climate change mitigation in the transport sector asian development bank, manila, 24-25 may, 2006...

Climate Change Mitigation in the Transport SectorAsian Development Bank, Manila, 24-25 May, 2006

The Brazil Ethanol Experience

Rick SellersRIO, Inc.

[email protected]+33 6 1841 2676


Source: Luiz Carlos Corrêa Carvalho


ProAlcool - The Brazilian Alcohol ProgramKey points: Started in 1975 by Federal Government. Objective was energy security: replacing petroleum imports with

domestic resources. Started as fuel additive in gasoline vehicles,

replacing lead and/or MTBE <10%. Stimulated production of ethanol only cars,

more recently flex-fuel cars. 4,000,000 cars running on pure (Hydrated)

ethanol in Brazil 680,000 flex-fuel vehicles (both ethanol and

gasoline, any blend) All gasoline now 20 to 26% of ethanol in volume basis – gasohol Ethanol economically competitive to gasoline at >$30-35/bblSource: Suani Teixeira Coelho


Source: Sérgio Antônio MONTEIRO FONTES


Over 70% of cars sold in 2006 are expected to be FFV


Ethanol cumulative productionEthanol price paid to producers

Year ( in million m3 ) ( 2001 US$ / m3 )

1980 2.668 632,38

Price Paid to Alcohol Producers in Brazil

100

1000

1000 10000 100000 1000000

Ethanol cumulative prodution (in million m³)

Etha

nol p

rice

paid

to p

rodu

cers

(200

1 U

S$/m

³) 2001

1980

1999

19851983

2000

1986

1990

1996

Production Advances

Productivity gains from improved species, advanced distilling technology, and increased use of waste (bagasse) in processing.


Ethanol international competitiveness

1

10

100

0 50000 100000 150000 200000 250000 300000Ethanol Cumulative Production (thousand m3 )

(200

4) U

S$ /

GJ

Ethanol prices in Brazil Rotterdam regular gasoline price

trend (Rotterdam gasoline prices) trend (Ethanol prices)

19862004

2002

1999

1980

1990

1995

Source: Nastari, 2005


Social benefits of biofuels Significant increase in employment opportunities,

mainly in rural areas. 2004, Brazil: 700,000 direct jobs and about 3.5 million indirect

jobs (production of 350 million tonnes of cane)

Ethanol: job rate in ethanol industry higher than in fossil industry Different estimates at 20:1 up to 150:1


Economic Cost/Benefit

Total incentives for ProAlcool program:

US$ 12 billion.Over the last 22 years, hard currency savings amounted to 1.8 billion US $/year or ~US $ 40 billion.Incentives now phased out; program is revenue positive for government through taxes.


Positive Industry Environmental Impacts

Brazil: Net CO2 Emissions Due to Sugarcane Production and Use, 1990-91

Mtons C/Year

Ethanol Substitution for Gasoline**Including blending 22% of ethanol with gasoline and 4.2 million pure ethanol-fired cars

- 7.41

Bagasse Substitution for FuelOil Burning as HeatSource in Other Industries

- 3.24

Fossil Fuel Utilization in Sugarcane Industry + 1.20

Net Contribution (uptake) - 9.45

Source: Macedo, 1992


Positive Urban Environmental Impacts

Lead: dropped from 1,4 ug/m3 in 1977 to less than 0,10 ug/m3 in 1991.

Sulfur: dropped from 50 ug/m3 in 1984 to 15 ug/m3 in 2003.

Particulate Matter: dropped from 90 ug/m3 in 1986 to 50 ug/m3 in 2003.


Negative Environmental Impacts

Local air pollution during harvesting season (burning required for manual harvest)

Burning sugar cane bagasse in the boilers not always best (low pollution) technology.

Slightly higher NOx emissions with gasahol than either gasoline or ethanol-only.


Lesson from Brazil – Think long term

1. Promote demand1. Mandate targets (replacement of oxygenates at 5% to start)2. Provide incentives to fuel companies to accomplish target3. Promote imports if insufficient existing production4. Mandate flex fuel auto sales to begin transforming fleet

2. Stimulate agro-industrial capacities (industry/private sector was responsible for recovery of Brazilian ethanol sector)

3. Establish “best practices” certification of production4. Provide incentives for use of new technologies5. Inform consumers (ethanol is compatible with current

vehicles, environmental and social benefits, etc.)6. Establish trading capabilities to improve liquidity of

market7. BE PATIENT!


Oil and Biofuels Trade

Oil Trade Based on WEO 2004

2002

2030


Conclusions

Brazil showed patience, determination, and excellent timing.

Energy security, employment, rural development, and environmental benefits are substantial and fundamental to success.

Ethanol programs based on sugar cane probably economic at oil prices over US$ 35/barrel.

At oil prices below ~ US$ 35/barrel, ethanol program may still be justified on energy security and social benefits basis, as well as a hedge against future price volatility.


Thank you!

Rick SellersRIO, Inc.

[email protected]


Additional Slides for Reference


Brazil Alcohol Statistics*

*Except where noted, data apply to the 2003/2004 season.

Land use 45,000 km² in 2000

Labour 1 million jobs (50% farming, 50% processing)

Sugarcane 344 million metric tonnes (50% sugar, 50% alcohol)

Sugar 23 million tonnes (30% is exported)

Ethanol 14 million m³ (7.5 anhydrous, 6.5 hydrated; 2.4% is exported)

Dry bagasse 50 million tonnes

Electricity 1350 MW (1200 for self use, 150 sold to utilities) in 2001


10 Myths about Ethanol

1. Brazilian experience is unique 2. incompatible with existing fleets; 3. low energy balances of biofuels4. high pollutant emissions (cleaner fossil fuels preferable) 5. complex logistics 6. competition with food for land, unsustainable practices,

deforestation7. should only be produced domestically by developed countries8. only subsidized production is possible 9. imports destroy local agriculture of developed countries10. energy efficiency alone will preserve oil resources and fulfill

Kyoto targets

Source: Suani Teixeira Coelho


Typical Ethanol Production Factors

economic cost of production: US$0.18–0.25 per liter of gasoline-equivalent

average export price of ethanol (2001-2003): US$ 0.23 per liter

Price paid per tonne of sugarcane:

US$11.4 (UNICA, 2005) plant lifetime of 25 years feedstock cost of US$ 0.143 per liter of ethanol investment cost around US$ 0.017 per liter of ethanol.


Technological Advances

Brazilian car production in 2002: 1.5 million ethanol share 3.16% (48 thousand) 2002 5.5 billion liters used in a 22 to 25% blend with gasoline 2003 3 million vehicles powered by hydrated alcohol 4.9 billion liters/year 2003: Launching of “Flexfuel” cars in the market


Technology AdvancesAll energy needs in sugarcane mills are provided without

any external energy source; Cogeneration process: production of steam and

electric/mechanical energy to the process from sugarcane bagasse.

Presently up to 80 kWh/tonnes of cane can be sold to the grid

1975 – 2000: low-pressure boilers (22 bar- 20 kWh/ tonnes of cane)

Since 2000: high pressure ones (up to 80 bar). Outputs of 120kWh/tonne better technology and recovery of sugarcane by-products (green cane harvesting).

Gasification technology (under development): 300 kWh/tonne of cane.


Ethanol Energy Balance

Source: Macedo, I et alli, 2004


Energy balances of feedstocks

0

2

4

6

8

10

12

Sugarcane Sugar beet Wheat straw Corn Wood

ethanol feedstock

en

erg

y o

utp

ut/

inp

ut

rati

o

Sources: Macedo et alii, 2004; UK DTI, 2003 and USDA, 1995


competition with land for foodHarvested Area in Brazil

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

1930 1940 1950 1960 1970 1980 1990 2000

1000 h

a

Rice Coffee Sugarcane Bean Corn Soybean Wheat

Source: Brazilian Statistics Bureau, several years


Quality of Jobs and Other Socioeconomic Issues

152

1

3

4

0 50 100 150 200

Ethanol

Oil

HydroelectricPow er

Coal

jobs/energy (oil=1)

220

145

98

91

70

44

11

0 100 200 300

Chem/Petrochemistry

Metallurgy

Capital goods

Automotive Industry

Intermediate Industry

Consumer Goods

Ethanol Agroindustry+ Industry

1000 US$/job

Source: Goldemberg, 2002


62% of the total sugarcane76 % of the C/S region (sugar)71 % of the C/S region (ethanol)

São Paulo

North - Northeast Region

15% of the total productionCrop: October to March

85% of the total productionCrop: April to December

Center -South Region

Brazil: Regions and Sugarcane Seasonality

Source: Suani Teixeira Coelho


Quality of Jobs and Other Socioeconomic Issues

Every 300 million tones of sugarcane produced in Brazil: creation of approximately 700,000 jobs.

Formal Jobs:• National average (Brazil): 55%• Sugarcane sector: 68.5%

Sugarcane production is seasonal but many jobs are formal and annual (equipment maintenance during off season).


Compatibility of Existing Fleets with Ethanol-gasoline Blend

Ethanol

Content in the Fuel

Carb

ure

tor

Fu

el In

jectio

n

Fu

el P

um

p

Fu

el P

ressu

re

Devic

e

Fu

el F

ilter

Ign

ition

Syste

m

Evap

ora

tive S

yste

m

Fu

el T

an

k

Cata

lytic

Con

verte

r

Basic

En

gin

e

Moto

r Oil

Inta

ke M

an

ifold

Exh

au

st S

yste

m

Cold

Sta

rt Syste

m

≤ 5%

5 ~ 10%

10 ~ 25%

25 ~ 85%

≥ 85%

- - - - - - - - - - - -- - - - - For any vehicle NN - - - - - - - - - - - - - - - - - -

- - - - - For relatively new fleets (10 ~ 15 years old) - - NN- - - -

- - - - - - - Brazilian Application - PN - - - -

- - - - - - - - - - - - - - - - - Brazilian Application PN- - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - USA Application PN - - -- - - - - - - - - - -

Source: ANFAVEA, 2005 - Not Necessary - Probably Necessary

- - - - - - - - NN - - - - - - -

- NN-


GHG emissions from different types of ethanol

Sources: Macedo et. alii, 2004, UK DTI, 2003 and USDA, 2004

0 10 20 30 40 50 60 70 80 90 100

Cereal ethanol

Beet ethanol

Wheat straw ethanol

Corn ethanol

Sugarcane ethanol

kg CO2eq./GJ fuel


Environmental Impacts

85

51

80

53

104

86

0

20

40

60

80

100

120

CO HC NOx

Gasoline 0% Gasohol 22% Ethanol 100%

Source: ANFAVEA, 2005

Comparative Raw Exhaust Emission


International Opportunities

Climate Change Mitigation in the Transport SectorAsian Development Bank, Manila, 24-25 May, 2006Flex-fuel Vehicles in Brazil

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