Regulatory Oversight Threatens Sugarcane Ethanol Supplies to U.S.

Leticia Phillips — posted 15/06/2013

Brazilian sugarcane ethanol has become an important component of America’s advanced biofuels supply. But language tucked away in a proposed Environmental Protection Agency (EPA) rulemaking could effectively end U.S. access to this clean renewable fuel.

Sugarcane ethanol producers are concerned the regulatory process is being used to impose onerous, anti-competitive requirements on foreign ethanol. So today, we submitted comments on EPA’s proposed “Regulation of Fuels and Fuel Additives: RFS Pathways II and Technical Amendments to the RFS2 Standards.” Our comments highlighted what’s at stake for advanced biofuels in the U.S. and underline the threat posed to reducing greenhouse gas emissions from transportation. While official comments close today – despite our request for an extension – EPA still wants to hear from you.

First, a little background. Under the Renewable Fuel Standard (RFS), sugarcane ethanol has become an important part of meeting America’s desire to use more advanced biofuels. Brazilian exports provided nearly one-quarter of the entire U.S. advanced biofuel supply in 2012, are projected to supply nearly 700 million gallons of fuel required to meet 2013’s targets, and could supply up to one billion additional gallons in 2014 – all with at least 61% fewer emissions than gasoline, according to the EPA.

Economic and Environmental Causes for Concern

However, EPA’s proposal as currently written would cause three principal problems that could halt the steady supply of this clean fuel.

1 – Cost-prohibitive requirements – If approved, every sugarcane ethanol producer exporting to America would be subject to a host of burdensome new requirements, like physically segregating the ethanol they export from the production plant all the way to port arrival in the U.S. and spending considerable sums on expensive third-party auditors and bonds. By our estimates, producers would have to post a compliance bond of roughly $1 million for every 5 million gallons exported to meet EPA’s proposed rules. In addition, every gallon of sugarcane ethanol would have to be segregated from the moment of production across each of Brazil’s 400 mills, and could no longer be combined for shipment to domestic or other international markets if even one drop was destined for America.

These new requirements will drive up production costs to the point where sending this advanced biofuel to the U.S. may no longer make economic sense. Biofuels thrive on the global market, and since half of Brazil’s sugarcane ethanol exports already go to other countries, new costly mandates could force exports away from America.

2 – Increased emissions – Segregated supplies would also boost associated transportation emissions of shipping sugarcane ethanol. Producers could no longer use pipelines or bulk storage facilities, rail shipments would have to be separated for exports, and ocean vessels might have to be shipped at less than capacity. More ships and trains mean more emissions – a change that seems incongruent to President Obama’s climate goals.

3 – Impossible requirements – Perhaps most concerning, proposed rules would force all Brazilian sugarcane ethanol producers to demonstrate compliance by January 1, 2013 – a deadline that passed more than seven months ago! By our calculations, $40 million in bond payments would be retroactively due on the 200 million gallons of sugarcane ethanol imported into the U.S. so far this year.

An Unnecessary Change

EPA’s intentions are laudable, and we support the agency’s goal of ensuring the regulatory system that tracks U.S. biofuel consumption (known as Renewable Identification Numbers or RINs) is accurate. But the current system monitoring foreign producers isn’t broken.

Significant protections already guard against RIN concerns, and the Brazilian sugarcane industry worked proactively with EPA to ensure Brazilian producers maintain records to comply with reasonable expectations. Plus, there has never been an instance of RIN fraud linked to Brazil.

These proposed changes appear to be a solution in search of a problem that will have (what we trust are) unintended consequences – namely threatening American access to one of the few advanced biofuels on the market today. We hope EPA will take our comments into consideration, and keep our reliable supply of clean and renewable sugarcane ethanol flowing into U.S. vehicles.

Increasing the cost of low carbon sugarcane biofuels by 20 cents per gallon all the while increasing transport emissions doesn’t seem like the right way to implement the RFS. If you agree with us, make sure the EPA hears your concerns.

A Renewed Voice in the Debate Over Renewable Fuels

Leticia Phillips — posted 28/05/2013

Sugarcane ethanol plays a modest but important role supplying the United States with clean renewable fuel. Last year, Brazilian sugarcane ethanol comprised only 3 percent of all renewable fuel consumed by Americans, but provided nearly one-quarter of the U.S. supply of advanced biofuels. Is that amount significant? It is if you care about cleaner air and a healthier planet! The 460 million gallons of sugarcane ethanol Americans used in 2012 cut CO₂ emissions by the same amount as planting nearly 57 million trees and letting them grow for 10 years.

These vital facts are getting lost in a debate that’s heating up in Washington, D.C. over renewable fuels. The key policy – known as the Renewable Fuel Standard – was enacted to improve U.S. energy security and reduce greenhouse gases. And the Renewable Fuel Standard (RFS) is clearly working as Congress intended when measured in terms of increasing American consumption of renewable fuel. It has grown production and use of biofuels in the U.S. from around 4 billion gallons in 2006 to 15 billion gallons last year. But critics and special interests are lining up to urge changes by both Congressional legislators and environmental regulators.

So sugarcane ethanol producers, along with our colleagues in the advanced biofuels industry, plan to step up our profile. We’ll take a more active role setting the record straight on the importance and benefits of this advanced biofuel – starting with new information available at our dedicated website: sugarcane.org/rfs. Here you’ll find a brief summary of the issue and our position that Congress and environmental regulators should maintain American access to clean, advanced biofuels like sugarcane ethanol. We also answer many frequently asked questions. Topics like: What is sugarcane ethanol? Why would Americans want it? What are advanced biofuels and other biomaterials from sugarcane? And many more.

You’ll also see more regular posts from me and other collaborators here on the Sugarcane Blog. So to kick things off, I’d like to reiterate some guiding principles (first articulated by my friend and colleague Joel Velasco) that will serve as ground rules for our blogging and participation in the RFS debate:

1 – Honesty. Americans’ trust in government keeps getting lower. I think this decline is mostly because our policy discussions are no longer honest debates, but a litany of overheated talking points that all too often veer from the truth. So, on this blog, we commit to sticking to the truth and promise to admit if we come up short. Honesty is the best prescription to regain the public trust.

2 – Consistency. Cherry-picking may be a good strategy at an orchard, but not for public policy. Being consistent means practicing what we preach, demanding accountability and, yes, being fair and balanced.

3 – Sweet Humor. There’s nothing wrong with mixing a little fun with work, and we’ll try to do that on this blog as well. Like this: In Brazil, a common sugar industry saying is “drink the best, drive the rest.” That’s because the national drink in Brazil, the “caipirinha”, is made with sugarcane alcohol, which, when it fills the tank of our cars, is called ethanol. We’re eagerly awaiting the “booze vs. fuel” debate to heat up. Any takers?

So take a look around and check back whenever you want an update. You’ll find that the United States and Brazil are the world’s largest biofuels producers and exporters. Both countries recently removed trade barriers protecting their domestic ethanol industries and have taken initial steps towards greater energy cooperation. And I firmly believe that Brazil and the U.S. have a responsibility to work together to build a global biofuels market that provides clean, affordable and sustainable solutions to the planet’s growing energy needs. That’s the ultimate goal of the campaign we renew today.

Why do Americans pay more for sugar?

Leticia Phillips — posted 15/05/2013

Most Americans who start the day stirring a spoonful of sugar into their coffee would be surprised to learn they generally pay more for the sweetener than residents of other countries buying it on the global market.  Major American commodities traders track two prices for sugar – a world price and a more expensive U.S. price.

Why the difference? According to the Wall Street Journal, “U.S. prices tend to be higher than world prices because the U.S. restricts sugar imports as part of the [U.S. Department of Agriculture’s] price-support program” for sugar (subscription required).  One USDA economist recently estimated this price-support scheme could cost American taxpayers $80 million in 2013 on top of requiring U.S. consumers to pay artificially higher prices for raw sugar, candy and other confections.

Given these sour facts and movement in the U.S. Congress to reform the sugar program, I’m not surprised the American Sugar Alliance is trying to change the subject to defend its price supports. Last month, the group released a report arguing that Congress must maintain current U.S. sugar policy “to shield consumers from foreign market manipulation,” particularly by Brazil which subsidizes sugar production according to the American Sugar Alliance.

The influential Cato Institute took a look at the group’s report and summarized its findings succinctly:
The sugar lobby for years have been complaining that we need the sugar program, which keeps prices high for producers by keeping imports strictly controlled, in order to enable “reliable” (i.e., managed) access to sugar. Now they think sugar is too available (i.e., cheap)? For sure, if I was a Brazilian taxpayer, I would baulk at the thought of subsidising (if that in fact is the situation) the sugar addictions of my richer neighbours to my north, but as a consumer? Muito obrigado! The sugar lobby’s talking points are getting ever more creative. But none of them are valid. 

I added emphasis on the last line above and was tempted to end my rebuttal there!  However, the Brazilian Sugarcane Industry Association felt obligated to set the record straight on this misleading report which overstates Brazilian support for domestic producers and turns a blind eye to comparable programs in the U.S.  You can download our point-by-point response here, and see for yourself how the American Sugar Alliance’s report reveals “the desperate need of the American sugar industry to keep the U.S. market closed and protected from competition.”

UNICA @Rio+20, be ready to commit!

Géraldine Kutas — posted 19/06/2012

The day we have all been waiting for has come.  

Over the last few months, governments have been working on a document that needs signatures of more than 130 international leaders coming to Rio from all over the world.

Keeping in line with the level of ambition associated with the summit the paper is called “The Future We Want”. It is meant to commit its signatories to do their best to put the world on a more sustainable development path and ultimately a green economy.

But just how much agreement governments reach should not be the only measure of success for Rio+20. At Rio, private sector and NGOs will be working in partnership across platforms to chart a path towards a more sustainable use of resources. Our commitment to each other is just as real and as binding. I’m excited that UNICA will be part of this historic moment, and we hope that what’ve learnt is a good blueprint for others.

I have previously talked on this blog about the future that UNICA wants and the urgency to take action and act responsibly.

In a world of rising energy demand, decreasing traditional energy supplies and a rapidly growing population, renewable energies are essential. And because the Brazilian experience shows that they can be an engine for economic growth there is even more good reason to hear us out. Times are tough for everyone, but if you can open up market opportunities, grow GDP and satisfy consumer demand for clean fuels, there is a solid business case.

We’ve been preparing for Rio+20 for some time now because we see an opportunity, economic as much as environmental. We have also been actively telling our story,  and with great authority, through the “Dialogues for Sustainable Development”, a UN platform for civil society participation in official discussions that has given an outstanding support to all our energy proposals. And for those of you here in Rio or those who’ll be following us from far, we plan to continue showing our commitment to a green economy and engaging with our stakeholders at a number of events this week:

On June 18^th, UNICA talked about the potential of sustainable bio-energy at an event organised by the Global Bioenergy Partnership (GBEP).

On June 19^th, UNICA will give a speech at the ICTSD Trade and Sustainable Development Symposium called “Enabling Climate Mitigation, Fostering Low-Carbon Growth”.

On June 20^th, UNICA will take part in the World Green Summit.

On the 21^st, we will venture into the Bioeconomy debate alongside Novozymes and Electrobras.

And we will round off our busy Rio schedule on June 22^nd with a presentation on the opportunities and challenges for bioenergy in Brazil at a conference organised by the CNA.

Sound busy? It’s not all.

A few days ago, we unveiled our latest contribution to understanding the potential of Brazilian sugarcane. We have launched an interactive digital tool that tells the story of our industry, provides timely information about market developments, and gives an overview of prospects and future uses of sugarcane ethanol. And it’s good fun to use it.  You can also download the app on your mobile devices and connect to our facebook page.

As you all see, much of the action in Rio+20 will not just take place at the negotiating table. We invite you to follow the debate and take part in the conversation.

We hope that this conference will mark the beginning of the future we all want.

The future we want

Géraldine Kutas — posted 22/04/2012

Today is Earth Day.

And this year we have a number of reasons to celebrate it. Perhaps the most significant one is the chance to build the future we want.

In June, the world will see Brazil hosting the largest forum ever in the history of the United Nations: Rio+20. The UN Conference on Sustainable Development represents a historic opportunity to define pathways to a more sustainable future. World leaders, along with thousands of participants from the private sector, NGOs and other groups, will come together to shape a more sustainable world where economic growth, poverty reduction, social equity and environmental protection go hand-in-hand.

The fact is that by 2050, our planet will be a home to nine billion people. Nine billion people who will need to feed themselves and power their lives. In a world of rising energy demand, decreasing traditional fossil energy supplies and growing concerns about climate change, we all urgently need to act.

At Rio+20, the international community will seek ways to make theoretical solutions become reality. Many of those solutions already exist; the goal is to scale them up, share best practice. And here is where we at UNICA have something to say.

At a time when most countries around the world are searching for clean, commercially viable, renewable options, sugarcane has proved to be a successful alternative to reduce greenhouse gas emissions in Brazil while diversifying energy supplies and reducing our dependence on oil.

In the last decade alone, sugarcane has been the centrepiece of Brazil’s renewable energy expansion strategy, and this gives Brazil a leading role in the search for low-carbon solutions to climate change, while promoting economic growth.

All this is largely possible because of sugarcane’s unique versatility. Just look at sugarcane derived ethanol – it is an affordable transportation fuel that, compared to gasoline, reduces C0₂ emissions by an average of 90 percent, and diminishes local air pollution and harmful emissions. Brazil replaced almost half of its gasoline consumption with ethanol, using just 1.4% of its arable land.

Bioelectricity is another great asset. Clean electricity generated from the stalks and straw of sugarcane (bagasse) has a lower environmental impact than fossil fuel thermoelectric plants or large hydroelectric power stations.

Sugarcane has the potential to help reshape the world energy markets, as high-tech innovation is unlocking many other uses of this plant that go beyond food, ethanol and bioelectricity, such as bioplastics, biohydrocarbons and biochemicals.

The Brazilian experience represents a successful example of what happens when private sector innovation and know-how and supportive policy go hand-in-hand. I am glad that industry will play a greater role at Rio+20, especially in helping demonstrate that many of the smart solutions we need to fight climate change already exist. We just need our governments to put in place incentive structures and enable the environment required for those solutions to grow in scale. Rio+20 gives Brazil the opportunity to lead by example – we hope that our unique journey can be a useful one for others.

The future we want is not just a mere ‘wish list’. The future we want is reflected every day through actions and decisions. We need energy to power our lives and our economies. But we no longer have to rely on fossil fuels – today we have a choice that allows us to tread lightly on the environment. On a day like today, I/we give our governments a vote of confidence and hope Rio+20 marks the difference between ‘what we say’ and ‘what we do’.

Shouldn’t every day be Earth Day?