Universidade Estadual de CampinasUNICAMPThe creation of a domestic market for bio-ethanol in Brazil and perspectives of future expansion of ethanol productionGilberto De Martino Jannuzzi18. June 2008HS XV, Institut für Geodäsie, Nussallee 16, UniversityofBonn

Structure of this presentationCreating the market for ethanolNational infra-structureProductionDistributionRetail market Affordability to final consumersThe private sector: the “Usineiros”, car manufacturers, Ultimate objective: self-sustainable business (market) Social objectives (energy as public good) and strategic objectives (security of supply as a public good)Public sector component

The strategyIdentification of the public good: rationale for a public policy (and public funds)LPG: energy as a social need (mid 60’s)Alcohol: energy as a “national security” issue (late 70’s)Strong governmental role in the economy:State company Petrobras Alcohol: purchase from private producers, distributionInstitutional and regulatory stabilityAbility to introduce subsidies and incentives, pricing controlsStrong participation of the private sector since the start-up:Alcohol: production, automobile industry

Ethanol strategyLarge incentives to producers 1979-85Subsidies to newdistilleries, retrofits, upgrades, etcGovernmentpurchasedallproductionatgivenpriceFinal subsidies to ethanolconsumers, nationalfixedpricing, country-widedistributionBlendswithgasolineandintroductionof 100% ethanolfuelledcarsIncentives (taxcuts) for ethanolcars (privatefleet), specially taxis andgovernmentfleetsGasolinetaxedheavily (1979-85)After 1985: lackofclear policies, higher sugar pricesPrivate sector (sugar industry) becameinterested in increasedproductivitiy

Ethanol National Program: Proálcool (1975-1985): Productiongrowsfrom 0.6 to 11.6 Bi litresPost-85: estabilizationofethanolproduction supplyshortage in 1989 Nineties: Deregulation Priority for sugar and sugar exportsInternalmarketgrows: flexfuelvehicles in 2003Results in increasing agricultural and industrial productivity

National automobile production (1979-2003)Note: includes diesel, gasoline and alcohol vehiclesSource: ÚNICA, 2004

Ethanol production learning curve

Ethanol and gasoline prices

Brazilian Production Evolution of Production: sugarcane, sugar and ethanol

Light fleet vehicles and Consumption of Ethanol (Hydrous and Anhydrous)

Improvements overtimeResults of Public and Private investments in R&D

Productivity (t/ha)Season 06/07 -84 t/ha81.577.773.355.7IBGE, 2003

Evolution of the fermentation yield

Evolution of the fermentation period

Conclusions: EthanolStrong governmental presenceSupply: governmental purchased total production from private sectorPetrobras (government) responsible for country-wide distributionSubsidies, incentives, tax cutsPrice controlsStrong and important private sector participation as part of the supply chain (and demand sector) but supported by the government (guaranteed revenues and buffer to sugar prices fluctuation), automobile industryDe-regulation (mid-eighties)Program too expensive to PetrobrasDiscussion about purchase prices from producers Producers from the Southeast decided to invest in productivity gainsQuality controls now under the Petroleum agency (ANP)Producers can sell directly to pump stationsPrices set by the market, with ANP oversightIntroduction of bi-fuel cars since year 2002

BIOFUEL PRODUCTION COSTSDoornbosch and Steenblink, 2007 Note: 1. Oil price US$ 20 – 70/barrel

LAND AVAILABLE FOR ENERGY BIOMASS PRODUCTION IN 2050 (Gha)Doornbosch and Steenblink, 2007

Present Location of Sugar-Ethanol Mills in Brazil

Near Term Expansion of New Sugar-Ethanol Mills ( ), C-S

Brazil: main crops 2007Brazil: 851 106 haTotal Arable land: 350 106 ha

Displacement of World Gasoline and Diesel Consumption (10%)Notes: 1. 150 billion liters ( 120 billion liters of gasoline) 2. 135 billion liters ( 120 billion liters of diesel)

ETHANOL AND BIODIESEL GHG REDUCTIONDoornbosch and Steenblik Notes: 1. Compared with gasoline; 2. Compared with mineral diesel

ENERGY BALANCE IN ETHANOL PRODUCTIONNotes: 1-Source: ORNL, 2- Source: Copersucar/UNICAMP, 3- Corn Stover not included,4- Tops and leaves not included, 5- Does not include credit for co-products, 6-Includes credit for 8% bagasse surplus

COST OF GHG EMISSION REDUCTION DUE TO SUBSIDIES TO ETHANOL AND BIODIESEL(US$/ton of CO2 equivalent)Doornbosch,R. and Steenblik,R. (OECD),2007

BIOFUELS ENERGY AND GHG BALANCESIEA, WEO2006NER=Net Energy Ratio (output renewable energy/input fossil energy)

ENERGY PERFORMANCE OF ENERGY CROPS IN EUIEA, WEO2006Solid fuelBrazilian conditionsIncludes all biomass

Ethanol: a new commodityGood business for tropical countries Challenges: - regularity and guarantee of supply - price stability

Good business for tropical countries

Challenges:

Sugarcane: world cultivated area and production FAO, 2005

Ethanol resists to oil prices fluctuation

NIPE-Unicamp Ethanol Project Coordinator:Professor Rogério Cezar de Cerqueira Leite (UNICAMP)Vice-Coordinators:Dr. Manoel Sobral Jr (phase I)Dr. Manoel Regis Lima Verde Leal (phases I e II)Dr. Luís Cortez (phase III) 9 senior researchers, around 20 researchers involved Collaboration: CGEE, MCT, MAPA, EMBRAPA, TRANSPETRO, PETROBRAS, DEDINI, CTCProject in agreement with the Brazilian Agro energy Policy

Coordinator:

Professor Rogério Cezar de Cerqueira Leite (UNICAMP)

Vice-Coordinators:

Dr. Manoel Sobral Jr (phase I)

Dr. Manoel Regis Lima Verde Leal (phases I e II)

Dr. Luís Cortez (phase III)

9 senior researchers, around 20 researchers involved

Collaboration: CGEE, MCT, MAPA, EMBRAPA, TRANSPETRO, PETROBRAS, DEDINI, CTC

Project in agreement with the Brazilian Agro energy Policy

Specific ObjectivesOE1: Present technology and possible improvements (E.Gomez,PhD.)OE2: Assessment of new technologies (Carlos Rossell, PhD. and Oscar Braunbeck, PhD.) – phase II and phase IIIOE3: Selection ofpotential suitable areas for sugarcane production in Brazil (Manoel Regis Leal, PhD.) – phase II and phase IIIOE4: Infra-Structure: existing and need for improvement and expansion (Mirna Gaya Scandiffio, PhD.) – phase I and phase IIIOE5: Assessment of socio-economic impacts (A.Scaramucci, PhD.) phase I and phase IIOE6: Construction of ethanol production scenarios and socio-economic impacts (André Tosi Furtado, PhD.)OE7:Assessment of environmental impacts (M.Jannuzzi, PhD.) – phase II and phase IIIOE8:Legislation and policies in different countries: producers and buyers (Manoel Sobral Jr., PhD.) – phase III

OE1: Present technology and possible improvements (E.Gomez,PhD.)

OE2: Assessment of new technologies (Carlos Rossell, PhD. and Oscar Braunbeck, PhD.) – phase II and phase III

OE3: Selection ofpotential suitable areas for sugarcane production in Brazil (Manoel Regis Leal, PhD.) – phase II and phase III

OE4: Infra-Structure: existing and need for improvement and expansion (Mirna Gaya Scandiffio, PhD.) – phase I and phase III

OE5: Assessment of socio-economic impacts (A.Scaramucci, PhD.) phase I and phase II

OE6: Construction of ethanol production scenarios and socio-economic impacts (André Tosi Furtado, PhD.)

OE7:Assessment of environmental impacts (M.Jannuzzi, PhD.) – phase II and phase III

OE8:Legislation and policies in different countries: producers and buyers (Manoel Sobral Jr., PhD.) – phase III

Methodology for elaborating maps Potential Areas - sugarcane productionAreas withenvironmental restrictionAreas withslope restrictionSoil MapsClimate MapEvaluation Criteria (soils)Criteria for Climate RestrictionProduction potencial (soils)Production potencial (climate)Soil/climate Potential for sugarcaneSoil/climate Potential with irrigation

POTENTIAL FOR SUGAR CANE PRODUCTION:SOIL AND CLIMATE - WITHOUTIRRIGATIONHighAverageLow (World average)InapropriateAmazon RainforestPantanalAtlantic ForestOther important preservation areasAbove 12% slope area

POTENTIAL FOR SUGAR CANE PRODUCTION:SOIL AND CLIMATE – WITH IRRIGATIONHighAverageLow (World average)InapropriateAmazon RainforestPantanalAtlantic ForestOther important preservation areasAbove 12% slope area

Ethanol transport – Brazil 1980 and 2007Pipelines and Hydro ways are the best way to transport Ethanol from the cost vs benefit point of view

Ethanol Exports by 2025: 205.5 million of m3Area=Prod. 106 m3Clusters(c)

Cost Comparision for Ethanol Production (1)

Important Issues (cost reduction and improve sustainability)Productivity gainsOtimization of agricultural operationsGains in industrial efficiencyReduction and recycling of effluentsReduction of energy and water consumptionOtimization of use of other resources Use of new technologies

Expected Productivity Gains

Impact of New Technologies

Genetic improvement: conventional and genetic engineeringPrecision agricultureRaw cane harvesting with trash recoveryPre-processing and storage of bagasse and trashR&D Priority Areas: agriculture

Improvements of fermentation, crushing and destilationReduction of vinasse production (per l of ethanol)High Energy Cane (“energy cane”)Hydrolysis of bagasseGaseification: EE and fuels (F-T)R&D Priority Areas: industry

R&D Priority AreasManagementAutomation (advanced system)Infra-structureProduction Model (small x large)Environment Licencing (methodology)CertificationAlcoolchemistry and sucrochemistryOther products

Sugarcane Primary Energy

Genetic ImprovementOptimized processing for ethanol production (convencional to advanced-hydrolysis)Raw cane harvesting with trash recoveryEnergy optimizationSugarcane Research Challenges

A análise em elaboraçãoorganização de informação quantitativa que deverá identificar indicadores para um desenvolvimento sustentável da política de expansão da produção de etanol Este estudo é baseado em dados de literatura e tem por objetivo quantificar a utilização de recursos críticos em todo o ciclo de produção e uso do etanol. Essa informação organizada através de indicadores poderá ser utilizada para a definição de “indicadores de sustentabilidade” para o etanol.análise de riscos sócio-ambientais associados ao cenário de expansão da produção e das estratégias sugeridas pelo projeto nos relatórios anterior (Fase 2). Essa etapa da análise inclui uma análise do tipo SWOT processo consultivo tem a finalidade de auxiliar a identificação de alternativas de menor impacto sócio-ambiental e validação das conclusões.Consulta aos aos especialistas envolvidos no projeto – Matriz de Impactos AmbientaisAnálise multicritério

vinhoto/águaEnergia (bagaço)CO2Produção de canaProdução de álcoolEscoamentox ha1 m3 etanoly m3z kg/ha fertilizantes/ defensivosΔCO2particuladosΔCO21 m3 etanolx ha

Análise SWOTStrength, Weakness, Opportunity, ThreatImpactos na qualidade do arSuprimento e qualidade da águaOcupação do solo e biodiversidadePreservação dos solos agrícolasUso de defensivos agrícolas e fertilizantes