Biofuels in Brazil - Historical Background in Brief

1925

1932

1975

1979

2003

2005

2008

2009

2010

1984/85

1978

Brazilian Energy Police (PNE)

� Enhance the participation of BIOFUELS in the national mix

� Consumers protection

� Guarantee fuel supply for the whole country (851 million ha)

� Free competition promotion

� Attracting investments for power generation and transmission

� Expand the country's competitiveness

� Partial substitution of diesel

� Environment Protection

Source: MME

PNE Biofuel Related Goals – How to achieve

NationalEnergy Policy

(PNE)Goals

• ↓ Vehicle emissions • ↓ Diesel dependence• ↓ Impacts and costs of urban transport • ↓ Impacts on heavy lorry transport • ↓ Impacts on electric power generation at isolated communities• ↓ Influence on the economic growth

• ↑ Diversification of the matrix with renewablesources• ↓ Agricultural risks in the energy market

• ↓ Dependence on soybean

Protecting consumer interests with respect to price, quality and supply

• ↑ Economic competitiveness of biodiesel• ↑ Competitive level in the supply chains• ↑ Biodiesel quality & its effects on vehicle• ↑ Learning curve of biodiesel

Environment protection

• Need of agricultural expansion under delimited areas defined by AEZ Maps• ↑ Knowledgement of the impacts by type of crop (soybean, palm, sunflower, sugarcane, etc.)

• ↓ Emissions of pollutants• ↓ Balance of CO2 and other greenhouse gases▪ Sustainability & responsibility• ↑Competition between biofuels and other clean energies

Spur economic activity & expand the country's

competitiveness in international market

• Job creation & income generation• The expansion of any energy source considering its impact on competitiveness of whole economy

Partial substitution of petrodiesel importation

Energy security

Sources: MME,MCT

Brazilian Energy Mix

Renewable

Petrol Products

37,9

Nuclear 1,4

Hydro15,2

OtherRenewables

3,8

Sugar CaneProducts

18,0

TraditionalBiomass

10,1

Coal4,8

Natural Gas8,8 Non-renewable

52,8%

47,2%

Source: MME

Brazilian Energy Mix in Relation to the World Market

BRAZIL (2009)

WORLD (2008) 12,6% 87,4%

OCDE (2008) 93,2%6,8%

47,2% 52,8%

Source: MME

Renewable Non Renewable

PNE Strategy for Biofuels

Stable Standards

Differentiated Taxation

Funding

Mandatory Admixtures

Agro Zoning Maps

R&D&InovationInternational Promotion

BIOFUELS

Agri Industrial Environ. Economical Social Labour R &D & I

Interlinked Policies

• Seizing the national vocations

• Protection of consumers interests

• Energy security

• Free competition

• Investment attraction

• Country competitiveness

• Sustainability & responsibility

BACKGROUND

Source: MME

Regulatory Framework

Law nº 9.478/97� Definition of principles and objectives of the National Energy Policy

� CNPE: proposal of specific policies and measures on biofuels

� ANP: regulation and supervision of the biofuels industry

Law nº 9.847/99� The national fuel supply is considered as a public utility

� Rules of supervision and administrative sanctions

Law nº 8.723/93• Mandatory addition of anhydrous ethanol in gasoline (E20 to E25)

Law nº 11.097/05• Introduction of biodiesel in the mix & mandatory addition of biodiesel in diesel

(from B2 to B5) Source: MME

Differentiated TaxationLight Vehicles Taxation

Motor Fuel Alíquota IPI (%)

1.0Gasoline 7,0%

Ethanol / Flex Fuel 5,0%5,0%

2.0Gasoline 13,0%

Ethanol / Flex Fuel 11,0%11,0%

Fuel Federal Taxation

Motor FuelTax (R$/liter)

Cide + Pis/Pasep + Cofins

OTTOGasoline “C” R$ 0,369

Ethanol Hydrous . R$ 0,120

DIESELDiesel R$ 0,180

Biodiesel R$ 0,0 to R$ 0,178

Source: MME

Sugar Cane in Brazil

Main cultivationregions

91% of production

9% of production

Sources: NIPE-Unicamp, IBGE, CTC, UNICA, EPE e MAPA.

Ethanol production in 2009:

26 billons of liters

Ethanol production in 2009:

26 billons of liters

Amazon Forest

AZM Sugar Cane (2009)

Source: EMPRAPA

Agricultural Zoning Maps – Sugar Cane

Agricultural zoning identifies climate risks for each crop, setting the better times of planting for each regoins and municipalities; also indicates forbidden areas for cultivation

•• PotentialPotential aptapt areasareas = 64 = 64 millionmillion ha ha

(7,5% (7,5% ofof brazilianbrazilian territoryterritory))

•• PresentPresent areaarea in use = 4,5 in use = 4,5 millionmillion ha.ha.

92.5% of brazilian territory unfit for cultivation and processing of cane sugar for environmental reasons

Three excluded biomas:

- Amazon

- Pantanal

- Alto Paraguai Basin

Soy

Canola

Palm Oil Castor Oil

Suflower

Source MME, MDA:

Agricultural Zoning Maps – Main Oil Seeds Crops

Soy

Palm

Cottom

Palm Oil

Why to expand biofuels & How

POSITIVE EXTERNALITIES:

� Renewable energy source

� Best CO2 balance& pollutant emissions

� Income distribution

� Multiplicity of companies and countries involved

� Greater job creation & social inclusion

� Potentiatilization of development areas agriculture is just beginning/incipient

� Trade Balance

HOW:

� Research, Innovation and Technology Transfer

� Appropriate Public Policies on:

� Investments/Subsides

� Agriculture

� Local Technical Assistance

� Production Industry

� Transport and Logistics

� Rural Credit

� Vehicle Industry

� Attraction of PrivateInvestments (large scaleproducers and investors)

Source: MME

Ethanol – Production Plants

Plants in operation 2009 (427)

Plants under construction 2009 (46)

Source: MME

Biodiesel – Panorama

PNPB PNPB mainmain taskstasks PresentPresent situationsituation

1. Introduction of a new renewable fuel in the market

Ok. plants in operation; establishment of

regulatory framework, anticipated goals, B5 throughout, stability of supply.

Ok. Biodiesel production has been contributed

considerably during the last years to the payment balance; but last year its effects has been reduced as diesel imports grew considerably due to greatest warming of the economy.

2. Reduction of diesel imports

At a slow pace. The response time of agriculture

is different. There is not scale, logistics and sufficient know-how to the rapid expansion of "new oil alternatives” rather than soya in the short-term. Brazil remains an importer of palm, sunflower and canola oils. Fresh perspective to palm with the program recently launched, but results in the medium term.

3. Diversification of crops and expansion of oil production according to regional differences

Biodiesel – Panorama

PNPB PNPB mainmain taskstasks PresentPresent situationsituation

4. Competitiveness with diesel Missed. Biodiesel still more expensive. Compulsory. Authorized market is not yet feasible

5. Reduction of regional

inequalities

In progress. Plants scattered throughout the country, with more concentration in the Mid west and Southeast. The North and Northeast have not shown greater competitiveness for the furthest distance from the main raw material available (soybean).

6. Strengthening of family farming

In progress. Creation of the Social Fuel Stamp (model combined participation between agribusiness and small-scale agriculture), but the challenges are many. Concentration in places where family framing was already taking palce and structured based on soy, particularly in Rio Grande do Sul Recently, it has grown in the Northeast with the new Petrobras Biodiesel Production Plants ( PBio).

Biodiesel Production Plants

Sources: MME/SPG & ANP

Plants withSocial Stamp(1,000 m3/yr)

Plants withoutSocial Stamp(1,000 m3 /yr)

Region PlantsInstalled Capacity

th. m3/yr %

N 6 193 4%

NE 5 706 13%

CO 24 1,921 37%

SE 11 8917 17%

S 9 1,544 29%

Total 55 5,255 100%

Total 2008 Production: 1,2 billion L (B2/B3)

Total 2009 Production: 1,6 billion L (B3/B4)

Total 2010 Production: 2,3 billion L (B5)

PNPB Main bottleneck: heavily reliance on soybeans

SoybeansSoybeans

BeefBeef tallowtallowcottomcottom

OthersOthers

Elaboração:MME. Fonte: ANP

Needs of diversification of raw materials

Biofuels Main Barriers

� Resistance to the new geopolitical dynamic energy markets

� Status Quo still heavily oriented to non-renewable fossil sources of energy

� Low competitiveness, small scale production

� Higher prices

� Debate over land use and food security

� Raw materials priced in non-energy market

� Barriers and restrictions on international trade

� Limited knowledge on new agricultural raw material

� Lack of global science-based criteria for sustainable biofuels production

Where to go on the next 10 years

� Ethanol– Strong supply growth based mainly on the domestic demand

– Expansion of exports focussing on US, EU and Asia

– Introduction of commercial projects for 2nd generation ethanol

– Development of bi-fuel hybrid vehicles

� Biodiesel– Increasing competitiveness and reducing production costs– Consolidation of B100 in the market and family farming production– Start biodiesel exportation– Diversification of raw materials (palm oil, jatropha, macauba, sugar

cane, etc.)

– Development of a new “flex fuel diesel vehicle”:B100 + diesel + ethanol

� Biokerosene

– Creation of a new governamental programme

New biofuels – Agenda for the next 10 years

� Cellulosic ethanolSugarcane bagasse, grass, wood, agricultural (corn stover, rice and wheat straws,etc.) & forestry residues

� Sugar cane biodiesel

– Microbial conversion of sugars

– Biodiesel, bio-jet & chemical products

� Oil seeds with higher energy densities

– Palm oil, macauba, babassu, jatropha, etc.

� Biokerosene

– Needs for higher pressure aiming at a higher commitiment of theairline industrie to climate changes

� Algae� Biosynthetics via thermochemical routes� Synthetic biology applied to develop biofuels� Biobased chemical & plastics� Hidrogenation of oils, HVO & HtL Biofuels

Cellulosic Ethanol Technologies in Brazil� Dedini Organosolv Process

– Ethanol/water solvent treatment; Sulfuric acid hydrolysis

– 2004 pilot unit

� Center for Sugarcane Technology (CTC)

– Alliance with Novozymes for development of enzymatic hydrolysis

– Pretreatment based on wet alkaline oxidation

� MCT Programme Bioethanol

– Consortium of several Brazilian universities and research centers

– Pretreatment by steam explosion, enzymatic hydrolysis

� Petrobras

– Dilute acid pretreatment, enzymatic hydrolysis

– 2008 pilot unit

– Partnership with KL Energy for commercial plant in 2013

� Shell-Cosan JV

– Shell has stakes in Iogen and CodexisSource: SRI Consulting

Special acknowledgments

� MME: Ricardo Borges Gomide & Ricardo Gusmão Dornelles

� MCT: Adriano Duarte & Rafael Meneses

� ANP: Rosangela Moreira

� Presidency Cabinet/Govern. Polices Dept.: Rodrigo Rodrigues & J. Accarini

� EMBRAPA: Silvio Crestana & Frederico Durães

� INMETRO: Romeu Daroda & Humberto Brandi

� INT: Domingos Manfredi & Attilio Travalloni

� UFOP: Dieter Bockey & Klaus Kliem

� BBE: Helmut Lamp

Muito Obrigado !

ContactINTAve. Venezuela, 82/60820081-312Rio de Janeiro – Brazil

Tel.: +55 (21) 2123 1198/1210Fax: +55 (21) 2123 1194e-mail:eduardo.cavalcanti@int.gov.br