1. Global Trade and Environmental Impact Study of the EU BiofuelsMandateMTID Brown Bag Seminar, April 2nd 2010 by Perrihan Al-Riffai, Betina Dimaranan,David Laborde Debucquetwith contributions from Antoine Bout and Hugo Valin

2. Overview Introduction and Background Modeling Choices Database The Baseline Results Concluding Remarks INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 2 3. INTRODUCTION INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 3 4. What is at stake? INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 4 5. What is at stake? INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 5 6. Goals of this study Effects of the EU mandate Focus on Indirect Land Use Change The core story Increase in yield Increase in areaIncreased Extension of cropproduction landReduction of other cropsNew Reduced Hunger?Demand supply for finalconsumers Substitution effectsfor crops Reduced Feedsupply for Other sectorsintermediate(agrifood, cosmetics) consumers Substitution effects INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 6 7. Background Works on Biofuels with MIRAGE Initiated in 2007 First study for the EC in 2008-2009 This study initiated in Fall 2009 More important than numbers, a pedagogical process Strong interaction with EC work group on biofuels Intense discussions Clarification of several concepts The CGE raise issues, underline key mechanisms and help to structure discussions INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 7 8. MODELING INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 8 9. Main Features Global CGE MIRAGE assume perfect competition Improvement in demand system (food and energy) - done in previous works Improved sector disaggregation New modeling of Ethanol sectors Land market and land extensions at the AEZ level Co-products (ethanols and vegetal oils) New modeling of fertilizers New modeling of livestocks (extensification/intensification)INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 9 10. Disaggregation (Sectors)Sector Description SectorDescriptionSector DescriptionRice RiceSoybnOilSoy OilEthanolW Ethanol - WheatWheatWheat SunOilSunflower OilBiodieselBiodieselMaizeMaize OthFood Other Food sectors ManufOther Manufacturing activitiesPalmFruit Palm Fruit MeatDairy Meat and Dairy WoodPaperWood and Paper productsRapeseedRapeseed Sugar SugarFuel FuelSoybeansSoybeans ForestryForestry PetrNoFuel Petroleum products, except fuelSunflower SunflowerFishing FishingFertiliz FertilizersOthOilSds Other oilseeds CoalCoal ElecGasElectricity and GasVegFruits Vegetable &Oil OilConstruction ConstructionFruitsOthCrop Other cropsGas GasPrivServ Private servicesSugar_cbSugar beet orOthMinOther minerals RoadTransRoad TransportationcaneCattleCattle Ethanol Ethanol - Main AirSeaTran Air & Sea sectortransportationOthAnim Other animalsEthanolCEthanol - SugarPubServPublic services(inc. hogs and Canepoultry)PalmOil Palm Oil EthanolBEthanol - Sugar BeetRpSdOil Rapeseed Oil EthanolMEthanol - Maize INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 10 11. Disaggregation (Regions)RegionDescription BrazilBrazil CAMCaribCentral America and Caribbean countries China China CIS CIS countries (inc. Ukraine) EU27European Union (27 members) IndoMalay Indonesia and Malaysia LAC Other Latin America countries (inc. Argentina) RoOECDRest of OECD (inc. Canada & Australia) RoW Rest of the World SSA Sub Saharan Africa USA United States of AmericaBut: Land markets at the AEZ level INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 11 12. Production Tree for an Ag. Sector Changes INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 12 13. Yield Changes in the Model Exogenous technology: TFP in agriculture Endogenous effects: Factor accumulation: More capital and labor by unit of land Fertilizers INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 13 14. Fertilizers Price elasticities calibrated from the IMPACT model Logistic approach for yield effects INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 14 15. Livestock Sector and IntensificationTraditional approach Intensification approach Feedstock Intermediate Like fertilizers consumption Ratio price of land/price of Intermediate consumption & feedstocks Producer choice Value Added (including Land) Increase in price of feedstock complementarySubstitution effect = Increase in feedstock prices Intensification + Overall price Increase in production cost effect = reduction in production Decrease in demand Overall, potential increase in Decrease in production Land use Decrease in Land Use+ Limitations in the interactions between pasture land and crop lands (P0/P1/P2)INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 15 16. Biodiesel ProductionOil Crops sector Biofuel(+meals)Sunflower Sunflowerseed oilSoybean SoybeanoilBiodieselRapeseedRapeseed oilPalm fruitPalm oil& Kernel INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 16 17. Ethanol Production Biofuels CropsBlending(+ DDG)Ethanol Wheat WMaizeEthanol MSugarEthanol B Ethanol Beet SugarEthanol C CaneImportedImportedEthanol*Ethanol*INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 17 18. Land Markets at the AEZ LevelWheatCornOilseeds CETSugar Substitutable VegetablesOther Livestock1LivestockNcropscrops and fruits crops CET CET Cropland Pasture CETAgriculturalManaged landforestCET Land extensionUnmanaged landManaged landNatural forest - Grasslands INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 18 19. Land Extension Coefficients (from Winrock Intl. EPA report)ForestManaged ForestPrimaryOther Pasture Savannah & GrasslandArgentina 16.4%0.0% 24.7% 35.6% 23.3% Brazil 0.5%16.3%11.2% 23.5% 48.5% CAMCarib 0.0%30.4%10.7% 16.1% 42.9% Canada 1.4%7.8% 42.5% 32.2% 16.1% China5.6%2.2% 27.3% 39.0% 26.0% CIS3.7%5.6% 33.3% 30.7% 26.7% EU27 8.4%0.4% 23.5% 36.8% 30.9% IndoMalay3.2%51.7% 7.0%7.0% 31.0% LAC 17.8%10.8%14.3% 23.4% 33.8% Oceania9.0%0.0% 32.6% 36.0% 22.5% RoOECD14.6%0.0% 18.8% 20.8% 45.8% RoW3.4%3.7% 36.9% 39.3% 16.7% SEasia 1.1%20.4%21.5% 23.1% 33.8% SouthAfrica1.1%5.1% 28.4% 43.2% 22.2% SouthAsia 12.7%0.0% 32.4% 31.0% 23.9% SSA0.1%13.0%16.7% 28.6% 41.7% USA5.4%2.5% 21.1% 47.4% 23.7% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 19 20. Computing Marginal ILUC by Crop EU Biofuel demand: x% mandate in 2020Foreign + 106 GJ extra demand in feedstock 2consumption Exports Domestic biofuel Foreign biofuel production production FeedstockFeedstock Feedstock FeedstockFeedstock Feedstock 12 3 12 3Domestic land Foreign land INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 20 21. Emissions Direct savings:FeedstockSet 1 1 MJ of fossile fuel: 25gCo2 eqWheat (EU) -45% What about biofuels?Wheat (Other)-32% Life cycle analysis (LCA)Maize (EU) -56% Consumption vs Production placeMaize (USA)* -46% Kyoto vs RED?Maize (Other)**-29% Indirect emissions:Sugar Beet -61% Land use effects:Sugar Cane -71% Forest (Primary + Managed)Soya -40% Other biotopes (Grassland Peatlands effects) Rapeseed -45% Direct savings (reductions) +Palm Oil -62% ILUC effects/20years Sunflower-58% (emissions) = Net effectsRole of certification ? INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 21 22. DATA INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 22 23. Major Efforts on Data: from Values to Quantities Improvement from GTAP7 Split for fertilizers and fossil fuels Disaggregation with specific procedure for Maize, Soybeans, Sunflower seed, Palm fruit, Rapeseed + relevant Oils + Co-products Production targeting (FAO) for all relevant crops Creation of a harmonized price database for calibration Case of co-products Creation of Ethanol and Biodiesel (2008 trade and production structure). Correction of some I-O data (e.g. China) Land use (AEZ GTAP database 2001 2004, + consistency with FAO and M3) Correction for Sugar cane AEZ in Brazil INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 23 24. General Remarks CGE: A world of value and prices But rarely real prices Calibration issueX Here, physical linkagesdX pY are crucial Substitution effectsdY pX Transformation effects Limits of CES and CET Constraints on the choice of elasticities Y INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 24 25. BASELINE INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 25 26. Defining a Relevant Baseline Macroeconomic targets Growth Oil prices EU fuel consumption for Road transportation Technology and yields Ludena and al. EU specific case Policies Trade policies Ag policies Biofuel policiesINTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 26 27. EU AD/CD on US Biodiesel2.001.801.60 EU imports, Mtoe1.40USA1.20RoOECD1.00LAC0.80IndoMalay0.60ChinaBrazil0.400.200.0020082020INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 27 28. Other Policies in the Baseline Agricultural policies Sugar reform in the EU End of the land set-aside Biofuel policies Status quo in the EU (3.3%=10.13 Mtoe in 2020) Mandate of 5% in OECD countries, China, Indonesia and Malaysia US mandate (51.64 Mtoe by 2020) Brazilian policy (14.05 Mtoe by 2020) World market: 88.79 Mtoe in 2020 (80% ethanol) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 28 29. RESULTS INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 29 30. Defining a Central Scenario Policy uncertainties Trade policies Status quo Full liberalization of biofuel (not feedstocks) in the EU Degree of ambition 5.6% ? 316 Mtoe in 2020: Total EU consumption for Road Transportation 31.6 Mtoe of renewable energies: 10% target 17.8 Mtoe of biofuels first generation by 2020 Compared to the current situation: 9.23 Mtoe in baseline 2008 (3.3%) Ethanol/Biodiesel mix: 45%/55% Parameter uncertainties Weak estimations on many parametersINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 30 31. Biofuels Production REFMandate 5.6% Mandate 5.6%+ Trade liberalization LevLevVar LevVarBiodiesel Brazil 0.36 0.371.81%0.372.92%Biodiesel China0.23 0.23-0.72% 0.23-0.76% Biodiesel EU27 8.15 9.04 10.92%9.0711.27%Biodiesel IndoMalay3.58 3.652.06%3.652.07%BiodieselLAC 0.45 0.485.91%0.486.10%Biodiesel RoOECD 3.24 3.24-0.01% 3.240.12%BiodieselUSA 3.46 3.45-0.18% 3.46-0.03%BiodieselWorld 19.4620.45 5.08%20.49 5.30%Ethanol Brazil 28.5132.7814.97%34.36 20.50%Ethanol CAMCarib 7.25 7.452.64%7.19-0.89%Ethanol China10.8110.83 0.18%10.83 0.16%Ethanol EU27 0.84 2.17 156.89% 0.44-48.23%EthanolLAC 0.69 0.690.95%0.702.21%Ethanol RoOECD 5.66 5.782.03%5.843.03%Ethanol RoW1.51 1.50-0.54% 1.50-0.49%EthanolUSA 29.1029.57 1.64%29.72 2.14%EthanolWorld 84.3890.77 7.58%90.57 7.34% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 31 32. EU Imports (2020) Mandate 5.6%+ Trade REFMandate 5.6% liberalization LevLevVar LevVarBiodieselBrazil0.00 0.006.21%0.005.49%BiodieselChina 0.00 0.00 14.45%0.0014.59%BiodieselIndoMalay 0.44 0.51 15.29%0.5115.46%Biodiesel LAC0.19 0.22 15.69%0.2216.04%Biodiesel RoOECD 0.00 0.00 12.92%0.0082.07%Biodiesel USA0.00 0.00 11.78%0.0012.10%BiodieselWorld 0.64 0.74 15.40%0.7415.79%EthanolBrazil0.92 5.53 502.82% 7.56 724.32%EthanolCAMCarib0.04 0.27 517.35% 0.01 -83.48%Ethanol USA0.00 0.01 546.96% 0.00 111.89%EthanolWorld 0.96 5.82 503.58% 7.57 685.98% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 32 33. EU Production by Feedstock Biodiesel2020Biodiesel100% 0.38 0.450.45 90% Share of EU production (MToe) by feedstock80%2.58 2.962.98 70% 60%Sunflower50% SoybeansRapeseed40% 4.33 4.584.60PalmFruit 30% 20% 10% 0.86 1.041.04 0% REFMandate 5.6% Mandate 5.6%+ Trade liberalization INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 33 34. EU Production by Feedstocks - Ethanol 2020 Ethanol 100%90% Share of EU production (Mtoe) by feestock 80% 0.990.43 0.24 70%60%Wheat 50% Sugar_cb 40% Maize 30% 0.980.35 0.16 20%10%0.07 0.200.040%REFMandate 5.6% Mandate 5.6%+ Trade liberalization INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 34 35. Agricultural Production (2020)CropsRegionREFMandate 5.6% Mandate 5.6%+ Trade liberalization LevLev Var Lev VarSugar_cbBrazil 913385 1001556.15 9.65%1045492.0814.46%RapeseedCIS571583.00 2.06%583.422.13%PalmFruit Brazil3117 3196.06 2.53% 3181.862.07%RapeseedBrazil 151153.15 1.59%152.851.39%RapeseedSSA108108.87 1.10%108.891.12%Sunflower Brazil 153155.23 1.24%154.911.03%Rapeseed RoOECD1384813969.92 0.88%13975.740.92%Soybeans RoOECD 3999 4020.98 0.54% 4025.620.66%SunflowerUSA2142 2155.86 0.64% 2156.200.65%SoybeansCIS 1129 1134.41 0.46% 1135.710.58%Soybeans LAC 7798178349.47 0.47%78428.700.57%SunflowerLAC5883 5916.54 0.57% 5916.340.57%Rapeseed LAC 141142.09 0.52%142.100.53%OthCrop Brazil9090 9034.08 -0.61%9002.90-0.96%Wheat IndoMalay 1 0.55 -5.92% 0.55-6.81%INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 35 36. Agricultural Value-Added (2020)1.20% Mandate 5.6%1.00%Mandate 5.6%+Trade liberalization0.80% 0.60% 0.40% 0.20% 0.00% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 36 37. Real Income Impacts (2020) Mandate 5.6%+ TradeREF Mandate 5.6% liberalizationLevLev VarLev VarBrazil 8568570.06%857 0.08%CAMCarib 444444-0.01% 444 -0.02%China 4593 45920.00% 4592 -0.01%CIS 1093 1091-0.18%1091 -0.17%EU2715182 151840.01%15182 0.00%IndoMalay564564-0.02% 564 -0.03%LAC 1605 1604-0.05%1604 -0.06%RoOECD8590 8589-0.01%8588 -0.01%RoW 5639 5633-0.11%5633 -0.11%SSA912911-0.12% 911 -0.12%USA 15219 152180.00%15218 -0.01%World 54697 54687-0.02% 54684 -0.02% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 37 38. Livestock Value-Added (2020) Scenario without trade liberalization0.10%0.05%0.00%Brazil USA EU27 World Cattle Other Animals-0.05% -0.10% -0.15% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 38 39. Cropland Extension by 2020BrazilCAMCaribChina CISEU27 IndoMalay LACRoOECD RoWSSA USA Mandate with trade liberalizationEU27: 460Brazil 6,866 Mandate without tradeliberalizationEU27: 780Brazil: 48130 2,0004,000 6,0008,00010,000 12,000Km2 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 39 40. Where the Land Extension Occurs? ForestmanagedBrazilEU271%Grassland Forest Pasture0% 0% primary15%Forestmanaged34% Other 12% Savanah Grassland 58%ForestprimaryOtherPasture 66%0% 14% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 40 41. Extension vs IntensificationMandate 5.6%Mandate 5.6%+ Trade liberalization Yield YieldLand use Total Yield YieldLand use TotalFactorsFertilizer Change Production FactorsFertilizer Change Production increase increaseincreaseIncrease Rapeseed 0.32% 0.04% 0.54% 0.90% 0.34%0.02%0.61% 0.97% PalmFruit0.10% 0.21% 0.31% 0.10% 0.20% 0.30% Maize0.04% 0.03% 0.01% 0.08% 0.03%0.03% -0.01% 0.05% OthCrop0.01% 0.00% 0.00% 0.01% 0.02%0.02% -0.01% 0.03% OthOilSds0.01% 0.01%-0.03%-0.01% 0.01%0.02% -0.03% 0.00% Rice 0.00% 0.00% 0.00% 0.00% 0.00%0.00%0.00% 0.00% Soybeans 0.04% 0.06% 0.12% 0.22% 0.05%0.07%0.15% 0.27% Sugar_cb 0.66% 0.54% 2.67% 3.87% 0.62%0.37%3.98% 4.97% Sunflower0.11%-0.10% 0.37% 0.38% 0.11% -0.10%0.39% 0.40% VegFruits0.00% 0.05%-0.06%-0.01% 0.00%0.05% -0.06%-0.01% Wheat0.06% 0.05% 0.00% 0.11% 0.00%0.04% -0.09%-0.05% INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 41 42. Land Use Emissions Mios tCO2eq by 20205.6% EU Mandate 5.6% EU Mandate + Full trade liberalization on biofuels Forest Biomass Organic Carbon inTotal land use Forest Biomass Organic Carbon inTotal land usechangeMineral Soil emissions changeMineral Soil emissionsBrazil 23.9733.3357.3028.5046.0274.52 CAMCarib 0.52 0.520.22 0.22 China 1.57 0.65 2.221.430.60 2.03 CIS 3.18 5.08 8.262.914.52 7.43 EU273.03 7.6010.631.804.50 6.30 IndoMalay 3.39 1.53 4.923.381.53 4.90 LAC 2.63 3.58 6.212.713.70 6.41 RoOECD1.08 2.47 3.550.872.34 3.22 RoW 1.20 0.94 2.140.880.71 1.59 SSA 1.49 4.50 5.991.364.04 5.41 USA 1.88 2.89 4.762.243.47 5.71 World43.41 63.09 107.50 46.0771.66117.74 Additional MtCo2 emissions from peatlands IPCC method0.17 Values are identical in both scenarios at 0.01 MtCO2eq Couwenberg(2009): 1.38 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 42 43. Carbon Balance Sheet (2020) Mandate 5.6%+ Trade REF Mandate 5.6% liberalization Total carbon release from forest biomass (MtCO2eq) 43.41 46.07Total carbon release from organic carbon in mineralsoil (MtCO2eq) 63.09 71.66EU Consumption of biofuel in 2020 (million GJ) 443743 746Annual carbon release from forest biomass(gCO2eq/MJ) 7.237.61Annual carbon release from organic carbon in mineralsoil (gCO2eq/MJ) 10.50 11.84Annual direct savings (gCO2/MJ) -60.55 -66.38Total emission balance on a 20 years period(gCO2/MJ) -42.82 -46.93INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 43 44. Marginal Crop-Specific ILUC, in 2020 Mandate 5.6%Mandate 5.6%+ Trade liberalizationWithoutWith PeatlandWithout Peatland With PeatlandPeatland effects effect effecteffect Ethanol 17.7417.7419.16 19.18 Ethanol SugarBeet 16.0716.0865.48 65.47 Ethanol SugarCane 17.7817.7818.86 18.86 Ethanol Maize 54.1154.1279.10 79.15 Ethanol Wheat 37.2637.2716.04 16.12 Biodiesel 58.6759.7854.69 55.76 Palm Oil46.4050.1344.63 48.31 Rapeseed Oil53.0153.6850.60 51.24 Soybean Oil 74.5175.4067.01 67.86 Sunflower Oil 59.8760.5356.27 56.89 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 44 45. Net Emissions Marginal, by Crop, in 2020 Mandate 5.6% Mandate 5.6%+ Trade liberalization Without Peatland With PeatlandWithout PeatlandWith Peatland effectseffect effect effectEthanol-49.69-49.68-53.55 -53.53Ethanol Sugar Beet -35.86-35.85 21.8421.83Ethanol SugarCane-53.95-53.95-55.53 -55.53Ethanol Maize3.643.65 62.8262.87Ethanol Wheat -7.00 -6.99-5.02 -4.95Biodiesel5.957.063.634.70Palm Oil -21.98-18.25-22.43 -18.76Rapeseed Oil 8.769.427.428.06Soybean Oil 24.0724.9618.9519.80Sunflower Oil8.739.387.748.37 INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 45 46. Non-linearity? (No Trade Liberalization) 4.60%5.60%6.60% 7.60%8.60%40.0020.00 0.00 -20.00 -40.00 -60.00 Annual carbon release (gCO2eq/MJ)Annual direct savings (gCO2/MJ) -80.00 Total emission balance on a 20 years period (gCO2/MJ) INTERNATIONAL FOOD POLICY RESEARCH INSTITUTEPage 46 47. Why Non-linearity? Biofuel mix Share of biodiesel vs ethanol in the marginal increase Modeling framework CES & CET Land use Productivity of new land: small or equal to existing average productivity To which extent the model reflects reality? Marginal productivity and utilityINTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 47 48. FINAL REMARKS INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 48 49. Conclusions Mechanisms more important than numbers A lot of research is needed to improve the quality of the parameters and modeling can still evolve too Limited amount of biofuels = positive effects But all biofuels are not equal We simulate a mandate with a strong ethanol component In our simulations, clear superiority of sugarcane ethanol from Brazil Limited environmental impacts Energy efficiency Cost efficiency No world wide effects on food prices INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 49 50. Answering Comments Already a lot echoes in the news and more pedagogy is needed UNICA welcomed the Commission's efforts to engage independent experts in its assessments but called for improvements in the current analysis. "The report currently contains a certain number of inaccuracies, so once these are corrected, we anticipate even higher benefits resulting from the use of Brazilian sugarcane ethanol. For example, the type of land for sugarcane expansion highlighted in the report does not take into consideration the agro-ecological zoning for sugarcane in Brazil, which prevents cane from expanding into any type of native vegetation," Desplechin added. A 2008 study published by The Netherlands' Wageningen University forecast that about 62% of the expansion of sugarcane in South-Central Brazil, the heart of the country's sugarcane harvesting region, would take place primarily on pasture land, while 37,8% would happen in lands previously occupied by other crops. The projection covered the period from 2008 to 2018. We do model land extension at the AEZ level and it plays a strong role in the reduction of emissions in our simulations. The fact that sugar cane will displace pasture lands and other crops is not a good argument. This is exactly the problem of ILUC and potentially the difficulty to implement good certification.INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Page 50