Sugar – the sweet spot of an EU-Mercosur trade deal

Géraldine Kutas — posted 05/09/2017

EU trade policy is on a roll. After the conclusions of a deal with Japan, the largest bilateral Free Trade Agreement yet, the EU has set its eyes on a deal with Mercosur. Such a deal offers huge potential for EU industry: it would greatly improve access to emerging markets of 250m+ consumers and many of Europe’s key sectors –automotive, machinery, chemicals and pharmaceuticals, but also agricultural and food producers such as garlic, olive oil, wine and pears – are set to benefit. Since this would be the first trade deal that Mercosur closes with another major trading block, the EU would have a first mover advantage, allowing EU businesses and products to establish themselves in the Mercosur markets before other competitors can move in. Altogether it would strengthen the EU’s role as a trading power and create jobs and growth.

Negotiations have historically been slow, but the Mercosur countries are showing unprecedented political will and strong alignment to get a deal done. This year talks progressed on many issues such as sustainable development, technical barriers to trade and public procurement. A measure of Mercosur’s willingness can be seen in opening up its procurement markets to European business – the first time ever it has opened these up to third parties.

However, some so-called ‘sensitive’ areas have not yet been included in the negotiations, in particular sugarcane products – sugar and ethanol. For Brazil this is critical. The sector is highly competitive and provides more than one million jobs. Brazil is the world’s largest producer and exporter of sugar but accounts for only 4% of all EU sugar imports, so there is clear room for growth with little to fear. In comparison, Mauritius alone accounts for 28% of EU sugar imports and EPA/EBA countries for 54%. Increasing sugar imports from Brazil will promote social and economic development. Brazilian legislation stipulates that sugar exports from Brazil to Europe be sourced in the Northeast region of the country, one of most vulnerable regions of the country. The GDP per capita of this region was US$5,834 in 2015 (US$ 8,757 for Brazil). Compare that with the US$9,252 GDP of Mauritius in the same period[1]. In a recent intervention in Brussels, Brazil’s chief negotiator Ambassador Ronaldo Costa made very clear that he “could not return home without sugarcane on the table”.

Also European industry would gain from imports of Brazil’s sugarcane products. Ethanol is an important feedstock for the chemical industry and today the high tariffs on bioethanol puts the European bioindustry at a disadvantage. In contrast there are practically no import duties on fossil inputs. The same is true for sugar which is a key raw material for the European food and drink industry, but also for the chemical sector.

So far the European sugar industry is rejecting any concessions to Brazilian sugarcane, claiming the industry is highly subsidised. In particular, they confuse and miss-label the high economic efficiency, industrial integration and product diversification of Brazilian sugar mills as cross-subsidisation. In its 2013-14 WTO notification Brazil reported a total aggregate measurement of support (AMS) for sugarcane of 0.24% of the value of its sugar production. The EU reported an AMS of 0.48%, or double, in the same period. OECD measurements of producer single commodity transfer show that over the past five years (2012-2016) support granted to sugar producers in Europe was 22 times higher than that granted in Brazil[2].

Successful trade agreements require give and take, and Mercosur countries are prepared to grant important advantages to EU industries, more than they have ever offered before. If the EU really wants to increase its access to the major growth markets of Mercosur and reap the benefits of a close partnership in South America it needs to also be open to concessions in the areas that are of critical importance for Brazil and other Mercosur countries. The EU cannot have its sugar-coated cake and eat it.

The original text of this blogpost was published in the Parliament Magazine website on September 5, 2017.

[1] World Bank and IBGE
[2] average 16.89%of the value of production in the EU compared to 0.74% in Brazil

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.

(Re)committing to the Paris Agreement? Europe needs to lead by example

Géraldine Kutas — posted 14/07/2017

As the US president visited Paris for Bastille Day celebrations, his host his rolled out all of the paraphernalia of state, the pomp and ceremony so reportedly beloved by his American counterpart, in a charm offensive many have suggested was also an effort to get the latter to reconsider his stance on the Paris Agreement. And it seems to be working – Trump’s statement during the joint press conference that “something could happen with respect to the Paris accord: we’ll see what happens; we will talk about that in the coming period of time”, was not insignificant.

Is this a coming in from the cold? Did the president keenly feel the chill wind of isolation at the G20 which in many respects became the G19, especially on climate change? No-one expects Trump to abandon wholesale his fossil-focused energy policy, but there was a clear softening of rhetoric during the Paris visit – quite the coup for neophyte Macron.

Macron famously parodied Trump’s “make America great again” rhetoric with his quip of making the planet great again. With recent announcements of France’s ambition to ban the sale of all petrol and diesel cars by 2040, Macron is clearly positioning himself as a European leader in environmental stewardship and clean transport.

One of the EU’s signature initiatives in demonstrating its leadership on climate change is the Clean Energy Package that proposes measures towards clean energy transition. But the Commission’s proposal for a 27% target for renewable energy is too low. Proposals by European Parliament committees to increase that target to 35% or 45% are a step in the right direction.

Transport is responsible for fully one quarter of the EU’s greenhouse gas emissions. Which is why it makes no sense for the Commission to lump all conventional biofuels in together and propose cutting their maximum share in the transport mix from 7% to 3.8%. We have repeatedly stated that biofuels need to be considered on their performance, not their source.

Brazilian sugarcane ethanol is one of the best-performing biofuels, cutting GHG emission when placed in the EU market by more than 70% compared to petrol, and still by more than half (55%), even when the GLOBOIM study’s ILUC factors are taken into account. Stated concerns about land use change are therefore no grounds on which to justify the reduction of sustainable biofuels such as Brazilian sugarcane ethanol.

Integrating sustainable biofuels now into European transport in significant numbers will really help EU leaders achieve 2030 targets, paving the way for more ambitious 2050 targets. Just look at Brazil, where the deployment of sugarcane ethanol in flex-fuel cars has directly cut transport CO₂–equivalent emissions by 370m tonnes in just 13 years.

It’s clear that it is perfectly feasible to significantly cut transport emissions if we use the clean technologies available today. If the EU is serious about meeting its own Paris Agreement commitments, it must therefore adopt serious and bold transport emissions reduction targets. As MEP Bas Eickhout’s stated, European policymakers are only credible in criticising Trump if they can themselves deliver at home. It would be an irony indeed if the Americans came back into the Paris Agreement fold, only for the EU to spectacularly wimp out on its own targets.

But the very real fear is that Member States will reject more ambitious targets. Macron will need to brandish his environmental credentials by not letting that happen. And EU policymakers should take advantage of their summer holidays to ponder on Eickhout’s comment. Let’s hope they return to Brussels in September with emboldened ambitions when it comes to transport emissions.

Wishing you all a great summer!

What’s your first-generation biofuels literacy?

Géraldine Kutas — posted 22/04/2017

Today we celebrate International Mother Earth Day. A day when we  should all stop  and think of how the Earth’s ecosystems provide us with life and sustenance and try to also understand how our actions  impact the environment, and ultimately our survival. This year’s theme set by the UN – “Environmental & Climate Literacy” – couldn’t be timelier.

Many people want to take action on Earth Day by planting a tree or informing themselves on climate change solutions and environmental conservation. However, in today’s era of post-truth politics and information overload, we often struggle to make sound judgements about what is best for the environment  and what is agenda-driven rhetoric. Same goes for lawmakers who are in charge of setting the policies that will lead us to a more environmentally friendly economy and lifestyle.

A perfect example is the issue of conventional biofuels. First generation biofuels have become the victim of misinformation and emotional headlines stating that all food-based biofuels are responsible for hunger and deforestation. The fact is that not all conventional biofuels are created equal, and that climate change itself threatens food security and ecosystems far more than biofuels.

While countries around the world have made enormous strides towards fighting climate change, some of the proposed policies in Europe lack the supporting evidence to justify their adoption. For example, the new Renewables Energy Directive aims to cut the use of food-based biofuels from the current 7% to 3.8% by 2030. MEPs and EU Member States have already started examining the proposal. In the spirit of today’s theme, I urge them to consider the evidence that will help to better understand and inform the options that Europe has to reduce GHG emissions in transports, and reach its Paris Agreement targets. My hope is that the following undisputable facts serve to add sound science to the debate regarding first-generation biofuels, and in particular, one of the most sustainable and available alternatives to conventional gasoline – Brazilian sugarcane ethanol.

– Brazilian sugar cane sold in Europe achieves among the highest GHG emission savings of all biofuels produced at scale: over 70% relative to fossil fuel alternatives and more than 55% when estimated ILUC emissions are accounted for.

– It is sustainable throughout its full life-cycle. In sugarcane fields, carbon stocks amount to 60 tonnes of carbon per hectare (including above and below ground carbon stocks). Sugarcane only needs to be replanted about every six years which reduces tilling of land that releases carbon dioxide.

– It has no role in the fuel vs food or deforestation debate. Brazilian sugarcane ethanol is produced in biorefineries that generate sugar, clean fuel and bioelectricity. It occupies only 1.5% of all arable land in Brazil and is grown 2500 km away from the Amazon rainforest.

There is an urgent need to set the record straight, to listen to facts and not rhetoric, and to make logical choices for alternative fuels and the decarbonization of the transportation sector. Instead, the new Renewables Energy Directive has largely disregarded the evidence and intends to phase out first-generation biofuels completely. This effectively shuts the door to one of the cleanest and most sustainable energy sources to ensure low-emission mobility.

Europe’s leaders often tout that the EU is a leader in the fight against climate change and environmental protection. However, the proposed biofuels legislation is in stark contrast to EU emission goals.  We should perhaps look outside our bubble and learn from other regions. Brazil has replaced more than 40% of its gasoline consumption with sugarcane ethanol, saving 370m tonnes of GHG emissions since 2003, and has done so in parallel with setting strict environmental laws to protect the tropical rainforest. The Agro-ecological Zoning for Sugarcane initiative limits the amount of land to be used for sugarcane to approximately 7.5% of Brazil’s territory, seven times more than what is currently used, and prohibits the clearance of native vegetation to expand sugarcane cultivation anywhere in the country.

Taking time to think about #EarthDay17 and all the benefits a clean environment provides, we should ask the critical questions regarding the choices Europe is making. In the name of “Environmental & Climate Literacy,” these choices should be backed by evidence and not by false, emotional statements. As the UN puts it, “education is the foundation for progress,” and policy lacking scientific justification is the foundation for regression.

Not all biofuels are created equal…Thoughts on the proposed RED II

Géraldine Kutas — posted 24/03/2017

The revision of the Renewable Energy Directive represents a tremendous opportunity to foster the further development of clean energy in the European Union (EU) for decades to come. The 2009 Directive has had a critical impact on increasing the share of renewables in the EU through binding targets, and a predictable overall framework for renewable energy implementation.

But the current proposal lacks ambition and is missing a key opportunity in helping to reach the Paris Agreement targets, especially with regards to the transportation sector, which accounts for almost a quarter of Europe’s GHG emissions.

In my opinion, the critical flaws of the proposed Renewables Energy Directive as it stands are as follows:

– The proposed target for renewables in transportation increases only 0.6% – from 10% currently to, in the best case scenario, 10.6% in 2030.
– No distinction is made among conventional biofuels. Renewable fuels, which are sustainable and have superior environmental benefits, such as Brazilian sugarcane ethanol, are inappropriately lumped in with worse-performing biofuels.
– Capping ALL conventional biofuels irrespective of their individual merits is not cost-effective or results-focused.
– The technology needed to produce significant amounts of lignocellulosic biofuels at a commercial scale is not yet mature and the cost is very high – making the 3.6% target quite ambitious.

Brazilian sugarcane ethanol is classified as an advanced biofuel by the US EPA, and by California’s Air Resources Board, even when ILUC is considered. These are transparent, scientific and credible benchmarks. It achieves the highest GHG emission savings of all biofuels produced at scale (over 70% relative to fossil fuels, and more than 55% when accounting for ILUC emissions). We therefore call to distinguish biofuels based on GHG emissions savings, rather than on the feedstock used. More specifically, a strict sustainability criteria based on GHG emissions savings should be applied to all biofuels that are currently capped at 7%, and only those biofuels that fail to meet these criteria thresholds should be capped at 3.8% in 2030.

A complete overhaul of climate and energy policy is needed if we are to reach the ambitious EU emission reduction targets, and sustainable conventional biofuels need to play a key role. A comprehensive EU energy policy which incentivises and promotes sustainable conventional biofuels will help the EU to meet its key climate abatement and energy security objectives in 2030 and beyond.

Second-generation ethanol will not happen without a robust and healthy first-generation ethanol market to provide business certainty for the development of more advanced renewable fuels. We should and must think long-term and continue to invest in R&D, but we must also act now and consider and implement all of the available solutions in transitioning towards low-emission mobility. Brazilian sugarcane ethanol can provide the EU with environmentally-friendly transport fuel to help decarbonise road transport.

If Europe is to achieve its ambitious targets and reduce its reliance on fossil fuels in transportation, the Commission should not pick winners. All sustainable alternatives should be promoted.