The Brazil Ethanol Experience

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The Brazil Ethanol Experience

• Rick Sellers
• RIO, Inc.
• Rick.Sellers_at_cegetel.net
• 33 6 1841 2676

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Source Luiz Carlos Corrêa Carvalho
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ProAlcool - The Brazilian Alcohol Program

• Key points
• Started in 1975 by Federal Government.
• Objective was energy security replacing
  petroleum imports with domestic resources.
• Started as fuel additive in gasoline vehicles,
• replacing lead and/or MTBE lt10.
• Stimulated production of ethanol only cars,
• more recently flex-fuel cars.
• 4,000,000 cars running on pure (Hydrated)
• ethanol in Brazil
• 680,000 flex-fuel vehicles (both ethanol and
• gasoline, any blend)
• All gasoline now 20 to 26 of ethanol in volume
  basis gasohol
• Ethanol economically competitive to gasoline at
  gt30-35/bbl

Source Suani Teixeira Coelho
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Source Sérgio Antônio MONTEIRO FONTES
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Over 70 of cars sold in 2006 are expected to be
FFV
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Production Advances
Productivity gains from improved species,
advanced distilling technology, and increased use
of waste (bagasse) in processing.
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Ethanol international competitiveness
Source Nastari, 2005
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Social benefits of biofuels

• Significant increase in employment opportunities,
  mainly in rural areas.
• 2004, Brazil 700,000 direct jobs and about 3.5
  million indirect jobs (production of 350 million
  tonnes of cane)
• Ethanol job rate in ethanol industry higher than
  in fossil industry
• Different estimates at 201 up to 1501

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Economic Cost/Benefit

• Total incentives for ProAlcool program
• US 12 billion.
• Over the last 22 years, hard currency savings
  amounted to 1.8 billion US /year or US 40
  billion.
• Incentives now phased out program is revenue
  positive for government through taxes.

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Positive Industry Environmental Impacts
Source Macedo, 1992
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Positive Urban Environmental Impacts

• Lead dropped from 1,4 ug/m3 in 1977 to less than
  0,10 ug/m3 in 1991.
• Sulfur dropped from 50 ug/m3 in 1984 to 15 ug/m3
  in 2003.
• Particulate Matter dropped from 90 ug/m3 in 1986
  to 50 ug/m3 in 2003.

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Negative Environmental Impacts

• Local air pollution during harvesting season
  (burning required for manual harvest)
• Burning sugar cane bagasse in the boilers not
  always best (low pollution) technology.
• Slightly higher NOx emissions with gasahol than
  either gasoline or ethanol-only.

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Lesson from Brazil Think long term

• Promote demand
• Mandate targets (replacement of oxygenates at 5
  to start)
• Provide incentives to fuel companies to
  accomplish target
• Promote imports if insufficient existing
  production
• Mandate flex fuel auto sales to begin
  transforming fleet
• Stimulate agro-industrial capacities
  (industry/private sector was responsible for
  recovery of Brazilian ethanol sector)
• Establish best practices certification of
  production
• Provide incentives for use of new technologies
• Inform consumers (ethanol is compatible with
  current vehicles, environmental and social
  benefits, etc.)
• Establish trading capabilities to improve
  liquidity of market
• BE PATIENT!

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Oil and Biofuels Trade
2002
2030
Oil Trade Based on WEO 2004
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Conclusions

• Brazil showed patience, determination, and
  excellent timing.
• Energy security, employment, rural development,
  and environmental benefits are substantial and
  fundamental to success.
• Ethanol programs based on sugar cane probably
  economic at oil prices over US 35/barrel.
• At oil prices below US 35/barrel, ethanol
  program may still be justified on energy security
  and social benefits basis, as well as a hedge
  against future price volatility.

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Thank you!

• Rick Sellers
• RIO, Inc.
• Rick.sellers_at_cegetel.net

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Additional Slides for Reference
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Brazil Alcohol Statistics

• Except where noted, data apply to the 2003/2004
  season.

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10 Myths about Ethanol

• Brazilian experience is unique
• incompatible with existing fleets
• low energy balances of biofuels
• high pollutant emissions (cleaner fossil fuels
  preferable)
• complex logistics
• competition with food for land, unsustainable
  practices, deforestation
• should only be produced domestically by developed
  countries
• only subsidized production is possible
• imports destroy local agriculture of developed
  countries
• energy efficiency alone will preserve oil
  resources and fulfill Kyoto targets

Source Suani Teixeira Coelho
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Typical Ethanol Production Factors

• economic cost of production US0.180.25 per
  liter of gasoline-equivalent
• average export price of ethanol (2001-2003) US
  0.23 per liter
• Price paid per tonne of sugarcane
• US11.4 (UNICA, 2005)
• plant lifetime of 25 years
• feedstock cost of US 0.143 per liter of ethanol
• investment cost around US 0.017 per liter of
  ethanol.

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Technological Advances

• Brazilian car production in 2002 1.5 million ?
  ethanol share ? 3.16 (48 thousand)
• 2002 ? 5.5 billion liters used in a 22 to 25
  blend with gasoline
• 2003 ? 3 million vehicles powered by hydrated
  alcohol ? 4.9 billion liters/year
• 2003 Launching of Flexfuel cars in the
  market

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Technology Advances

• All energy needs in sugarcane mills are provided
  without any external energy source
• Cogeneration process production of steam and
  electric/mechanical energy to the process from
  sugarcane bagasse.
• Presently up to 80 kWh/tonnes of cane can be sold
  to the grid
• 1975 2000 low-pressure boilers (22 bar- 20
  kWh/ tonnes of cane)
• Since 2000 high pressure ones (up to 80 bar).
  Outputs of 120kWh/tonne ? better technology and
  recovery of sugarcane by-products (green cane
  harvesting).
• Gasification technology (under development) 300
  kWh/tonne of cane.

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Ethanol Energy Balance
Source Macedo, I et alli, 2004
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Energy balances of feedstocks
Sources Macedo et alii, 2004 UK DTI, 2003 and
USDA, 1995
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competition with land for food
Source Brazilian Statistics Bureau, several
years
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Quality of Jobs and Other Socioeconomic Issues
Source Goldemberg, 2002
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Brazil Regions and Sugarcane Seasonality
Source Suani Teixeira Coelho
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Quality of Jobs and Other Socioeconomic Issues

• Every 300 million tones of sugarcane produced in
  Brazil creation of approximately 700,000 jobs.
• Formal Jobs
• National average (Brazil) 55
• Sugarcane sector 68.5
• Sugarcane production is seasonal but many jobs
  are formal and annual (equipment maintenance
  during off season).

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Compatibility of Existing Fleets with
Ethanol-gasoline Blend
- - - - - - - - - - - -- - - - - For any vehicle
NN - - - - - - - - - - - - - - - - - -
- - - - - For relatively new fleets (10 15
years old) - - NN- - - -
- - - - - - - Brazilian Application - PN - - - -
- - - - - - - - NN - - - - - - -
- - - - - - - - - - - - - - - - - USA Application
PN - - -- - - - - - - - - - -
- NN-
- - - - - - - - - - - - - - - - - Brazilian
Application PN- - - - - - - - - - - - -
- Not Necessary
- Probably Necessary
Source ANFAVEA, 2005
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GHG emissions from different types of ethanol
Sources Macedo et. alii, 2004, UK DTI, 2003 and
USDA, 2004
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Environmental Impacts
Comparative Raw Exhaust Emission
Source ANFAVEA, 2005
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Source Luiz Carlos Corrêa Carvalho
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(No Transcript)
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Source Luiz Carlos Corrêa Carvalho
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International Opportunities
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Flex-fuel Vehicles in Brazil