Impact of biofuel policies on markets and trade. Trade and Markets Division

Transcription

1 Impact of biofuel policies on markets and trade

2 World oil prices and estimated ethanol costs of production from maize and sugar US cents per litre M1 1997M1 1999M1 21M1 23M1 25M1 27M1 Ethanol cost from sugar Crude oil in ethanol equiv Ethanol from maize

3 Key questions How important are key bio-fuel policies in affecting global biofuel and commodity markets? tariffs, tax exemptions, subsidies, mandates Is the potential sum effect of key bio-fuel policies large?

4 Cosimo-Aglink Model OECD FAO Agriculture Outlook 27 baseline for initial implementation and testing collaborative work with large credit to OECD for the important modules of USA, EU and Brazil Aglink-Cosimo Model about 2 commodities 58 countries and regions ethanol and biodiesel markets 17 countries results presented are preliminary, we are still testing and refining key parameters and specifications

5 Biofuel Policies USA, EU, Brazil, Canada highly detailed policy structure Other developing countries Tariffs Taxes Subsidies Blending mandates

6 Impact of a 1% increase in world oil price on world commodity prices Crude oil Biodiesel Ethanol Maize Sugar Molasses Veg oil

7 US tariff/tax credit make ethanol from maize economic in US, not elsewhere World ethanol price 4 3 US ethanol price US ethanol net cost from maize

8 Mozambique will EBA limit expansion of ethanol production? 7 US cents per litre Moz. ethanol price Ethanol net costs from cane

9 Lessons from simple scenarios: Tariff liberalization US tax exemption for ethanol and biodiesel US tariff/tax exemption Global mandates sum effect

10 Impact of limited tariff liberalization on biofuel prices 25 Percent change World ethanol price World biodiesel price

11 Mozambique ethanol tariff liberalization lowers incentive for biofuel production? 7 US cents per litre Scenario price Base price Scenario cost Base cost

12 Estimated changes in net trade due to tariff reductions 1 Absolute change USA Brazil EU

13 Change from Base % Removal of US tax exemption for ethanol: impact on world prices Ethanol Biodiesel Maize Veg oil

14 Removal of US tax exemption for ethanol: impact on ethanol margin US cents per litre Base Removal of US tax exemption

15 Removal of US tax exemption for ethanol: impact US balances Change from Base Net trade Ethanol production Ethanol consumption

16 Removal of US tariff and tax exemption for ethanol: impact on net trade Change from Base USA Brazil

17 Removal of US tariff and tax exemption for ethanol: impact on world prices Change from Base % Ethanol Biodiesel Sugar Maize Veg oil

18 Blending targets mandates or obligations what is the cumulative impact? Ethanol Biodiesel Target Year Target Year Australia 35m litres - Brazil 25% 5% 213 Canada 5% 21 2% 212 Columbia 1% - Ethiopia - - EU 1% 22 1% 22 India - - Indionesia - 1% Malaysia - 5% 28 Mozambique 5% 5% Peru 7.8% 5% Philippines 5% 1% South Africa 2% 213 Tanzania 2% 2% Thailand 1% Turkey - - United States 6b litres/maize 215 4b litres 212 Viet Nam 5% - Source: OECD, FAO

19 Impact of Mandates/Obligations on markets: impact on world prices Change from Base % Ethanol Biodiesel Veg Oil Maize Sugar

20 Conclusions The biofuel industry is new and rapidly evolving, and only recently economic without policy intervention. Policies have serious implications for international markets and trade, and prices. Distorted biofuel/agriculture markets affect location and development of the global industry. International policy disciplines are needed to prevent a repeat of global policy failure.