Brazilian Sugarcane Ethanol Can Help America Achieve Its Climate Goals

Géraldine Kutas — posted 31/08/2019

The Renewable Fuel Standard (RFS) is a vital component of the Environmental Protection Agency’s (EPA) policy to enhance America’s energy security and reduce the impact of transportation emissions on the environment. As global leaders in search for clean, renewable options, the Brazilian Sugarcane Industry Association (UNICA) has been a strong supporter and contributor of the RFS program since its inception. The industry is committed to continuing to help the RFS achieve its carbon saving goals.

Brazilian sugarcane ethanol is one of the most climate-friendly biofuels available in the market today. In fact, in 2010, the EPA determined that Brazilian sugarcane ethanol achieved an average reduction in lifecycle green-house-gas (GHG) emission of 61% compared to a gasoline baseline, making it an advanced biofuel.

The EPA has published proposed renewable fuel standards for 2020 and biomass-based diesel volume for 2021. We continue to support the implementation of the RFS program, but there are certain elements of the proposal that we believe the EPA should review. As our comments to EPA show, Brazilian sugarcane producers’ top tier recommendations are a increase in projection for imports for Brazilian sugarcane ethanol imports that are closer to the volumes expected from Brazil in 2019, and the implementation of an incentive multiplier program to help reduce the shortage of advanced biofuel.

Sugarcane Ethanol Available in 2020 Will Be Much Greater Than Current Projections

We believe EPA has underestimated the amount of Brazilian sugarcane ethanol actually imported in 2018. Reports suggest that in 2018, Brazil’s ethanol production reached more than 8 billion gallons, a 9% increase compared to 2017 production levels. Historically, we know that when the market conditions are right, Brazil can supply the Unites States with large volumes of advanced biofuel, and this is the case today.

The Agency suggests that only 60 million gallons of imported sugarcane ethanol will be reasonably available on the U.S. market in 2020. We believe EPA needs to increase this projection, as it is based on incomplete numbers from the U.S. Energy Information Administration (EIA). EPA’s own data monitoring system (EMTS) shows that, in 2018, over 76 million gallons of Brazilian sugarcane ethanol generated D5 RINs and current data already shows that more than 67 million D5 have been generated from imported sugarcane ethanol so far in 2019. The U.S. Census Bureau also shows the same 76 million gallons of Brazilian sugarcane imported in 2018. The pace of imports in 2019, coupled with market intelligent and projections, suggest that Brazil will export to the U.S. close to 135 million gallons that will generate D5 RINs in 2019. Thus, the RFS’ projections should reflect these considerations and use this number a a basis for sugarcane ethanol imports from Brazil in 2020.

Global Industry Trends Are Reshaping the Market for Sugarcane Ethanol

EPA could strengthen the proposal by taking into account important global trends that are likely to increase quantities of Brazilian sugarcane ethanol available for import in 2020. First, recent changes in Japan’s biofuel policy that allow for the use of corn-based ethanol will result in a greater amount of sugarcane ethanol available for shipment to other markets, including the United States. By 2020, said impact will be obvious, and the U.S. will be seeing availability of higher volumes of sugarcane ethanol than in recent years.

The second global factor to consider is the low price of sugar. As a result of lower market prices, Brazilian producers have expanded ethanol production. When prices are low mills tend to distill more sugarcane into ethanol. UNICA is not expecting any change in the market that would substantially hinder Brazil’s ethanol export capacity in 2020, therefore EPA should count on this trend to increase its projection of sugarcane ethanol imports for that year.

Lastly, we encourage the EPA to recognize that the competitiveness of sugarcane ethanol could increase in the short-term as there is a possibility that the U.S. biodiesel tax credit might not be extended, as it has been the case for the past three years.

Given these trends we believe EPA should considerably increase its imports projections for sugarcane ethanol from Brazil. Brazil has shown that when market conditions are right—as they are now—the industry can deliver significant amounts of clean, climate-friendly ethanol to U.S. consumers.

Incentive for Continuous Improvement

Brazilian sugarcane ethanol producers encourage the constant advancement of sustainable practices throughout the industry. In order to empower continuous improvement in GHG performance, the EPA could adopt a new incentive multiplier program for the most climate-friendly biofuels. Specifically, we recommend an approach that would help reduce the advanced biofuel shortage by allowing producers to generate an additional amount for every 10% reduction in their lifecycle GHG emissions below 50%.

As the global market for ethanol increases, Brazil will continue to be a strong ally in America’s quest to meet its clean energy goals. Brazilian sugarcane producers are willing and proud to contribute to the increased use of advanced biofuels in the EPA’s RFS program. We hope the Agency keeps on the path to fostering the production and use of as much advanced biofuels as the market can deliver.

Advanced Biofuels Could Play a Larger Role Greening America’s Transportation Sector

Leticia Phillips — posted 17/08/2018

The Renewable Fuel Standard (RFS) celebrates its thirteenth anniversary this month and remains a foundational energy policy that enhances America’s energy security and improves the environment. Brazilian sugarcane biofuel producers are proud of the modest but important role they have played helping make the RFS a success, especially when it comes to supplying the U.S. with clean, advanced biofuels that offer superior environmental benefits.

The Environmental Protection Agency has proposed new RFS volume requirements for 2019, and there are certainly elements of the proposal that deserve broad support. At the top of our list is increasing the advanced biofuel requirements by 12 percent to 4.88 billion gallons in 2019 and recognizing that Brazilian sugarcane ethanol can supply at least 100 million gallons of that amount.

But EPA could also strengthen the proposal in ways that would encourage advanced biofuels to play a greater role greening the U.S. transportation sector. Here are two suggestions that Brazilian sugarcane producers recommend in our official comments submitted to the Agency today.

Expect More from Advanced Biofuels

We think the 2019 volume requirements should be even higher. Because under the right market conditions and with appropriate regulatory incentives, the advanced biofuel industry – including Brazil’s sugarcane industry – could produce more.

EPA designates sugarcane ethanol from Brazil as an advanced biofuel because it reduces greenhouse gases by at least 61 percent compared to gasoline. Brazil currently produces more than seven billion gallons of sugarcane ethanol each year, and typically makes between 400 million and 800 million gallons of its annual production available for other countries to import.

However, Brazil could export considerably greater volumes of sugarcane ethanol to the United States. In the past, Brazil has exported a record of 1.35 billion gallons to the United States in one year (2008) and 164 million gallons in one month (September 2008). At a mere 100 million gallons, EPA is underestimating the volume of sugarcane ethanol that can be made available to the U.S. market under the right conditions.

Create New Incentives for the Cleanest Fuels

One way EPA could help nudge those market conditions into a more favorable posture is by creating an incentive program that would give extra credit to the most climate-friendly biofuels. The RFS statute clearly grants EPA this authority, but to date, the Agency has not exercised it.

As a potential model, EPA need look no further than its program for regulating greenhouse gas emissions from motor vehicles. Under these regulations, vehicle manufacturers are required to meet fleet-wide average emission standards. The fleet-wide average is generally determined by taking the weighted average of the emissions associated with each vehicle produced by a manufacturer. However, EPA regulations create an incentive multiplier for electric and other advanced vehicles, which allows manufacturers to double-count these vehicles for purposes of determining their fleet-wide average.

Even though the Clean Air Act does not specifically contemplate such a multiplier, EPA determined it could create such an incentive to “promote the penetration of certain ‘game changing’ advanced vehicle technologies.”

We encourage EPA to create a similar incentive for game-changing advanced biofuels that exceed minimum RFS requirements.

Continuous Improvement

Over the past six years, nearly 1.3 billion gallons of sugarcane ethanol imported from Brazil flowed into American vehicles. During this time, sugarcane ethanol comprised only one percent of all renewable fuels consumed by Americans but has provided more than six percent of the entire U.S. advanced biofuel supply. Brazilian sugarcane producers take pride in this track record of success and are eager to contribute even more.

The RFS is now a teenager, and EPA must continue to play a thoughtful role guiding the program through unavoidable growing pains. We hope the Agency will stay laser focused on fostering the development of advanced and cellulosic biofuels.

Thoughts on Brazil’s Temporary Tariff-Rate Quota for Ethanol

Leticia Phillips — posted 03/04/2018

As the world’s largest ethanol producers, the U.S. and Brazil enjoy the benefits of trading biofuels. Our two countries have worked together for many years to build a global biofuels market that provides clean, affordable and sustainable solutions to our planet’s growing energy needs.

That’s why many observers were surprised last year when Brazil imposed a limit on duty free ethanol imports. With the tariff-rate quota (TRQ) policy in place since September, let’s take a closer look at this temporary solution to what UNICA hopes will be a temporary problem.

The Context
China and Europe recently closed their biofuel markets, making Brazil the only major market that was open to receive excess ethanol supplies. Because of this domino effect, ethanol imports to Brazil skyrocketed in 2017. Brazil received triple the amount of foreign ethanol last year than it did in 2016 and five times more than 2015 imports.

Long term, UNICA wants to address this challenge by removing trade barriers and working with other international leaders to expand free trade of biofuels. But in the short term, Brazil’s government needed to act for two reasons:

• Environmental: Brazil intends to fulfill its commitments made under the 2015 Paris Climate Agreement and had to safeguard against displacing lower-carbon fuels with higher-carbon fuels.

• Economic: The Brazilian sugarcane sector generates nearly 1 million direct jobs and is still recovering from a crippling financial crisis during which approximately 20 percent of sugarcane mills closed.

A Fair Compromise
As Brazilian officials mulled options for how best to respond, UNICA worked to moderate extreme positions and produce a fair compromise. We advocated—and the Brazilian government adopted—a temporary response that still allows a large volume of duty-free exports into Brazil.

Up to 158.5 million gallons of foreign ethanol can still enter Brazil annually without paying any import tax. For two years starting last September, volumes above that amount will pay a 20 percent tax. But there is no limit on the total volume of foreign ethanol that can be exported to Brazil.

The annual duty-free limit of 158.5 million gallons equals Brazil’s average annual ethanol imports from 2014 to 2016. In practice, the TRQ maintains what was the status quo before the 2017 spike, while protecting Brazil’s environment and economy from such an unwelcome surge generated by other closed markets. UNICA views this temporary response as a reasonable compromise that moderates what would have been harsher alternatives, such as imposing a 20 percent import tax on all ethanol as allowed by Mercosur policy.

The duty-free limit resets quarterly, and so far, the TRQ system appears to be working as intended. During the first three months under the new policy (September to November 2017), Brazil imported the maximum 39.6 million gallons allowed to enter duty free each quarter. An additional 26.7 million gallons also entered the country during that time, with a 20 percent import tax.

What’s Next
UNICA remains committed to removing trade barriers and working together with other biofuel leaders toward our ultimate goal of a global market for clean, renewable fuels. For starters, we will continue to collaborate with our allies and competitors on opening Asian markets, which should generate billions of gallons of new demand.

Opening the closed U.S. market for sugar also would help. While our American friends tend to view sugar and ethanol policy as unrelated issues, the lack of open trading partners for sugar directly pressures sugarcane ethanol producers in Brazil, especially those in the northeast. This region is economically underdeveloped but politically influential in the capital city of Brasilia. Producers in the northeast were some of the loudest voices calling for a tariff on imported ethanol and would most directly benefit from access to larger sugar quotas on the international market.

Finally, our organization is optimistic that RenovaBio—a new program in Brazil modeled on both the U.S. Renewable Fuel Standard and California’s Low Carbon Fuel Standard—will be a game changer. By providing more predictability for investors and incentives for technological innovation, RenovaBio should stabilize Brazil’s sugarcane sector and benefit global biofuels players.

NOTE: This essay originally appeared in the April issue of Ethanol Producer Magazine.

Brazil to Launch Ambitious Biofuels Program

Leticia Phillips — posted 04/12/2017

Building, in part, on the successes and lessons learned from two signature American policies, Brazil is poised to launch a government program that will support the continued development and use of low-carbon, clean biofuels. This new initiative, dubbed RenovaBio, will play a key role in meeting Brazil’s ambitious commitments made at the Paris climate summit in December 2015.

Brazil pledged to reduce its greenhouse gas (GHG) emissions by 43 percent of 2005 levels by 2030. Achieving that goal will require biofuels to supply approximately 18 percent of the country’s energy mix by 2030 through greater sugar cane ethanol production, expanded second-generation biofuels and additional biodiesel for transportation.

Ethanol and bioenergy produced from sugar cane already constitute 15.7 percent of Brazil’s energy mix, replacing more than 40 percent of gasoline demand and avoiding 600 million tons of carbon dioxide emissions since the beginning of the ethanol program in the 1970s. Growing to 18 percent in a developing country is a reasonable target, but the right incentives and policies will be necessary to support this progress. That’s where RenovaBio comes in.

HOW IT WILL WORK
Brazilian drivers today consume ethanol in two ways. First, all gasoline sold in Brazil is required to contain 27 percent ethanol. Second, most Brazilians drive flex-fuel vehicles allowing ethanol to compete directly with gasoline on price at the pump. But Brazilian consumers have enjoyed subsidized gasoline prices for many years, which weakens demand for ethanol. RenovaBio will alter this dynamic and encourage fuel distributors to boost sales of ethanol versus gasoline by requiring them to lend a hand meeting GHG reduction goals.

The Brazilian biofuel program is expected to incorporate two elements that will be familiar to American policymakers and industry representatives.

Similar to California’s Low Carbon Fuel Standard, RenovaBio will assign a carbon intensity rating to the specific biofuel produced at each mill. This system will reward producers who invest in manufacturing biofuels as cleanly and efficiently as possible.

Fuel distributors will then be encouraged to buy more of this clean biofuel through a credit trading program that works much like renewable identification numbers (RINs) under the federal Renewable Fuel Standard. With RenovaBio, distributors will be required to purchase Emissions Reductions Certificates (or CBIOs in Portuguese). Mills that produce fuels with low carbon intensity rankings will receive a larger allotment of CBIOs than mills producing fuels with higher carbon intensity.

Just as the U.S. EPA is required to publish renewable volume obligations annually, Brazil’s National Economic Policy Council (CNPE) will adjust the number of available CBIOs and distributor purchasing requirements each year. Fuel producers and distributors will then be allowed to buy and sell CBIOs on the open market, introducing a new price signal that places a value on low carbon emissions.

RenovaBio enjoys support not only from biofuel producers but also Brazil’s automotive sector. Earlier this year, UNICA and our country’s national association of automobile manufacturers, Anfavea, signed a joint memorandum aligning each industry’s strategies for delivering efficient transportation that meets Brazil’s commitments under the Paris climate agreement.

WHAT’S NEXT
Informed observers expect action soon—either by Brazil’s congress or an announcement by Brazilian President Michel Temer issuing what is essentially an executive order to implement the program—that will clarify many key details. What is clear already, however, is that RenovaBio will be another evolution in smart biofuels policy that deserves emulation by other countries.

Last year in this space, I argued that successfully meeting Brazil’s climate commitments will depend on three fundamental pillars: predictable policy, sustainable production and technological innovation. With RenovaBio, Brazil’s government will take a major step forward on the first pillar. Meanwhile, biofuel producers remain laser focused on the second and the third. Working together, we can make a cleaner, lower-carbon future possible for our children and grandchildren.

NOTE: This article originally appeared in the December issue of Ethanol Producer Magazine.

UNICA Proud to Sponsor Platts Conference on Global Sugar Markets

Leticia Phillips — posted 24/07/2017

Brazil may be the world’s largest producer of sugar, but the nation’s sugarcane harvests aren’t just winding up in your cup of coffee. They’re flowing into gas tanks as low-emission sugarcane ethanol, generating clean electricity from biomass to help fight climate change, and creating the future of clean renewable fuel through next-generation biofuels.

As the world’s sugar industry gathers at the 4th annual Platts Kingsman Miami Sugar Conference, it’s worth considering the modest but important role Brazilian sugarcane ethanol exports play in meeting not only the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS) and California Low Carbon Fuel Standard (LCFS) targets, but the world’s biofuel needs.

Platts’ conference will examine major trends facing the global sugar industry, and representatives of Brazilian sugarcane industry will share insights on topics like ethanol fuel supplies, sugar production and exports, and industry sustainability efforts – all reasons why we’re proud to be official conference sponsors.

REGIONAL SUGAR MARKETS AND CHALLENGES OF OVER-SUPPLY

Brazil sent nearly 630 million tons of sugarcane to crush in 2016-2017, producing nearly 34 million tons of sugar, and exporting nearly 27 million tons. As the top global producer, Brazil helps demonstrate how sugar supplies can be brought to market and avoid oversupply challenges.

Sugarcane ethanol has proven to be an extremely effective outlet for Brazil’s sugar output. Brazil currently produces more than 7 billion gallons of sugarcane ethanol per year, and typically makes between 400-800 million gallons of its production available for other countries to import. Over the past five years, nearly 1.2 billion gallons of sugarcane ethanol imported from Brazil flowed into American vehicles, providing nearly one-tenth of all advanced fuels consumed by Americans, with at least 61 percent fewer emissions than gasoline.

Those numbers are significant, but they pale in comparison to Brazil’s domestic consumption. Ethanol and bioenergy produced from sugarcane already constitutes 15.7 percent of Brazil’s energy mix, replacing more than 40 percent of gasoline demand and avoiding 600 million tons of carbon dioxide emissions since the ethanol program began in the 1970s – all while using less than 1.5 percent of the country’s arable land.

UPDATES ON ETHANOL PROGRAMS AND COGENERATION

Even with existing sugarcane ethanol successes, Brazil is advancing technology further into the future. Increased production efficiencies mean even more sugarcane ethanol flows from fields to fuel tanks.

Indeed, Brazil has the potential to replace 14 percent of global transportation fuel demand without altering current sugar production – a big boost in the fight to cut emissions. By 2050, global energy needs could double, increasing emissions up to 80% unless we pursue low-carbon fuel options.

Sugarcane ethanol producers are also pushing the envelope on cogeneration using leftover stalks (bagasse). Self-sufficient sugarcane mills use bagasse to power their operations instead of fossil fuels, often producing enough power to sell clean electricity back to the grid. In 2016, Brazil produced 15 million megawatt-hours of bioelectricity from cogeneration, and technology improvements could help this technology supply more than 20 percent of domestic electricity demand by 2023.

BRAZIL’S RECIPE FOR A SWEETER SUGAR(CANE) FUTURE

Add it all together, and the “Brazilian experience” of using sugarcane to power a renewable energy future is a recipe for success on how stable policy and investment in new technologies can fuel a green economy while cutting emissions and dependence on foreign oil.

This is an important point. The World Energy Council reports fossil fuels generate 63 percent of total global emissions, with transportation fuel generating 28 percent of U.S. emissions and 17 percent of Brazilian emissions.

So when it comes to creating a sweeter future for sugar and biofuels, follow the leader – Brazil.

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MORE ABOUT THE PLATTS KINGSMAN MIAMI SUGAR CONFERENCE

Leticia Phillips, North American Representative, The Brazilian Sugarcane Industry Association (UNICA) will participate in a session titled, Sustainability for the Sugar Industry on Tuesday, September 12, at 4:45 p.m. The session will address:

– Changes in the expectations of sugar buyers
– A new outlook in the next few years
– How are sugar producers planning to meet the requirements of buyers?
– Examples from Brazil and other countries

To register to attend the conference, please click here.