How the RED in Europe will reshape the Brazilian Ethanol Export market October 25, 2011
Agenda1. EU Biofuels Policy2. Fuel Quality Requirements3. Ethanol in the Gasoline Pool4. Article 7.a of the FQD5. Sustainability Criteria under the RED and FQD6. Verification of Sustainability7. RED Implementation8. EU Ethanol Forecast to 2020
Overview of the Current LegislationImplications for the biofuel industryRENEWABLE ENERGY and FUEL QUALITY DIRECTIVES• 10% by energy content Renewable Energy in transport by 2020 (RED);• Minimum GHG saving requirements of biofuels to be consumed: o 35% GHG saving compared to fossil fuel equivalent from implementation (grandfathering clause for plants in operation in Jan. 2008), o increasing to 50% from 2017 and 60% for new plants starting from 2018 (RED and FQD);• 6% life-cycle GHG reduction per unit of energy of transport fuels between 2010 and 2020 (FQD)• ILUC effect still being debated, EC report expected in September/October 2011 SUSTAINABLE BIOFUELS
Fuel Quality DirectiveMore than fuel quality Fuel suppliers are required to: • ensure that gasoline, diesel and non-road diesel meet environmental quality requirements; • reduce life-cycle GHG emissions per unit of GHG QUALITY energy from fuel and energy supplied by 6% EMISSIONS REQUIRE- by 2020 compared with 2010 (+4% indicative REDUCTION MENTS target) TARGET Life-cycle GHG emissions: all net emissions of CO2, CH4 and N2O that can be assigned to fuel (incl. any blended component) – all relevant stages from extraction or cultivation, transport, distribution, processing, combustion. SUSTAINABLE BIOFUELS
Consequences for the Gasoline PoolHigher oxygenate content Environmental requirements for gasoline Source: IFQC, compiled from Directive 98/70/EC as amended, 2009
Article 7.a of the FQD6% GHG reduction 2010-20 Fuel supplier to reduce life-cycle GHG emissions per unit of energy from fuel and energy supplied by 6% by 2020 compared with 2010Life-cycle GHG emissions: all net emissions of CO2, CH4 and N2O that can be assigned to fuel (incl. anyblended component) – all relevant stages from extraction or cultivation, transport, distribution, processing,combustion.1. Sustainable biofuels (methodology of calculation shared with the RED’s10% renewable energy target, with some differences), e.g. double counting),2. Electricity for use in road vehicles (methodology to be developed – June 2011),3. Other fuels and energy (default values for fossil fuels differentiated by origin/technology/crude oil – industry against – proposal in June 2011; EC opened a contract for measurement of upstream emissions).Additional 2%:4. Energy for transport supplied for use in road and non-road applications (electricity in NRMM),5. Use of any technology reducing GHG emissions (incl. CCS).Additional 2%:6. Use of credits purchased through the CDM.
Sustainability Requirements for Biofuels 2018 (new installations) 2017 2011 or 2013 (with grandfathering clause) “soft” interpretation of the term “installation”
Verification of SustainabilityFormal requirements It is Member States’ authorities responsibility to require from economic operator to show that the sustainability criteria are met, irrespective of what method of verification is chosen by the economic operator: 1. National system 2. Voluntary scheme Must be recognized by the European Commission (DG Energy) – 7 voluntary 3. International agreement schemes recognized so far (July 2011) and next 12 awaiting EC EC Scheme Comitology can start assessment If OK If OK decision operating
RED ImplementationMS Biofuels Targets: Implications for the Biofuel Industry The data submitted by Member States in the National Renewable Energy Action Plans (NAPs) under the Renewable Energy Directive (RED) show a sharp growth in ethanol consumption, likely linked to sustainability and feedstock sourcing concerns attached to biodiesel vs. ethanol. The EU is expected to rely on ethanol and biodiesel imports until 2020, which could be partly met by intra-Member State trade. Overall ethanol imports by 2020 could reach 4.2 billion liters. Overall biofuels consumption by 2020 could reach 9.4% with the combined forecasts of the NAPs and those of Hart Energy’s WRFS. The overall forecasts in the NAPs seem overestimated and Hart Energy proposes adjusted values, in particular for ethanol consumption until 2020, which leads to an overall share of biofuels of 9.3% by 2020.
EU Ethanol Forecast to 2020Implications for Brazilian Ethanol Ethanol Forecast Million Liters 16,000 NAP Ethanol Supply 14,000 NAP Ethanol Demand 12,000 HE Ethanol Demand 10,000 8,000 6,000 4,000 2,000 0 2011 2015 2020• Capacity: Ethanol current: 8.7 billion liters and projected 10.4 billion liters;• With the NAP and WRFS forecasts the share of biofuels in transportation would reach 9.4% by energy content in 2020, 10.3% considering the double accounting of the expected amount of Art. 21.2 biofuels.• However for the compliance with Art. 7.a only 9.4% will count and they would need to meet GHG savings of 64% to reach the 6% GHG saving mandate.• However, several MS seem to have overestimated the level of biofuels they will have on their market and the amount of Art. 21.2 biofuels available by 2020.Source: Hart Energy’s Global BiofuelsCenter, September 2011
Thank you! Maelle Soares PintoDirector Biofuels Europe and Africa Global Biofuels Center MSoaresPinto@HartEnergy.com