The Brazilian Ethanol Industry

1
The Brazilian Ethanol Industry

• Aparna Kant Rampal
• EDGE II, Winter 2007.

2
The Brazilian Sugar Industry

• Brazil is the worlds largest producer of
  sugarcane, sugar, and fuel alcohol.
  
• Sugar accounts for about 2 percent of the
  countrys gross national product, 17 percent of
  the countrys agricultural product, and employs
  over one million people.

3
The Brazilian Sugar Industry

• Produced 272 million metric tons in 2001/2002.
• More than 50 of the sugarcane is used for
  Ethanol production.
  
• Sugarcane replanting (renewal) rate is high at
  20.
  
• It is one of the few countries that can adjust
  sugar production to world sugar shortfalls and
  high prices.
  
• Nearly 4 years ago, Brazil produced so much sugar
  that sugar prices in the international market
  fell to fewer than 5 cents per pound.
  

4
Main sugarcane producing areas

• Central South Includes Sao Paolo and accounts
  for 90 of the Ethanol production. Harvest season
  is from May through November.
  
• North North East Accounts for 10 of Ethanol
  production. Harvest Season is from September to
  April.
  

5
Regional Statistics
6
Why use Sugarcane for Ethanol production?

• More efficient source of fermentable
  carbohydrates than corn or soya.
  
• Easier to grow.
• Easier to process.
• Brazils tropical climate suits sugarcane
  growth.
  
• Largest sugarcane crop in the world.
• Low cost of sugar _at_ the time (1973 oil crisis.)

7
Reasons why large areas are devoted to sugarcane
plantation

• Favorable returns relative to competing crops.
• Availability of under-used land.
• Expansion programs by mills to increase output.
• Elimination of export taxes.
• Low land prices.
• Harvesting mechanization.

8
The Brazilian Ethanol Industry

• Ethanol production started in Brazil during the
  1970s petroleum crisis under the control and
  support of the Brazilian government.
  
• Pró - Álcool Program (National Alcohol Program)
  was initiated by General Emilio Garrastazu Mèdici
  in 1975.
  

9
The Brazilian Ethanol Industry

• Eventually, the government relinquished control
  and the state oil company, Petrobras took over.
  Petrobras is now Brazils largest maker of
  Ethanol.
• Petrobras expects to export eight billion liters
  of ethanol by 2010.

10
Phases of the National Alcohol Program

• Phase I (1975) - Reduced the countrys energy
  need by mandating the use of mixtures of
  anhydrous alcohol with gasoline.
  
• Phase II (1979) - Program was expanded to promote
  the use of hydrous alcohol as a gasoline
  substitute. This led to the introduction of
  alcohol-fueled cars, which were promoted by the
  government by means of tax incentives and
  subsidized fuel prices.

11
Phases of the National Alcohol Program

• 1983-1988 Alcohol fueled cars accounted for
  more than 90 percent of total auto sales.
  
• 1994 Brazil had more than 4.6 million cars
  powered totally by alcohol.
  
• Late 1980s Oil prices began to decline and the
  government reduced the subsidies and production
  of alcohol.
  
• Late 1990s Sale of alcohol-fueled cars
  amounted to less than 1 percent of total annual
  auto sales.
  

12
Flex Fuel Engines

• Can alternate between 2 sources of fuel.
  Controller regulates the fuel and alcohol
  balance. Flex fuel cars can run with arbitrary
  combinations of gasoline and alcohol.
• In Brazil, however, the gasoline is blended with
  20-25 alcohol.
  
• Content determined by the (CIMA) Alcohol
  Inter-ministerial Committee composed of the
  Ministry of Agriculture, Finance, Mines and
  Energy and Industrial Development and Commerce.
• Flex Fueled car sales in Brazil run at about 1.2
  million a year.
  

13
Flex - Fuel

• Motorists today can choose to fill up with 100
  percent ethanol at half the price of gasoline at
  over 30,000 filling stations nationwide, or
  petrol blended with 20-25 percent ethanol.

14
Effect on the Environment

• Pros
• Ethanol burns cleaner than gasoline, and its use
  has led to an improvement in air quality due to
  fewer harmful emissions.
  
• Large areas are being used for sugarcane
  plantation, which has had significant
  environmental benefits.
  
• CO2 fixation.

15
Effect on the Environment

• Cons
• Air pollution - Sugarcane fields were
  traditionally burned just before harvest, to
  remove the leaves and kill snakes. A recent law
  has been created in order to ban the burning of
  sugarcane fields. Advancements in fertilizers and
  natural pesticides have eliminated the need to
  burn fields.
• Amazon deforestation.
• Sugarcane monoculture lack of bio diversity.
• According to Birdlife International, sugar cane
  provides no habitat at all for birds - and
  presumably little or none for other wildlife.
  
• Studies showed a decrease in soil organic carbon
  of 24 percent over 20 years when forest is turned
  into pastureland in Brazil. The carbon content
  was further reduced by 22 percent over the next
  20 years when a sugarcane plantation was
  established on the pastureland.

16
Going International

• In December 2005, Petrobras announced a contract
  with the Japanese Nippon Alcohol Hanbai for the
  creation of a joint-venture based in Japan to
  import ethanol from Brazil. The company,
  Brazil-Japan Ethanol, will have as its main
  object the creation of an ethanol market in
  Japan.
• The U.S., potentially the largest market for the
  Brazilian ethanol, currently imposes trade
  restrictions on Brazilian ethanol in order to
  encourage domestic ethanol production, most of
  which has so far been based on processing corn
  instead of sugar cane (which is much less
  efficient). This is because allowing the heavily
  subsidized Brazilian ethanol to enter the U.S.
  market without taxation will undercut the budding
  ethanol industry in the U.S.

17
Going International

• Other countries are wanting to get in on Brazil's
  act on their own. India, the second-largest
  producer of sugar, is pushing a plan to buy
  10,000 hectares from Brazil privately and produce
  cheap biofuels.
• This would be a boost to Brazil's agriculture
  industry and would provide India with a cheap and
  reliable source of ethanol.

18
In the pipe-line

• Brazil-Japan Ethanol
• Enron The Dabhol Power Project (Western India)