Global Biofuels Market & Policy Developments

Global Biofuels Market & Policy Developments Liisa Kiuru Executive Director, International Fuel Quality Center lkiuru@ifqc.org Presented to Missao Tecnica Internacional de Logistica: Petroleo

Presentation Overview About the IFQC and GBC Common drivers and feedstocks Regional biofuels policy review Ethanol & biodiesel blending limits, current usage and future usage requirements Global production, trade flows and capacity Biofuels v. transportation fuels demand (2005) Conclusions, thoughts and questions to consider

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Presentation Overview About the GBC Common drivers and feedstocks Regional biofuels policy review Ethanol & biodiesel blending limits, current usage and future usage requirements Global production, trade flows and capacity Biofuels v. transportation fuels demand Conclusions, thoughts and questions to consider

Common Drivers Facilitating Growth of Global Biofuels Energy security = #1 Poverty reduction & rural job creation #2 National security Climate change Air quality improvement MTBE & Lead switch out; octane enhancement Global Energy Demand to grow 40% by 2020 = supply & sustainability pressures! Refining Capacity saturated Crude & product supply constraints = record high prices More petroleum use leads to increased GHG emissions CO2 impact on Climate Change Carbon Credit Trading Opportunities for biofuels Observations: Drivers are cross-cutting issues that affect developed and developing countries alike Biofuels can generally be used in the existing liquid fuel infrastructure Conventional vehicles easily adapted for biofuel use in most cases

Common Biofuels Feedstocks E=Ethanol, B=Biodiesel North America -E: Corn, barley, wheat -B: Soy, canola, cooking oil, tallow, palm Europe -E: Sugarbeets, wheat -B: Rapeseed Latin America /Caribbean -E: Sugarcane -B: Soy, palm Prime Feedstock Growing Area Africa -E: Sugarcane -B: palm, jatropha Asia -E: Sugarcane, corn -B: Palm, jatropha, cooking oil, tallow, coconut Source: Global Biofuels Center, April 2007

Europe -Largest user of biodiesel in the world -Germany largest biodiesel market -Tax incentives v. mandates?? -Leading on question of sustainability -Higher biofuels blends to reap energy security and climate change benefits? Africa -Interest from several countries to start domestic programs -Brazil to help with expertise -South Africa in lead Regional Biofuels Policy Review Asia -Lots of trials/pilot projects -Huge opportunity for palm producers in Indonesia, Malaysia -Generally seem to set specs first before wide introduction -Japan looking at ETBE -China 3 rd largest global ethanol producer, exported to US in 06 US & Canada -RFS finalized, AFS to increase biofuels usage -US: Biofuels as foreign policy? -Canada proposing own RFS -Renewable diesel, palm biodiesel, biodiesel tax credit a political problem -Biodiesel quality unacceptable -Cellulosic much hyped, R&D not funded -Boutique Biofuels in the states Latin America -Brazil world champion for ethanol -International Biofuels Forum -To grow market in Brazil, huge infrastructure investments needed -Flexi-Fuel Vehicle market exploding!! -Venezuela: Proyeto Etanol?? -Argentina: Will become huge biodiesel exporter!! -Ethanol programs in region aim to support failing sugar industry and boost soy, palm Source: Global Biofuels Center, March 2007

Current Ethanol Blending Limits for Conventional Gasoline Source: Global Biofuels Center, March 2007.

Current Ethanol Usage Source: Global Biofuels Center, March 2007

Current Biodiesel Blending Limits B100 for blending Source: Global Biofuels Center, March 2007.

Current Biodiesel Usage Source: Global Biofuels Center, March 2007

Biofuels Use Requirements, 2007 E10 in 9 provinces Source: Global Biofuels Center, April 2007

Biofuels Use Requirements, 2010 Other potentials in Europe could include Spain, Portugal, Czech. Rep., Ireland, Lithuania Voluntary 1% by 2010 Source: Global Biofuels Center, April 2007

Other Countries Considering Biofuels Use Requirements, 2010-2012 Timeframe Source: Global Biofuels Center, April 2007

Estimated 2006 Biofuels Production Ethanol and Biodiesel 10% 33% 14% 4% 39% Asia Europe North America Latin America except Brazil Brazil Source: Global Biofuels Center, March 2007.

Summary of Major, Current Trade Flows Ethanol Biodiesel Palm Source: Global Biofuels Center, April 2007

Estimate of Current Biofuels Production Capacity Millions M 3 30 25 20 15 10 87% U.S. 96% Brazil 5 - North America Latin America Europe Asia Ethanol Biodiesel Source: Global Biofuels Center, March 2007

Biofuels v. World Transportation Fuel Demand Worldwide Transportation Fuel Demand (2005) Gasoline 58% Diesel 38% Alt Fuels 4% LPG 27% Ethanol 23% CNG/LNG 45% Biodiesel 4% ETBE 1% Source: Hart s World Refining and Fuels Service, 2006

Conclusions, Thoughts & Questions to Consider Moving toward creation of a global biofuels market Brazil leading the way, addressing barriers to commoditization. How are policymakers preparing for the coming of a global biofuels market? How will policy framework evolve to support increased biofuels usage? Biofuels expected to solve a host of policy dilemmas can it? Countries grappling with affording fiscal incentives for the long term versus instituting mandatory targets. Mandatory targets are coming everywhere! Higher biofuels blends coming in the future, e.g., E10+, B10+ for several countries. Some countries integrating of second-generation biofuels, R&D ongoing Sustainability concerns: Issue will continue to grow in importance in coming years

Thank you! Questions? Liisa Kiuru Executive Director, International Fuel Quality Center lkiuru@ifqc.org +1.713.260.6474