BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION

Joel Velascojoel@unica.com.br

California Biomass CollaborativeCalifornia Biomass CollaborativeBrazilian Ethanol Industry: Sugarcane’s

Sustainability Today and Tomorrow

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OUTLINE

• Introduction: Who, What, Where

• Sustainable expansion reality today – 1% of arable land = 50% gasoline– #1 renewable source in Brazil– +80% GHG emissions reduction

• Sugarcane is a superior feedstock– Carbon absorbing machine– High and growing yields– Continuously improving technologies

• Sustainability of Gas prices?

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Introduction: Who, What, Where

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WHO WE ARE

• UNICA is the leading sugarcane industry association, representing 110 producers and mills in Brazil

• Responsible for 60% of all ethanol and sugar production in Brazil.

• Emerging as a leader in the generation of bioelectricity

• International presence, now in Washington & Brussels, to engage in constructive dialogue

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WHAT WE PRODUCE

26B LITERS26B LITERS

33 33 MTMT

+3000 +3000 MWMW

+550 MT+550 MT

Note: Estimates based on available data.

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WHERE ARE WE

South-Central region represents 87% of

sugarcane harvest

South-Central region represents 87% of

sugarcane harvest

Sources: NIPE-Unicamp, IBGE and CTC

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SUGARCANE PLANTING AREA (2008/09)

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Brazil’s sugarcane is sustainable today

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Millions of hectares (2007) %total land

%arable land

BRAZIL 851

TOTAL ARABLE LAND 354.8

1. Total Crop Land 76.7 9.0% 21.6%

Soybean 20.6 2.4% 5.8%

Corn 14.0 1.6% 3.9%

Sugarcane 7.8 0.9% 2.2%

Sugarcane for ethanol 3.4 0.4% 1.0%

Orange 0.9 0.1% 0.3%

2. Pastures 172.3 20% 49%

3. Available area Total arable land – (crop land + pastures)

105.8 12% 30%

Source: IBGE. Elaboration: UNICA.

1% OF ARABLE LAND DISPLACES 50% GASOLINE

All sugarcane ethanol produced in Brazil occupies All sugarcane ethanol produced in Brazil occupies area smaller equal to 8% of Californiaarea smaller equal to 8% of California……

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COMPARISON OF SHARE OF RENEWABLE ENERGY

Source: Ministry of Mines and Energy (MME), BEN(2008 preliminary estimate).

Sugarcane is #1 source of renewable energy with 16% of total energy consumed though Brazil has 80% of its electricity from hydros

SUGARCANE IS NOW #1 RENEWABLE IN BRAZIL

Source: Ministry of Mines and Energy (MME), BEN(2008 preliminary estimate).

2006 vs. 2007 Comparison

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Note: Reductions in well-to-wheel CO2-equivalent GHG emissions per km, from bioethanol comparared to gasoline, calculated ona life-cycle basis. Source: IEA – International Energy Agency (May, 2004), based on a review of recent articles.

AVOIDED GHG EMISSIONS [VS. YESTERDAY’S GAS]

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sugarcane is an advanced biomass feedstock

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A CARBON ABSORBING MACHINE?

Source: PoloBio via Weber Amaral from various sources

2 METERS

3 METERS

2 METERS

3 METERS

1 METER

1 METER

4 METERS

22-36 tons C/ha

3-5 tons C/ha

Unlike corn, Unlike corn, sugarcane sugarcane is replanted is replanted only every only every 55--7 years7 years……

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Annual net income per hectares

US$ 45-90US$ 45-90 US$ 280-410US$ 280-410

CANE VS. PASTURES: OPPORTUNITY COSTS

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Annual tons carbon per hectare

3-8 t C/ha3-8 t C/ha 22-36 t C/ha22-36 t C/ha

CANE VS. PASTURES: CARBON UPTAKE

17Source: IEA – International Energy Agency (2005), USDA, MTEC. Elaboration: ICONE and UNICA.

Liters per hectareAVERAGE PRODUCTION YIELDS

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ENERGY BALANCE

Source: Based on various estimates compiled by World Watch Institute.

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BREAKDOWN OF SUGARCANE’S ENERGY

Source: UNICA

Mill

ion

hect

ares

Bill

ion

liter

s

Cultivated area

Genetic improvement

Assumptions: a) productivity gain based on new technology is absorbed by ethanol production (we assume that sugar production is not affected); b) genetically modified varieties available in 2015. with a sugar content 20% higher than the current varieties. These new varieties will occupy 10% of the area in 2015. 30% in 2020 and 60% in 2025; c) we assume that the hydrolysis of cellulose technology is already implemented by 2015. and will be used in 20 to 40% of the plants in 2020 and 2025. respectively. Hydrolysis will allow a productivity gain of 37 litres per ton of cane sugar.

Hydrolysis

TECH: HIGHER YIELDS WITHOUT MORE LAND

21Source: INPE and UNICA

Thou

sand

hec

tare

s av

aila

ble

for h

arve

st

0

500

1.000

1.500

2.000

2.500

3.000

2006/07 2007/08

UnburnedBurned

34%

47%Sugarcane mechanical

harvesting continue to grow during the crop year 2008/09 and properly will overcome

the burned sugarcane areas.

66%53%

TECH: REDUCTION OF MANUAL HARVEST

Note: ave.MW = MW firm capacityAssumptions: a) 2006/2007 harvested area; b) 2012/13 harvest prediction based on the following values: 1 ton of sugar cane produces 250 kg of bagasse e 204 kg de straw, 1 ton of cane (only bagasse) generates 85,6 KWh for exporting, 1 ton of cane (bagasse + straw) generates 199,9 KWh for exporting, the straw inferior calorific value = 1,7 bagasse inferior calorific value, capacity factor = 0,5. Source: Cogen, Unica. Prepared by: Unica

TECH: GROWING ROLE OF BIOELECTRICITY

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INSURANCE AGAINST SUBSIDIES…

BIOELECTRICITY

Exports

Domestic

Domestic

Exports

SUGAR

ETHANOL

Note: 2006/2007 real values; 2015/2016 the percentage of the 2015-2016 projection were calculated using as a base the potential for production and exports, considering the constant prices of 2006.

32%

51%

$20 Billion $45 Billion

According to FAO, the total harvested area is

about 1.4 billion hectares while only 15

million devoted to ethanol production.

Source: FAO, F.O.Licht, Datagro, UNICA, USDA, European Commission. Elaboration: UNICANote: “Others” include the harvested area for the remaining crops like fruits, fibers, nuts, pulses, roots and tubers , spices and other vegetables .

WORLD LAND USE

Note: 1) 2007 * - estimated data ; 2) Sugarcane include cane destined for ethanol production, sugar production and other uses (animal feed, spirits, etc); 3) Sugarcane destined for ethanol production has been calculated using the data of MAPA.Source: IBGE.

Base 100 in 1982

GROWTH IN AGRICULTURAL LAND IN BRAZIL

Sources: IBGE (2007) and UNICA. Elaboration: UNICA.Note: * estimated

Ethanol

Sugar

Area

Annual growth rate 2.7% in the last decade

Since 1990 sugarcane Since 1990 sugarcane ethanol volumes have ethanol volumes have

increased 130% and sugar increased 130% and sugar around 350%around 350%

NO FOOD VS. FUEL ISSUE WITH SUGARCANE

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sustainability of gasoline prices?

Gasoline

Ethanol

Source: ANP e UNICA. Prepared by Unica

GASOLINE IS NOW THE ALTERNATIVE FUEL

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GROWING SHARE OF FLEX FUEL FLEET

Source: Copersucar and Unica.

Mill

ion

units

FLEX FUEL ENGINES HISTORY

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DEMAND GROWS WITH FLEX FUEL

Accumulated sales of flex fuel vehicles

Monthly sales of hydrous ethanol

Source: ANP and ANFAVEA. Elaboration: UNICA

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R$ 0.50

R$ 0.75

R$ 1.00

R$ 1.25

R$ 1.50

R$ 1.75

R$ 2.00

R$ 2.25

R$ 2.50

R$ 2.75

Retail Gasoline (E-25) 2.521 2.509 2.510 2.528 2.533 2.517 2.497 2.486 2.480 2.479 2.488 2.504

Retail Ethanol (E-100) 1.586 1.584 1.581 1.663 1.668 1.513 1.401 1.359 1.339 1.320 1.398 1.489

Hydrous Ethanol for CBI (R$/Liter, FOB) 0.916 0.892 0.950 0.839 0.793 0.750 0.703 0.755 0.670 0.667 0.680 0.667

Anhydrous Ethanol for US (R$/Liter, FOB) 1.032 0.980 1.104 0.990 0.884 0.820 0.766 0.745 0.784 0.737 0.725 0.650

JAN FEB MAR APR MAY JUN JUL AGO SEP OUT NOV DEC

Average Gasoline (E-25) retail prices were R$2.50, ranging from a low of R$2.18 (Sep) to a high of R$2.93 (Jan).

Average Ethanol (E-100) retail prices were R$1.49, ranging from low of R$1.08 (Oct) to a high of R$2.22 (May).

Average price for ethanol export (FOB, no sales tax) in Brazil was R$0.77 (Hydrous) and $0.85 (Anhydrous).

Note: Brazilian Gasoline has 25% ethanol content. There is no "pure" gasoline available in Brazil.Sources: ANP, Brazilian Oil & Gas Agency; UNICA, Brazilian Sugarcane Industry Association; Reuters.

ETHANOL IS MUCH CHEAPER (2007)

Deflated values for March 08 with CPI - base 100 in jan/95

Oil

Agricultural non-foodraw materials

Food

Note: “Agricultural non-food raw materials” include cotton, wood.,wool, timber and leather.Sources: FMI (2007) and US Bureau of Labor Statistics (2007). Elaboration: UNICA .

In the last decade, while food prices increased 36%,

oil prices jumped 500%

FOOD VS. OIL PRICES

Source: British Sugar

100 countries could supply biofuels to 200 nations, while currently 20 oil producers provide fossil fuels to the rest of the world.

GLOBAL AVAILABILITY OF SUGARCANE

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SUMMARY• Sustainable expansion reality today

– 1% of arable land = 50% gasoline– #1 renewable source in Brazil– +80% GHG emissions reduction

• Sugarcane is a superior feedstock– Carbon absorbing machine– High and growing yields– Continuously improving technologies

• Proliferation of criteria and schemes is counterproductive– Multilateral and multistakeholder forum must consider the

sustainability of feedstock/processes, including fossil fuels, in a balanced way (environmentally adequate, socially fair and economically feasible).

BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION

Joel Velascojoel@unica.com.br