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Universidade Estadual de Campinas

UNICAMP
The creation of a domestic market for bio-
ethanol in Brazil and perspectives of future
expansion of ethanol production

Gilberto De Martino Jannuzzi


18. June 2008
HS XV, Institut für Geodäsie, Nussallee 16,
University of Bonn
Structure of this presentation
• Creating the market for ethanol
– National infra-structure
• Production
• Distribution Public sector
• Retail market component
– Affordability to final consumers
– The 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)
The strategy
• Identification 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, distribution
– Institutional and regulatory stability
– Ability to introduce subsidies and incentives, pricing controls
• Strong participation of the private sector since the start-up:
– Alcohol: production, automobile industry
Ethanol strategy
• Large incentives to producers 1979-85
– Subsidies to new distilleries, retrofits, upgrades, etc
– Government purchased all production at given price
• Final subsidies to ethanol consumers, national fixed pricing,
country-wide distribution
• Blends with gasoline and introduction of 100% ethanol fuelled
cars
• Incentives (tax cuts) for ethanol cars (private fleet), specially
taxis and government fleets
• Gasoline taxed heavily (1979-85)
• After 1985: lack of clear policies, higher sugar prices
• Private sector (sugar industry) became interested in increased
productivitiy
Ethanol National Program:

• Proálcool (1975-1985): Production grows from


0.6 to 11.6 Bi litres
• Post-85: estabilization of ethanol production ⇒
σ υ π π λ ψ σ η ο ρ τ α γ ε ι ν 1989
• Νι ν ε τ ι ε σ :
– Deregulation
– Πρ ι ο ρ ι τ ψ φ ο ρ σ υ γ α ρ α ν δ
συ γ αρ ε ξ π ο ρ τ σ
• Ι ν τ ε ρ ν αλ µ αρ κ ε τ γ ρ ο ωσ:
φ λ ε ξ φ υ ε λ ϖε η ι χ λ ε σ ι ν
2003
• Results in increasing agricultural and industrial
productivity
National automobile production
(1979-2003)
1.800.000 100
1.600.000 90
1.400.000 80
70
total vehicles

1.200.000

% alcohol
60
1.000.000
50
800.000
40
600.000 30
400.000 20
200.000 10
0 0
1985
1987
1989
1991

1995
1997
1999
2001
2003
1979
1981
1983

1993

Note: includes diesel, gasoline and alcohol


Source: ÚNICA, 2004
vehicles
Ethanol production learning
curve
Ethanol and gasoline prices
Brazilian Production
Evolution of Production: sugarcane, sugar and ethanol

600.000 35.000

t)
3
30.000
500.000

litres) & Sugar (10


25.000
400.000
Sugarcane (10³ t)

20.000
300.000
Sugarcane
15.000

6
200.000

Ethanol (10
Eth a n o l 10.000

100.000 S ugar
5.000

- -
74/75 7 8/79 82/83 8 6/87 90/91 94/95 98/99 0 2/03 06/0 7
Light fleet vehicles and Consumption of
Ethanol (Hydrous and Anhydrous)
6.100 12.000
Light Fleet Vehicles (10 3 Units)

Ethanol (Anhydr + Hydr) 106 litres


5.100 10.000

4.100 8.000

3.100 6.000

2.100 4.000

1.100 2.000

100 0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

Light Fleet 100%Eth+Flex Consumption Hydrated


Consumption Anhydrius Consumption Hydrated
Improvements overtime

Results of Public and Private


investments in R&D
Productivity (t/ha)
Yield by Brazilian Regions

90
81.5
80 São Paulo 77.7
70 73.3
Yield(t/ha)

Center-South
Brazil
60

50 55.7
Northeast
40

30
77/78

83/84

87/88

93/94

97/98

01/02
79/80

81/82

85/86

89/90

91/92

95/96

99/00

03/04
Harvest Seasons
IBGE, 2003
Evolution of the fermentation yield
RENDIMENTO FERMENTATIVO(%)

92

91

90

89

88
(%)

87

86

85

84

83

82
1975 1980 1985 1990 1995 2000 2005
SAFRA
Evolution of the fermentation period
PRODUTIVIDADE
Tempo de Fermentação(h)

16

15

14

13

12

11
(h)

10

6
1975 1980 1985 1990 1995 2000 2005
SAFRA
Conclusions: Ethanol

• Strong governmental presence


– Supply: governmental purchased total production from private sector
– Petrobras (government) responsible for country-wide distribution
– Subsidies, incentives, tax cuts
– Price controls
• Strong 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 industry
• De-regulation (mid-eighties)
– Program too expensive to Petrobras
– Discussion about purchase prices from producers
– Producers from the Southeast decided to invest in productivity gains
– Quality controls now under the Petroleum agency (ANP)
– Producers can sell directly to pump stations
– Prices set by the market, with ANP oversight
– Introduction of bi-fuel cars since year 2002
BIOFUEL PRODUCTION COSTS
Biofuel/Feedstock US$/L gasoline or diesel eq.
Ethanol
Sugarcane 0.25 – 0.50
Maize 0.50 – 0.80
Sugar beet 0.63 – 0.83
Wheat 0.70 – 0.95
Lignocellulose 0.80- 1.10
Biodiesel
Animal fat 0.40 – 0.55
Vegetable oil 0.70 – 1.00
Lignocellulose (FT) 0.90 – 1.10
Gasoline/Diesel1 0.16 – 0.50

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


LAND AVAILABLE FOR ENERGY BIOMASS
PRODUCTION IN 2050 (Gha)
Region Total Rain-fed Land under Arable land Housing, Additional Land for
Land cultivation Forest in use food, land bioenergy
NA 2.1 0.4 0.1 0.2 infrastructur
0.0 available
0.00 0.00
e
S&CA 2.0 0.9 0.3 0.1 0.1 0.25 0.25

EU 2.3 0.5 0.1 0.2 0.0 0.08 0.04

Africa 3.0 0.9 0.1 0.2 0.1 0.44 0.18

Asia 3.1 0.5 0.0 0.6 0.1 -0.07 -0.07

Oceania 0.9 0.1 0.0 0.1 0.0 0.04 0.04

Total 13.4 3.3 0.8 1.5 0.3 0.74 0.44

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 2007

Brazil: 851 106 ha


Total Arable land: 350 106 ha

Area
[106 ha]
Pasture 150-200

Soybean 22

Corn 11
Sugarcane 7
Others 21

Agric. land 61
Displacement of World Gasoline
and Diesel Consumption (10%)
Biofuel Feedstock Yield Land
( L/ha) requirement
Ethanol1 Sugarcane 6,000 (Mha)
25

Maize 3,500 43

Biodiesel2 Soya 400 340

Castor beans 500 270

Oil palm 3,000 45

Notes: 1. 150 billion liters ( 120 billion liters of gasoline)


2. 135 billion liters ( 120 billion liters of diesel)
ETHANOL AND BIODIESEL GHG
REDUCTION
Biofuel/Crop GHG Emission Reduction
Ethanol1
Sugarcane 90 %
Lignocellulose 70 - 90 %
Sugar beet 40 - 50 %
Maize 13 %
Biodiesel2
Rapeseed/soybeans 40 - 50 %
Palm oil 35 %

Doornbosch and Steenblik Notes: 1. Compared with gasoline; 2. Compared with mineral diesel
ENERGY BALANCE IN ETHANOL
PRODUCTION
PROCESS Maize1 Switchgrass1 Cane2

(GJ/ha.yr) (GJ/ha.yr) (GJ/ha.yr)


Energy consumption in 18.9 17.8 13.9
agriculture
Biomass energy 149.53 220.2 297.14

Energy ratio in agriculture 7.9 12.3 21.3

Energy consumption in distillery 47.9 10.2 3.4

Ethanol energy content 67.15 104.4 132.56

Total energy ratio 1.21 4.43 8.32

Notes: 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)
Country Ethanol Ethanol Biodiesel Biodiesel
Low High Low High

USA NA 545 NQ NQ

EU 590 4520 340 1300

Switzerland 340 394 253 768

Australia 244 1679 165 639

Doornbosch,R. and Steenblik,R. (OECD),2007


BIOFUELS ENERGY AND GHG BALANCES
Fuel/Feedstock NER GHG Emission
Reduction (%)
Ethanol
Corn 1.25 13
Wheat 1.23 30
Sugar beet - 40-60
Sugarcane 8.3 90
Biodiesel
Rapeseed - 40-60

IEA, WEO2006
NER=Net Energy Ratio (output renewable energy/input fossil energy)
ENERGY PERFORMANCE OF ENERGY CROPS IN EU
Crop Typical Yield
Dry tonne/ha/yr
Primary Energy
Input
Net Energy Yield
GJ/ha/yr
Production Cost
EURO/GJ
GJ/ha/yr
Rapeseed 2.9 11 110 20

Sugar beet 14 13 250 12

Willow1 10 5 180 3-6

Poplar1 9 4 150 3-4

Miscanthus1 10 13-14 180 3-6

Sugarcane2 42 14 5003 6

IEA, WEO2006
1.Solid fuel
2.Brazilian conditions
3.Includes all biomass
Ethanol: a new commodity

üGood business for tropical countries

üChallenges:

- regularity and guarantee of supply

- price stability
Sugarcane: world cultivated area
and production
Country Cultivated Area Production
(103ha) %/total (Mton) %/total
Brazil 5,455 27.1 411 31.2
India 4,100 20.4 245 18.6
China 1,316 6.5 93 7.1
Thailand 1,050 5.2 64 4.8
Pakistan 1,049 5.2 52 3.9
Cuba 700 3.5 24 1.8
Mexico 639 3.2 45 3.4
Australia 415 2.0 36 2.7
Others 5.77 26.7 347 26.3
Total 20,100 100.0 1,318 100.0

FAO, 2005
Ethanol resists to oil prices
fluctuation
24000 80
Ethanol Production 106 Litres

21000 70

Oil Price/Barrel WTI US$


18000 60
15000 50
12000 40
9000 30
6000 20
3000 10
0 0
1972 1977 1982 1987 1992 1997 2002 2007

Ethanol Production_Brazil Oil Price/Barrel


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, CTC

–Project in agreement with the Brazilian Agro energy


Policy
Specific Objectives
–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 of potential suitable areasfor 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 policiesin different countries: producers and
buyers (Manoel Sobral Jr., PhD.) – phase III
Methodology for elaborating maps
Potential Areas - sugarcane production
Areas with
Areas with slope
environmental
restriction
restriction

Soil Maps Climate Map

Evaluation Criteria Criteria for Climate


(soils) Restriction

Production Production
potencial potencial
(soils) (climate)

Soil/climate Soil/climate
Potential Potential
for sugarcane with irrigation
POTENTIAL FOR SUGAR CANE PRODUCTION:
SOIL AND CLIMATE - WITHOUT IRRIGATION
High
Average
Low (World average)
Inapropriate

Amazon Rainforest
Pantanal
Atlantic Forest

Other important
preservation areas

Above 12% slope


area
POTENTIAL FOR SUGAR CANE PRODUCTION:
SOIL AND CLIMATE – WITH IRRIGATION
High
Average
Low (World average)
Inapropriate

Amazon Rainforest
Pantanal
Atlantic Forest

Other important
preservation areas

Above 12% slope


area
Ethanol transport – Brazil
1980 and 2007

Pipelines 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 m3

Area=Prod. 106 m3
Clusters(c)
Cost Comparision for Ethanol Production (1)
Item USA Germany (2) Germany (2) Brazil
Corn Wheat Sugarbeet Sugarcane
Buildings 0.39 0.82 0.82 0.21
(euro/hl) (euro/lh) (euro/lh) (euro/hl)
Equipment 3.40 5.30 5.30 1.15
Labor 2.83 1.40 1.40 0.52
Insurance, taxes 0.61 1.02 1.02 0.48
Raw material 20.93 27.75 35.10 9.80
Other operational 11.31 18.68 15.93 2.32
costs
Total production 39.48 54.96 59.57 14.48
cost
Sale of -6.71 -6.80 -7.20 ---
byproducts
Subsidies 7.93 --- --- ---
Net production 24.84 48.16 52.37 14.48
cost
(1) R$ 3 = 1 US$ (1) 1.20 US$ = 1 (2) 200 ML/year Henniges (2004)
euro
Important Issues (cost reduction and
improve sustainability)

• Productivity gains
• Otimization of agricultural operations
• Gains in industrial efficiency
• Reduction and recycling of effluents
• Reduction of energy and water
consumption
• Otimization of use of other resources
• Use of new technologies
Expected Productivity Gains

2005 2015 2025


Cane Prod. 70 82 96
(t/ha.year)
Pol (%) cane14.5 15.9 17.3

Industrial 83.5 90.0 90.0


efficiency
(%)
Liters 6,000 8,200 10,400
ethanol/ha
Impact of New Technologies

2005 2015 2025


Technology l/tc l/ha l/tc l/ha l/tc l/ha

Conventional 85 6,000 100 8,200 109 10,400

Hydrolysis --- ---- 14 1,100 37 3,500

Total 85 6,000 114 9,300 146 13,900

area needed for 104 M l 17 M ha 7.5 M ha


R&D Priority Areas: agriculture

• Genetic improvement: conventional


and genetic engineering
• Precision agriculture
• Raw cane harvesting with trash
recovery
• Pre-processing and storage of
bagasse and trash

R&D Priority Areas: industry

• Improvements of fermentation,
crushing and destilation
• Reduction of vinasse production (per l
of ethanol)
• High Energy Cane (“energy cane”)
• Hydrolysis of bagasse
• Gaseification: EE and fuels (F-T)

R&D Priority Areas

• Management
• Automation (advanced system)
• Infra-structure
• Production Model (small x large)
• Environment Licencing
(methodology)
• Certification
• Alcoolchemistry and sucrochemistry
• Other products
Sugarcane Primary Energy
Sugarcane Energy Cane

Produtivity 70 100
(t/ha.year)
Fiber (%) cane 13.5 26.0
Trash (%) cane 140 25.0
Pol (%) cane 14.5 12.0
Total fiber 19.3 51.0
(t/ha.year)
Primary Energy 520 (12.5 toe) 1.100 (26 toe)
(GJ/ha.year)
Sugarcane Research Challenges

• Genetic Improvement
• Optimized processing for ethanol
production (convencional to
advanced-hydrolysis)
• Raw cane harvesting with trash
recovery
• Energy optimization
A análise em elaboração
1. organização 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.
2. 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
3. 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 Ambientais
– Análise multicritério
vinhoto/água

Energia (bagaço) CO2

x ha
1 m3
y m3 etanol
Produção de Produção de
Escoamento
cana álcool
z kg/ha
fertilizantes/
defensivos
ΔCO2 ΔCO2
particulados
x ha 1 m3 etanol
Análise SWOT
• Strength, Weakness, Opportunity, Threat

• Impactos na qualidade do ar
• Suprimento e qualidade da água
• Ocupação do solo e biodiversidade
• Preservação dos solos agrícolas
• Uso de defensivos agrícolas e fertilizantes
S W
Há legislação de controle e de proibição da Poluição atmosférica (poluentes e fuligens):

prática da queima queimadas e mecanização agrícola


Nenhuma ou pouca necessidade de irrigação Falhas de fiscalização (queimadas e vinhoto)

Reutilização/reciclagem de grande parte da Alterações estruturais do solo (perdas de água,

água utilizada nutrientes, solo, salinização, acidez)


Disponibilidade de terras Compactação do solo

Maior preservação dos solos em relação a Salinização e contaminação dos lençóis e

outras culturas mananciais


Uso controlado do vinhoto Enxurradas e assoreamento

Menor uso de defensivos/ fertilizantes em Fragmentação de habitats e redução de

relação
O a outras culturas biodiversidade
T
Plantio direto Efeitos cumulativos do uso do solo, implementos

Uso de ETC’s agrícolas, depleção de recursos hídricos


Agricultura de precisão Aumento do uso de defensivos agrícolas e

TI fertilizantes inorgânicos


Corredores de biodiversidade Aumento do uso de água

Redução da coleta, uso e lançamento d’água Aumento da demanda por irrigação em áreas

Melhoramento genético com déficit hídrico


Hidrólise enzimática e ácida Riscos de degradação e queima de áreas de

Concentração térmica e biodigestão do vinhoto reservas