Seminar on Biofuels Study in Mozambique

Transcription

1 Seminar on Biofuels Study in Mozambique Potential and challenges in the international market for ethanol and bio-diesel André Meloni Nassar Director-General, Brazilian Institute for International Trade Negotiations Research team Luiz Fernando do Amaral and Marcelo Moreira July 27

2 OUTLINE Biofuels market drivers Ethanol and biodiesel feedstocks Biofuel policies Biofuel world market Current situation Perspectives

3 Raw Material FOSSIL World Production (million tones, 25) Fuel RENEWABLES Fuel Raw Material Gasoline 1237 MT (53,8 BGJ) Sugar Cane 1,292 MT Petroleum MT (184,9 BGJ) LPG 391 MT (11,9 BGJ) Diesel* 177 MT (46,1 BGJ) Kerosene 92 MT (3,9 BGJ) Ethanol 36 MT (,96 BGJ) Biodiesel 3,2 MT (,12 BGJ) Total (Energy Equiv.)** = 115,7 BGJ 1,1 BGJ Renewables/Total:,9% Notes: 23 for palm, gasoline, diesel, LPG and Kerosene. * Distillated Diesel. LPG: Liquefied petroleum gases. ** BGJ = Billions of Giga Joules. Sources: FAO, Oil World, F.O. Licht, LCM, EIA. Elaboration: ICONE. Corn 72 MT Soy 214 MT Palm 8 MT Castor Seed 1,4 MT Wheat 628 MT Rapeseed 47 MT Sunflower 31 MT

4 Diesel and Gasoline Consumption India China Japan EU-27 US Diesel* Gas Billion liters Note: * Highway diesel. Based on Cera s Asian Fenix Scenario. Source: CERA, Dawn of a New Age. Elaboration: ICONE.

5 Biofuel World Market: Growth Drivers Biofuels Program: Main Drivers Climate change; reduction on green house gases emission Support to farm income; rural development Energy security; high oil prices Regions/countries examples European Union China and India (future) European Union Unites States Developing countries United States Developing countries China and India (today) Domestic policies Mandatory blends Tax exemption Direct subsidies Tax exemption Supply policy Domestic and imports Domestic Domestic and imports Trade policy Low border protection High border protection Low border protection Feedstock efficiency Very important (energy balance) Low importance Low importance Natural resources availability (land and water) Very important Low importance Very important Source: Icone

6 Conditions to Create a World Market for Biofuels Drivers: climate change and energy security; Technical standardization accepted worldwide; Elimination of border protection (tariffs and no tariff barriers); Stable, organized and widespread supply and demand Supply: efficient feedstocks; Demand: mandatory blends and tax exemption; No negative impacts in food market; Structured financial market: future markets, pricing mechanisms, liquidity, risk management, etc. Source: Única, Icone

7 The World Biofuel Market Positive impact Negative impact Impact s result varies (ii) Demand Stable supply (i) Supply (iv) Financial Market Replacement Targets Energy security and environmental concerns Oil prices Biofuel use Pure Fuel Additive (iii) Policies Agricultural feedstock: Productivity (liters/ha) Energy balance GHG emissions Availability Technical Improvements Cellulosic ethanol GMOs Agricultural techniques Tax exemptions Mandatory blends International Trade Policy Regime World Trade Organization Barriers to trade Tariffs Border protection measures

8 Available water and land resources: Potential for developing countries 3º 3º 2º 4º 1º Tropical zone 1º 2º Note: Harvest area in 24, potential arable lands. Source: FAO (2); FAO (27). Elaboration: ICONE. Mapa elaborado com auxílio do programa Philcarto, disponível em Water Land ND - + Xº Top cane producers Xº Top palm producers

9 Sugar Cane: Source of Energy 1/3 JUICE 276 kg/t 5% humidity 1/3 BAGASSE Hydrolysis Hydrolysis 165 kg/t 15%humidity 1/3 STRAW SUGAR (153 kg/t) ETHANOL CO-GENERATION OF ELECTRICITY Source: UNICA MOLASSES Straw: tops and leaves of sugar cane Cellulosic ethanol revolution: when will it take place?

10 OUTLINE Biofuels market drivers Ethanol and biodiesel feedstocks Biofuel policies Biofuel world market Current situation Perspectives

11 Fossil Energy Balances (estimates) 1 9 ETHANOL BIODIESEL Sugar Cane Wheat Sugar Beets Corn Palm Oil Waste vegetable Oil Soy Rape Note: Figures represent the amount of energy contained in the listed fuel per unit of fossil fuel input. Source: Various, compiled by World Watch Institute.

12 Ethanol Yields 7, Liters per Hectare 6, 5, 4, potential 3, 2, 1, Sugar cane Brazil Beet EU Sugar cane India Corn US Cassava Thailand Wheat EU Source: IEA International Energy Agency (25) e MTEC.

13 Biodiesel productivity 4,5 Liters per Ha 4, 3,5 3, 2,5 2, 1,5 1, 5 Palm Rapeseed Sunflower Castor seed Soy Cotton Notes: Brazilian productivity for palm, castor seed and cotton (25). European productivity for Rapeseed (26). Sunflower and Soy values represent average of Brazilian, European and North American productivities (22 and 25). One liter of oil assumed to produce one liter of biodiesel. Sources: IEA 25,MAPA and GMF

14 Ethanol: Production Costs (25) (US$ cents per litre) Brazil Thailand Australia Cane Cane Cane US China Corn Corn Europe Wheat/Beet Source: O. Henniges and J. Zeddies, Economics of Bioethanol in the Asia-Pacific: Australia-Thailand-China, in F.O.Licht s. World Ethanol and Biofuels Report, vol. 3, n. 11, 25.

15 Green House Gases reductions: ethanol s vs. gasoline s emissions % Grains (US / EU) Beet (EU) Sugar cane (Brazil) -2% -4% -6% -8% -1% -12% Note: Percentage reduction is compared with gasoline s GHG emissions. Considered overall emission in the fuel lifecycle (well-to-wheels) Source: IEA International Energy Agency (24) and Macedo, I. de C. et al. (24). Elaboration: ICONE.

16 Brazil US EU 26/7 25/6 25 Ethanol Ethanol Ethanol Biodiesel Plants in operation Feedstocks Sugar cane Corn Cereals, sugar beet, potatoes, etc. Oil from rapeseed, sunflower, palm and soy, animal fats, frying oils etc. Areas cultivated hectares) (mn *Cereals: 51,5 *Sugar beet: 2,2 6 Feedstocks production (mn tons) *Cereals: 253 *Sugar beet: % of feedstocks dedicated to biofuels 48% 2% *Cereals: 1.6% *Sugar beet:.6% 4% rapeseed Yields (t/ha) *Cereals: 6.2 *Sugar beet: 66 *Rapeseed: 3.4 *Sunflower: 1.7 Biofuels production (mn liters) 17,411 18, ,458 Productivity (liters/hectare) 6,8 3, *Cereals: *Sugar beet: 7 25 *Rapeseed: *Sunflower: 833 % of biofuels consumption in fossil fuels 4% 3.8%.6% 2% Imports (mn liters) -- 2, Exports (mn liters) 3,

17 OUTLINE Biofuels market drivers Ethanol and biodiesel feedstocks Biofuel policies Biofuel world market Current situation Perspectives

18 Public Policies for Biofuels Government intervention on ethanol production, consumption and markets usually occurs in three different forms: 1. Tax exemptions in the production chain 2. Compulsory blend (mandated use) 3. Subsidies for producers and blenders 4. Import protection from lower-cost suppliers

19 Public Policies for Bio-ethanol Gas+Ethanol Consumption (billion liters of gasoline equivalent) Canada Thailand Colombia Argentina Philippines 2% 5% 5% 1% 1% Blends US* 3% 222 EU-27 China Japan Brazil India 3% permited Variation range Current Goal date Mandated 25% Mandated in some areas Biofuel consumption goal/total gas+ethanol consumption % 5% 1% 15% 2% 25% Notes: Gas+Ethanol consumption estimates for 26 (Brazil s data for 25). *US percentage blends were calculated using US gasoline consumption estimates and the 27 Energy bill approved by the Senate (all renewable transportation fuel consumption assumed to be fulfilled by ethanol). Percentage in volume. Sources: USDA, MAPA, GTZ, FO LICHT, ÚNICA, CERA, AMI, RFA, World Watch Institute, Datagro. Elaboration: ICONE.

20 Ethanol for fuel ends: MFN applied import tariffs 7% 6% 63.% 5% 4% 3% 2% 4.% 39.% 3.% 27.2% 1% %.% EU(1) China(2) US(1) India(3) Japan(4) Brazil(5) Note: (1) ad valorem equivalent, average, for non denaturized ethanol (majority of imports). (2) 24 applied tariff for denaturized ethanol (majority of imports). (3) 26 applied tariff for denaturized ethanol ( majority of the imports). (4) 23 applied tariff for non denaturized ethanol for other ends (not beverage). (5) Exception from the External Mercosur tariff (TEC) of 2%. Source: WTO, Comtrade, India customs union, Secex and Eurostat. Elaboration: Icone

21 US Ethanol: Petroleum vs Corn prices Petroleum price (US$/barrel) Breakeven (no subsidies) Subsidy (US$,51/gal) Corn price (US$/bushel) Source: Prices obtained at PERKINS, S. European Conference of Ministers of Transport using USDA & US EIA data; cost equivalence calculation: Bear Stearns, Ethanol 21: Beyond Corn, 26. Breakeven obtained at TYNER, W.E. U.S. Ethanol Policy possibilities for the Future. Purdue University. Available at:

22 The US targets for biofuels Target To accomplish the target* Date law/proposal Billion liters of ethanol Target year Tons of corn % current corn area Current production % In force 25 Renewable Fuel Standards % Last stages of Congress approval procedures 27 Of which: Bill approved by the Senate Corn starch ethanol Advanced biofuels n.a. 15% 63% n.a. Advanced biofuels are defined as fuel derived from renewable biomass other than corn starch (it includes cellulosic ethanol and/or sugar ethanol). Note: * based on current productivity and yields. Ethanolconsidered as the only biofuel in the achievement of the targets Source: USDA and Governors Ethanol Coalition. Elaboration ICONE.

23 Brazilian Fuel Ethanol History Incentives, mandatory blends, new technologies Deregulation, Sugar Exports Flex Fuel Global Market? Ethanol production (billion liters) PROÁLCOOL FIRST PHASE Mandatory blend and subsidies. ETHANOL CRISIS at the end of the 8s Oil prices down. Brazilian government cuts support. Higher sugar prices affect ethanol production and sales of E-1 cars went down rapidly Anhydrous Hydrous 72/73 73/74 74/75 75/76 76/77 77/78 78/79 79/8 8/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/9 9/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/ /1 1/2 2/3 3/4 4/5 5/6 6/7e 1973 Oil crisis & low sugar prices PROÁLCOOL SECOND PHASE Fiscal incentives and tax exemptions for ethanol production and E-1 fueled cars. All gas stations must obligatorily sell ethanol. Low ethanol prices (65% of gasoline s) guaranteed at the pump. 23 FLEX FUEL Flex fuel vehicles begin to be sold. Source: Datagro, 26 (dados). Elaboration: ICONE.

24 Biodiesel Programs in the World US Energy Security approach EU Objective is to reduce oil dependency from the Middle East Environmental approach 2.% of biofuels in % of biofuels in 21 8.% of biofuels in 22 BRAZIL Social approach Objective is to promote social inclusion by creating jobs and increased farm income Elaboration: Abiove

25 Biodiesel Excise duty in the EU (Oct 25) Italy.4 Diesel Spain.27 Biodiesel Sweden.36 Netherlands.6.37 France.9.42 Germany.47 UK Source: Rabobank euros/litre

26 Ethanol Excise duty in the EU (Oct 25) Italy Petrol Spain.4 Bioethanol Sweden.53 Netherlands France Germany.66 UK Source: Rabobank euros/litre

27 OUTLINE Biofuels market drivers Ethanol and biodiesel feedstocks Biofuel policies Biofuel world market Current situation Perspectives

28 World Ethanol Production Billion liters US Brazil e Others India EU China Note. E=estimates. Source: F.O. LICHT, UNICA., CARD.

29 World Ethanol Exports billion liters 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1,,5 hõe Brazil, e Others C. Rica- Jamaica Saudi Arabia China South Africa US EU Note: e=estimates (US and Brazil final data for 26, South Africa data was projected considering preliminary data for 26, for other countries projections were made based on growth rate). Only the extra block trade was considered in the case of EU. Fonte: F. O. Licht, USITC, EUROSTAT e MDIC.

30 World Ethanol Imports 6. billion liters Other Nigeria 3. Korea India 2.5 Japan Latin Am. 1. EU.5 US e Note: e=estimates (US and Brazil final data for 26, South Africa data was projected considering preliminary data for 26, for other countries projections were made based on growth rate). Only the extra block trade was considered in the case of EU. Fonte: F. O. Licht, USITC, EUROSTAT e MDIC.

31 Brazil Ethanol Exports (Billion liters) High volatility of prices and destinations (buffer) Lack of international standards Others India Nigeria Korea Japan EU.5. Latin Am. US Note: Ethanol defined by NCMs and Source: MDIC-SECEX

32 US: Fuel Ethanol and MTBE Consumption MTBE banned in California, New York and Connecticut MTBE Jan-99 Mar-99 May-99 Jul-99 Sep-99 Nov-99 Jan- Mar- May- Jul- Sep- Nov- Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-2 Mar-2 May-2 Jul-2 Sep-2 Nov-2 Jan-3 Mar-3 May-3 Jul-3 Sep-3 Nov-3 Jan-4 Mar-4 May-4 Jul-4 Sep-4 Nov-4 Jan-5 Mar-5 May-5 Jul-5 Sep-5 Nov-5 Jan-6 Mar-6 May-6 Jul-6 Sep-6 billion liters Ethanol Source: EIA. Elaboration: ICONE.

33 US: Ethanol Imports Brazil Caribbean Basin China Others 27: : 92 M liters 25: 82 M liters 26: 2.74 M liters 5 MTBE ban dez/6 jan/7 fev/7 mar/7 abr/7 jan/4 fev/4 mar/4 abr/4 mai/4 jun/4 jul/4 ago/4 set/4 out/4 nov/4 dez/4 jan/5 fev/5 mar/5 abr/5 mai/5 jun/5 jul/5 ago/5 set/5 out/5 nov/5 dez/5 jan/6 fev/6 mar/6 abr/6 mai/6 jun/6 jul/6 ago/6 set/6 out/6 nov/6 Million liters Source: USITC. Elaboration: ICONE.

34 World Vegetable Oil and Fats Production Million tons /1 1/2 2/3 3/4 4/5 5/6F Others Brazil Argentina India US Malaysia Indonesia EU-25 China Note: F = forecast. Source: Oil World 26.

35 Vegetable Oil and Fats Production Growth 1 = production in /1 2 Indonesia Argentina Brazil India Malaysia China Others US EU-25 8 /1 1/2 2/3 3/4 4/5 5/6F Note: F = forecast. Source: Oil World 26.

36 Net Vegetable Oil and Fats Trade Million tons 4 3 Net Exporters Brazil Argentina 2 1 Malaysia Indonesia China Net Importers /1 1/2 2/3 3/4 4/5 5/6F EU-25 India Others Note: F = forecast. Source: Oil World 26.

37 Source: Oil World Annual 26.

38 Billion MT EU-25: Vegetable Oil Imports ( ) Argentina Canada Malaysia Ukraine Others Brazil Indonesia Russia US Palm Sunflower Soy Rape Note: HS defining the products: Soy (1571,1579), Palm (15111,15119,151321,151329), Sunflower (151211,151219), Rape (15141,151411,151419,15149,151491,151499). The exports of a country indicated in the key may be included in others. Source: Eurostat.

39 OUTLINE Biofuels market drivers Ethanol and biodiesel feedstocks Biofuel policies Biofuel world market Current situation Perspectives

40 Billion liters Biofuels Projections Ethanol Production Biodiesel Consumption Note: Projections based on the announced targets and capacities of each country. Source: CARD Iowa State (Prof. Bruce Babcok for US), FAPRI, ACTI, FO Licht, UNICA, ABIOVE, TOEPFER International and ICONE Billion liters US EU-25 Malaysia China Others Brazil Argentina Indonesia India

41 World Ethanol Production (Billion liters) 54.1? 18.5 US Others.2.3 Canada Colombia Brazil.2.2 Argentina.1.3 Turquie Fonte: CARD (Iowa State University), F.O. Licht, UNICA.. Elaboração: ICONE. Mapa elaborado com auxílio do programa Philcarto, disponível em EU South Africa.3.3 Ukraine.8.9 Russia Japan China Thailand India.2.2 Indonesia.2.2 Australia Legenda

42 Biodiesel World Consumption (billion liters) US EU China.2 Malaysia Outher India 4.9 Brazil 4.7 Legenda Argentina.2 Indonesia Nota: 5% blend in Brazil for 212/13. Source: Toepfer International, ABIOVE, TOEPFER. Elaboration: ICONE. Mapa elaborado com auxílio do programa Philcarto, disponível em 41

43 22 Projections: Ethanol Imports on Principal Markets Scenario 1 Scenario Billon liters India and Canada China US Japan 25 EU Note scenario 1: US corn to ethanol yield growing at 1.4% aa, EU targets in Volume. Scenario 2:US corn to ethanol Yield growing at 1% aa, EU target in volume. Source: ICONE India and Canada EU China US Japan

44 22 Projections: Ethanol Exports by Principal Suppliers Scenario 1 Scenario Billon liters Brazil Preference (EU and US) Colombia Note scenario 1: US corn to ethanol yield growing at 1.4% aa, EU targets in Volume. Scenario 2:US corn to ethanol Yield growing at 1% aa, EU target in volume. Source: ICONE Brazil Preference (EU and US) Colombia

45 Impact of Tariff Reduction on US and EU Ethanol Imports 4 35 US (223-3) 47,62 billion litres 3 Billon liters US ( 29-16) 1,56 billion litres UE (26-23) 56,5 billion litres Note scenario 1. Source: ICONE

46 EU Vegetable oils supply and demand Million liters Total Consumption Biodiesel Food and other Production Total Net Imports Total Assumptions: 5 feedstock considered (rapeseed, sunflower seed, soybeans, cotton seed and palm). All seed production assumed to be crushed. Same density assumed for all oils (1.15 kg/l ). Biodiesel consumption assumed to be 6.6% of diesel consumption (linear growth from 5.75 percent of biofuels incorporation in 21 and 1 percent in 22). Fixed per capita consumption of oil for other ends. Production growth based on area and yield growth projections. area t = f (area n, rotation of cultures, area t ), yield= f( yield n, yield n,s )

47 Select commodities: nominal prices Soybean Oil US$/t Soybeans Soybean Meal Raw Sugar jan/ mai/ set/ jan/1 mai/1 set/1 jan/2 mai/2 set/2 jan/3 mai/3 set/3 jan/4 mai/4 set/4 jan/5 mai/5 set/5 jan/6 mai/6 set/6 jan/7 Corn Notes: Soybean Meal: CBOT-Chicago Soybean Meal Futures (first contract forward) Minimum 48 percent protein Soybean Oil: CBOT-Chicago Soybean Oil Futures (first contract forward) exchange approved grades, US$ per metric tonne Soybeans: CBOT-U.S. soybeans, Chicago Soybean futures contract (first contract forward) No. 2 yellow and par, US$ per metric tonne Raw Sugar (NYBOT Sugar 11) Corn: CBOT-Chicago Board of Trade Source: CBOT, NYBOT, ABIOVE, IMF. Elaboration: ICONE.

48 Corn use in the US Animal feed Milhon Ton Fuel Exports Seeds, domestic and industrial consumption Source: USDA; USDA Baseline Elaboration ICONE.

49 Projected prices and planted area in the US Corn Soybean M Ha US$/t M Ha US$/t Source: Projection presented by Prof. Bruce Babcock at the WWC Biofuel seminar (feb27).

50 US: Perspectives for Ethanol Ethanol has grown due to environmental pressures (green house gases emissions, MTBE substitution, 26 Energy Policy Act) and subsidies to corn production. Energy security is a growing and very important concern, especially if oil prices remain high (imports represent 64% of oil consumption). Costs of corn ethanol are higher than sugar cane ethanol. Gasoline taxes are low in the US (18%, compared to 44% in Brazil). Even with tax exemptions, US ethanol is not competitive. Recent growing demand is due to MTBE phasing out. Long term growth is based on the adoption of mandatory blends. Great potential for ethanol consumption if there is an officially mandated blend. Positive perspectives after Senate Bill approval. Flex fuel cars are not the most effective way to increase ethanol consumption in the US.

51 Ethanol Perspectives in Other Countries Europe: large variety of feedstocks used in ethanol production (cereals account for the major part, followed by sugar beet and wine). Potential for ethanol production growth from sugar beet as a consequence of the 26 sugar reform. Potential imports from ACP countries (which have duty free access to the European market). Growing concern with sustainability (pressures for production standards) Japan: 3% blend represents a consumption of 2 billion liters of ethanol. Main concern is security of supply, as Japan does not produce ethanol. China: an ethanol program was launched (potential for 4.5 billion liters per year). However, main prospects for biodiesel (diesel consumption is three times higher than gasoline). India: new stages of the ethanol program are planned (today a 5% blend is required in 9 provinces, which represent a demand of 56 million liters). National expansion is expected in the near future with a blend between 1% and 2%. Main challenge is stability in local production.

52 EU: Perspectives for Biodiesel Growing demand for vegetable oils caused by biodiesel production. Expansion of rapeseed areas are constrained by rotational limits reached already in most producing regions. Sunflower may have greater potential for area extension, however, yield potential is limited by water availability. To meet the commission targets, imports will need to increase. Because EU technical norms limit the utilization of soy and palm oil blend in diesel, the majority of imports should be rapeseed/rape oil and sunflower seed/oil. The decision to import oilseeds or oil will depend on investments made to increase EU crushing capacity. Imports of vegetable oils for food consumption will also rise to substitute the quantities of oil produced in the EU that will be dedicated to biodiesel. Great potential for soy and palm oil (developing countries).

53 CONCLUSIONS 1. Biofuel use will expand if there is interest by consumers (ex. Global warming) and governments (public policy). 2. Impacts on agriculture may be significant as a result of the global competition between the 4 Fs in a period of supply expansion. 3. Brazil is the country with the largest potential for biofuel expansion mainly based on two issues: incorporation of new technologies (agricultural & industrial) and higher croplivestock land integration. 4. Cellulosic ethanol will potentially diversify the number of producers. However, tropical developing countries will still have competitive advantages in biomass production.

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