)

    Governors Biofuels Coalition, WDCFebruary 2010

  • THE BLEND WALL

    • In the US, expansion of ethanol demand is currently limited by the 10% blend wall, mostly due to the small engines issue. 

    • In Brazil, small engines (boats, lawn‐moars) have been using E20‐25 since 1978without any problemsince 1978 without any problem.

    • In 2008, Honda launched in Brazil flex motorcycles (125 cc) capable of using E100 ‐ E25. g

    Governors Biofuels Coalition, WDCFebruary 2010

  • Ethanol use can go beyond E10g y• Increasing blend level above 10%.• Flex fuel fleet, Brazilian style, in tropical and sub tropical countriessub‐tropical countries.

    • Flex fuel fleet in the US, lacking distributionnetwork for E85.

    • Production of bio‐plastics and substitutes forProduction of bio plastics and substitutes for other petrochemical products.

    • Fuel cells– Ethanol is preferred liquid fuel. 

    Governors Biofuels Coalition, WDCFebruary 2010

    p q

  • Logisticsg

    • In Brazil ethanol has been transported in• In Brazil, ethanol has been transported in multi‐product pipelines without pigs, for over 3030 years.

    • Brazilian logistics experts do not understand g pwhy there is still controversy over this issue in the USthe US.

    • Ethanol absorbs and dries out all condensation water in the system, maintaining it water‐free afterwards.

    Governors Biofuels Coalition, WDCFebruary 2010

  • IN THIS DECADE, ETHANOL HAS GROWN 

    MUCH FASTERMUCH FASTER THAN SUGAR.

    Governors Biofuels Coalition, WDCFebruary 2010

  • World Sugar Production(raw sugar equivalent)

    160

    170(raw sugar equivalent)

    150

    Tonn

    es

    130

    140

    Milli

    on T

    120

    100

    110

    1 2 3 4 5 6 7 8 9 e

    00/0

    01/0

    2

    02/0

    3

    03/0

    4

    04/0

    05/0

    06/0

    07/0

    08/0

    9

    09/1

    0e

    Survey & Analysis: DATAGROBasic Data:DATAGRO / ISO

    Governors Biofuels Coalition, WDCFebruary 2010

  • 87 0World Ethanol Production

    76.7

    87.0

    66.3

    Lite

    rs

    45 7

    56.0

    Bill

    ion

    35.3

    45.7

    25.0

    0/01 /0

    2

    2/03

    3/04

    4/05

    5/06

    6/07

    7/08

    8/09 10

    e

    00 01 0 2 03 04 05 06 07 08 09/1

    Survey & Analysis: DATAGRO

    Governors Biofuels Coalition, WDCFebruary 2010

  • World Sugar & Ethanol Production(raw sugar equivalent)

    140 

    160 (raw sugar equivalent)

    100

    120 

    80 

    100 

    on Ton

    nes

    40 

    60 

    Millio

    20 

    00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10e

    World Ethanol Production World Sugar ProductionSurvey & Analysis: DATAGROBasic Data:DATAGRO / ISO

    Governors Biofuels Coalition, WDCFebruary 2010

  • Potential Market is Very Large! y gNew Trends

    • The world of fuels and petrochemical applications is MUCH larger than the world of sugar.

    • Biofuels and renewable feedstocks can become raw material for polyethilene, PET, textile fibers, bio‐derived gasoline and di ldiesel. 

    Governors Biofuels Coalition, WDCFebruary 2010

  • PRODUCTION IS STILLPRODUCTION IS STILLMUCH CONCENTRATED IN THE US AND BRAZIL

    Governors Biofuels Coalition, WDCFebruary 2010

  • WORLD ETHANOL PRODUCTION2009 - 85.15 BILLION LITERS

    0 9%

    S ill h 8 4%

    3.2%0.9%

    0.3%

    Still much concentrated in the US & Brazil 9.4%

    8.4%

    the US & Brazil

    48.3% U.S.A

    >> In 2009, world ethanol production

    29.4%Brazil

    Asia>> In 2009, world ethanol production

    was 85.15 billion liters, or151.2 million tons of raw sugar

    equivalent.

    EU

    Other Americas

    Governors Biofuels Coalition, WDCFebruary 2010

  • Sugarcane Ethanol can increase gincome from agriculture in many 

    other countries• Price of sugars in molasses are, in general,Price of sugars in molasses are, in general, much below the ruling price of sugar in each marketmarket. 

    • This is why sugar producers tend to extract from molasses as much sugars as they can: 1st, 2nd & 3rd strike sugars.1st, 2nd & 3rd strike sugars.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Ethanol: increasing income from gagriculture

    • In this decade, world price of molasses withIn this decade, world price of molasses with 55% sugars has varied in the range of:$65 180 / t FOB– $65‐180 / ton FOB, or 

    – $120 to 330 / ton of sugar equivalent.

    • Price of white sugar has varied from $ 250 toPrice of white sugar has varied from $ 250 to 830 / ton!

    Governors Biofuels Coalition, WDCFebruary 2010

  • P i f Bl k t M lPrice of Blackstrap MolassesUS$ / metric ton of molasses FOB - US ports

    120.00

    130.00

    100.00

    110.00

    120.00

    on

    DATAGRO

    70.00

    80.00

    90.00

    US$

    / m

    etric

    to

    40.00

    50.00

    60.00

    U

    30.00

    jan/

    95

    jul/9

    5

    jan/

    96

    jul/9

    6

    jan/

    97

    jul/9

    7

    jan/

    98

    jul/9

    8

    jan/

    99

    jul/9

    9

    jan/

    00

    jul/0

    0

    jan/

    01

    jul/0

    1

    jan/

    02

    jul/0

    2

    jan/

    03

    jul/0

    3

    jan/

    04

    jul/0

    4

    jan/

    05

    jul/0

    5

    jan/

    06

    NEW ORLEANS HOUSTON SOUTH FLORIDA

    Governors Biofuels Coalition, WDCFebruary 2010

  • Price of White Sugar vs Price of Sugars in MolassesPrice of White Sugar vs. Price of Sugars in Molasses Molasses Basis New Orleans - in US$/ metric ton of sugar

    450.00

    500.00

    350.00

    400.00

    450.00

    on

    DATAGRO

    200.00

    250.00

    300.00

    S$ /

    met

    ric to

    100.00

    150.00

    US

    0.00

    50.00

    n/95

    ul/9

    5

    n/96

    ul/9

    6

    n/97

    ul/9

    7

    n/98

    ul/9

    8

    n/99

    ul/9

    9

    n/00

    ul/0

    0

    n/01

    ul/0

    1

    n/02

    ul/0

    2

    n/03

    ul/0

    3

    n/04

    ul/0

    4

    n/05

    ul/0

    5

    n/06

    jan ju jan ju jan ju jan ju jan ju jan ju jan ju jan ju jan ju jan ju jan ju jan

    SUGAR (LN 5) NEW ORLEANS

    Governors Biofuels Coalition, WDCFebruary 2010

  • Ethanol: increasing income from gagriculture

    M l h l B ili d bl• Molasses to ethanol: Brazilian producers were able to value almost all sucrose for a price nearly equivalent to that of sugarequivalent to that of sugar. 

    • Great edge against its competitors.E bl d i l l i li d i h• Enabled capital accumulation, applied in the modernization of industrial and agricultural processesprocesses.

    • Explains average increase in agrindustrial productivity of 3 7% per year during the past 35productivity of 3.7% per year, during the past 35 years.

    Governors Biofuels Coalition, WDCFebruary 2010

  • General Positive Impactsp• Sugar cane ethanol has proven to be one of the few 

    ff ti t i bl d l t t t i teffective sustainable development strategies to:

    – Generate jobs with low investment costs, and mitigate poverty in developing countries

    – Address the 2 main problems faced by the developed world: 

    • the need to find a viable replacement to oil• control urban pollution and mitigate greenhouse p g ggas emissions.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Ethanol can be long term solutiong• Brazil´s self‐sufficiency:

    – Substituted 1.87 billion barrels of gasoline, in 35 years = 13.8% of Brazil´s current proven crude oil and condensate reservesreserves.

    • Savings of over $78 billion in constant dollars of• Savings of over $78 billion, in constant dollars of 2009, measuring substituted gasoline for the price in the world market, in each year.the world market, in each year.– $241 billion savings, when foregone interests on foreign

    debt are considered.– Brazil’s total foreign reserves in Dec/09: $239.5 billion.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Extending its use is attainableg• Ethanol occupies in Brazil  only 4.0 million hectares of 

    sugarcane (2009) enough to substitute >50% of its gasolinesugarcane (2009), enough to substitute >50% of its gasoline. 

    • World consumption of gasoline is currently 20.07 millionWorld consumption of gasoline is currently 20.07 million barrels/day: only 19.9 million hectares in sugar cane would be required to substitute 10% of world’s gasoline use.

    • This land mass is available in many regions: in Central and South America, Africa and Southeast Asia.

    Governors Biofuels Coalition, WDCFebruary 2010

  • MOU US‐Brazil on Ethanol• March 09, 2007: Memorandum of Understanding (MOU) to promote greater cooperation on ethanol and other biofuels in the Western Hemisphere.

    • Americas Summit (Miami, 1994): pledge to ban MTBE and substitute it with ethanol.

    • Obama Administration has historicalObama Administration has historical chance to develop further policy on ethanol and biofuels in general.

    Governors Biofuels Coalition, WDCFebruary 2010

    ethanol and biofuels in general. 

  • Towards Geopolitics of Clean Energyp gy

    • Biomass ethanol mostly from sugarcane can play a majorBiomass ethanol, mostly from sugarcane, can play a major role at a moment many poor nations are in need of finding alternative uses and markets for their traditional agricultural production, reduce  energy dependence, and find new sources of income.

    • For more developed countries, there is a new option ahead:– Promote freer trade for clean, sustainably‐produced ethanol, while at 

    same time providing safeguards to domestic producers andsame time providing  safeguards to domestic producers, and   

    – Open new markets for its products and services, as fresh income is irrigated to clean‐energy‐producing less‐developed countries.

    Governors Biofuels Coalition, WDCFebruary 2010

  • Towards Geopolitics of Clean Energyp gy

    • Brazil is part of Mercosur, where there is a intra‐zone tariff (0%) and an external tariff for ethanol imports (20%), establishing a preference for intra zone tradeestablishing a preference for intra‐zone trade.

    • Brazil is considering lowering the external tariff also to 0%: decision has been postponed to June/10decision has been postponed to June/10.

    • Efforts continue to promote ethanol production and use in other countries. 

    • It is unmistaken that the strategy is to transform clean energy into the new major platform of trade!

    Governors Biofuels Coalition, WDCFebruary 2010

  • d twww.datagro.com [email protected]

    19th May 20104th ISO / DATAGRO New York Sugar & Ethanol Conference 

    The Waldorf=Astoria, Starlight Roof ‐ New York Sugar Dinner. 

    www.isodatagrony.com

    18th ‐19th October 2010X International DATAGRO Sugar & Ethanol ConferenceX International DATAGRO Sugar & Ethanol Conference

    Grand Hyatt São Paulo, Brazil.

    www.conferencia.datagro.com.br

    Governors Biofuels Coalition, WDCFebruary 2010

  • Governors Biofuels Coalition, WDCFebruary 2010ONLINE REGISTRATION:   www.isodatagrony.com