By Lynn L. Bergeson
On June 5, 2018, Brazil’s National Energy Policy Council (CNPE) set a target to reduce fuel emissions ten percent by 2028. These targets are part of the RenovaBio law, passed in December 2017, that aims to meet Brazil’s commitments under the Paris Climate Agreement by increasing the share of ethanol and biodiesel in Brazil’s fuel mix and reducing greenhouse gas emissions. Andre Rocha, president of the National Sugarcane/Ethanol Forum, a group of 16 state sugar/ethanol producers associations, told Bloomberg Environment (subscription required) that the ten percent target “is not very ambitious, but is sufficient to encourage biofuel producers’ to expand output.”
The passage of RenovaBio will set up a carbon credit market for biofuel producers to trade carbon dioxide emissions credits with fuel distributors. Fuel distributors must either purchase credits or additional biofuels to meet annual emissions reductions targets. This carbon credit market will go into effect in 2020, with the carbon credits expected to result in $341 billion in biofuel investments and 8.3 billion additional gallons of ethanol and biodiesel consumption by 2028. On June 11, 2018, The Wilson Center hosted a meeting with a delegation from Brazil’s Ministry of Mines and Energy to discuss the implementation of RenovaBio. The slides from the presentation are available online.
By Lauren M. Graham, Ph.D.
According to Brazil’s Agriculture Minister Blairo Maggi, Brazil is considering lifting the 20 percent tariff on ethanol imports from the U.S.. Demand for ethanol in Brazil has increased due to record-high gasoline prices. As indicated in the BRAG blog post Grain, Ethanol Industry Send Letter To U.S. Trade Representative On Brazil Ethanol Tariff, U.S. ethanol producers would welcome the removal of the tariff and renewed access to Brazil, which is the largest destination for U.S. biofuel exports. Minister Maggi indicated that the decision to remove the tariff would depend on the U.S. lifting the ban on fresh beef exports from Brazil. In 2017, the U.S. banned fresh beef from Brazil following a food safety scandal and Brazil imposed a tax on ethanol from the U.S. following an increase in imports. While speaking to reporters on January 16, 2018, Minister Maggi stated that “[t]here is, on the part of the United States, a big demand to withdraw [the ethanol tariff] and we also have this problem with beef. . . . Obviously one thing influences and contaminates the other.” According to Minister Maggi, Brazil has addressed all U.S. requirements regarding the safety of its fresh beef and is awaiting the U.S.’s decision.
By Kathleen M. Roberts
On November 14, 2017, the Governors' Biofuels Coalition announced that grain and ethanol industry stakeholders, including the U.S. Grains Council, the Renewable Fuels Association (RFA), and Growth Energy, sent a letter to U.S. Trade Representative Robert E. Lighthizer to request that the U.S. suspend Brazil’s designated country status as a result of a 20 percent tariff on ethanol exports to Brazil. The tariff is to be assessed on all current and future imports of ethanol exceeding a 159-million-gallon quota. Since the U.S. exports nearly 500 million gallons of ethanol to Brazil, the tariff would apply to imports of U.S. ethanol despite an agreement between Brazil and the U.S. regarding zero-duty tariffs for ethanol. In the letter, industry representatives indicate their intent to file a petition for a suspension of Brazil’s status in the Generalized System of Preferences (GSP), which requires WTO member countries to treat imports from all other WTO member countries as those countries would treat their most-favored trading partners. The letter states that given “their protectionist and market distorting actions in implementing a tariff rate quota that affects imports of U.S. ethanol, and pursuant to their obligations under 19 U.S. Code 2462, we believe that Brazil is no longer eligible for GSP trade benefits.”
On March 14, 2017, researchers from the Brazilian Bioethanol Science and Technology Laboratory (CTBE) published a study focused on quantifying the economic and environmental impacts of second generation biofuels, based on current and future scenarios of sugarcane biorefineries that include consideration of improvements to the industrial process and biomass production systems. Although costs were determined to be higher in the short term, the study demonstrates that second generation ethanol production is more competitive than first generation ethanol in the long run, and that it reduces climate change impacts by more than 80 percent compared to gasoline. According to the researchers, the results should stimulate incentives and funding programs that support the production and consumption of second generation ethanol.
On August 24, 2016, Brazil's government announced that it would not be extending a tax break on ethanol sales that is due to expire in December 2016. During the 2015 Paris Climate Accord, Brazil pledged to increase cane-based ethanol and biodiesel to nearly 18 percent of its total energy mix by 2030, requiring an increase in annual ethanol production from 30 billion liters in 2015/2016 to 50 billion liters in 2030. The loss of the ethanol tax break prevents biofuel from being cost competitive with gasoline, and will severely impede the ability of ethanol and biodiesel to make up a larger percentage of Brazil's energy mix. Elizabeth Farina, head of the cane industry association Unica, stated that this change will push cane mills to switch from biofuel to sugar production. Two days after the announcement that Brazil would not be renewing the ethanol tax break, Brokers INTL FCStone predicted that the top cane growing region of Brazil would produce 4.7 percent less ethanol in the 2016/2017 crop than it did in 2015/2016.
While in Brazil last week, U.S. Secretary of Energy Ernest Moniz stressed the importance of biofuels as part of President Obama's Climate Action Plan to reduce greenhouse gas emissions. To this end, Secretary Moniz called for greater partnership between the U.S. and Brazil on biofuels. Significantly, it was reported that Secretary Moniz stated that the U.S. Environmental Protection Agency (EPA) has the authority and ability, and will continue to consider imports when EPA sets the annual renewable volume obligations (RVO) under the federal Renewable Fuel Standard (RFS). This statement is important and signifies that EPA could continue to allow imported Brazilian sugarcane ethanol to meet annual RFS requirements.
As we recently reported, the U.S. Chamber of Commerce's Export Green Initiative continues plans for an upcoming trip to Brazil September 30-October 2, 2013, to encourage an increased relationship between that country and the U.S. on biofuels. Representatives from the Renewable Fuels Association (RFA), the trade association representing the Brazilian sugarcane industry (UNICA), and the Advanced Biofuels Association, along with 15 companies that produce biofuels in the U.S., are expected to attend the trip. More information is available online.
This week, Brazilian biotechnology company GranBio and Solvay Group company Rhodia announced they have signed an agreement to partner to produce bio n-butanol, used to manufacture renewable chemicals and biobased products, including paint. Under the agreement, the companies intend to build the first biomass-based n-butanol plant in Brazil, with operations planned to come online in 2015. The press release is available online.