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São Paulo,
May 02nd, 2012
Luana Maia
Institutional Relations
Brazilian Sugarcane Industry Association (UNICA)
SUGARCANE ETHANOL:
MAJOR CHALLENGES AND OPPORTUNITIES
University of Texas at Austin
The Brazilian Sugarcane Industry Association (UNICA) is the leading sugarcane
industry association in Brazil. Its more than 130 member companies, voluntarily
engaged, represent over 50% of the ethanol and 60% of the sugar produced in
Brazil.
UNICA has around 60 staff and its expertise covers key areas including the
environment, energy, technology, international trade, corporate social
responsibility, sustainability, regulation, economics and communications.
It has offices in five locations: São Paulo (headquarters), Ribeirão Preto (in the
heart of the sugarcane producing region), Brasília (Brazilian capital),
Washington D.C, and Brussels.
ABOUT UNICA
1. A look at the current domestic market
2. The development of biofuels programs worldwide
3. Sustainability aspects
4. Final Remarks
OUTLINE
1. A look at the current domestic market
2. The development of biofuels programs worldwide
3. Sustainability aspects
4. Final Remarks
OUTLINE
Source: LMC, F.O.Licht’s, Secex, UNICA e Rais.
Number of mills: 430
Sugarcane growers: 70,000
Direct employment: 1.2 million
Sector annual revenue: US$ 48 billion
Foreign revenue (Exports): US$ 15 billion
% Energy Matrix: 18% - 2nd source (behind
oil) and 1st source of renewable energy
1st SUGAR PRODUCER IN THE WORLD
25% of world production
50% of world exports
2nd ETHANOL PRODUCER IN THE WORLD
20% of world production
20% of world exports
KEY NUMBERS - BRAZILIAN SUGARCANE SECTOR
Petroleum
and derivatives
37.6%
Sugarcane17.8 %
Hydro
14.0%
Wood and
other biomass
9.7%
Natural Gas
10.3%
Coal and
derivatives5.2%
Other
renewables4.0% Uranium
1.4%
Source: Balanço Energético nacional BEN (2011) and International Energy Agency. Key World Statistics 2010. Elaboration: UNICA
World Energy Supply Structure (%)
54.5 87.1 92.4
45.5 12.9 7.6
Brazil (2010) World (2008) OECD (2009)
Non-renewable
BRAZILIAN ENERGY MATRIX INPUT
0
10
20
30
40
50
01 02 03 04 05 06 07 08 09 10
#1 Source of Renewable Energy in BR
(million toe)
Toe: tons of oil equivalent
0
100
200
300
400
500
600
700
0
5
10
15
20
25
30
35
40
45
75/7
6
77/7
8
79/8
0
81/8
2
83/8
4
85/8
6
87/8
8
89/9
0
91/9
2
93/9
4
95/9
6
97/9
8
99/0
0
01/0
2
03/0
4
05/0
6
07/0
8
09/1
0
11/1
2*
Sugarc
ane (
mill
ion t
ons)
Sugar
(mill
ion t
ons)
Eth
anol (b
illio
n liters
)
Sugarcane Sugar Ethanol
Source: UNICA and MAPA. Note: 11/12* - estimated data.
Proalcool program
1st phase: strong
government
intervention; pure
ethanol vehicles &
distribution
FFV Automakers
decision
NATIONAL SUGARCANE CRUSHING
SUGAR AND ETHANOL: HISTORICAL OVERVIEW
Overview of
the last decade
0
10
20
30
40
50
60
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mill
ion
s
Flex Fuel Gasoline Ethanol Only
50%
86%
Source: UNICA.
NATIONAL LIGHT VEHICLE FLEET
Today, 12 automakers offer over 90 models of flex fuel
vehicles, which already account for almost 50% of the
Brazilian light vehicle fleet.
Cane stalks
Cane juice
(Sucrose)
Bagasse
(Cellulose)
Straw
(Tops and Leaves)
(Cellulose) Bioelectricity
Ethanol
Sugarcane
Sugar
Biopolymers
(bioplastics,
isoprene, etc)
Current
technology
SUGARCANE PRODUCTS: STEP BY STEP
Technology under
development Detergents &
solvents
Cosmetics
Lubricants
Flavors and
Fragrances
Food
Drop-in fuels
(diesel, jet fuel,
gasoline)
3° generation
BIOELECTRICITY USE Brazilian potential to generate bioelectricity
Note: 1 t of cane produces 250 kg of bagasse and 204 of straw and points, 1 t of cane (bagasse + straw) generates 199,9 KWh for export, Lower Calorific Value
(LCV) of straw = 1,7 LCV of bagasse, capacity factor = 0,5 (Koblitz), using a 65 bar boiler. In 2008/09, it should be considered a use of 75% of available bagasse and
5% of available straw and, from 2015/16, a use of 75% of available bagasse and 70% of available straw. Up to 2010, it was considered the energy traded at Energy
Auctions in a Regulated Contracting Environment, for 2011 an increment of 1600 MW was considered, and by 2012 an increment of 2000 MW per year. Source:
UNICA, Cogen, Koblitz (2009).
2 Itaipus
2nd Largest
hydroelectrici
ty power
plant in the
world
ONS data indicate a 4% savings
of reservoirs for every 1,000 MWa
of bioelectricity generated during
the dry season (April-November)
BIO-PACKAGING FROM SUGARCANE
Sugarcane is replacing traditional fossil fuel
inputs in the petrochemical industry
BIOPLASTICS FROM SUGARCANE
Sugarcane is replacing traditional fossil fuel
inputs in the petrochemical industry
Bio-Isoprene
DECADE OVERVIEW
-
100
200
300
400
500
600
700
2000/0
1
2001/0
2
2002/0
3
2003/0
4
2004/0
5
2005/0
6
2006/0
7
2007/0
8
2008/0
9
2009/1
0
2010/1
1*
2011/1
2**
Mill
ion
tons
Sugar Ethanol - exports Ethanol - domestic use
Sourcee: UNICA and Ministry of Agriculture,Livestock and Supply. Nota: 11/12 – estimate
Launch of flex fuel vehicles in 2003
Global interest in ethanol
Ethanol: 10.5% a.a.
Sugar: 8.9% a.a.
555 MT
1. World financial crisis acquisitions involving affected companies
2. Weather problems in three consecutive harvests
3. Loss of domestic competitiveness for ethanol compared to gasoline
Stagnation
Moema
Group
Higher concentration increases competitiveness
(economies of scale and scope)
Despite recent M&A, the industry remains fragmented
STRONG CONSOLIDATION
Estimate of the Brazilian fleet of light
vehicles (Otto cycle)
Source: Estimate of UNICA.
-
10
20
30
40
50
60
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Mill
ion
s o
f ve
hic
les
Flex fuel Gasoline Ethanol (only)
51% Flex/total
70% Flex/total
81% Flex/total
0
5
10
15
20
25
30
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Fle
et
moto
rcycle
s (
mill
ion)
Flex fuel Gasoline
61% Flex/total
Fleet of motorcycles: 53% of bikes sold, in the
first half of this year, were flex
Brazil will need to double the supply of fuels (ethanol and gasoline) to
attend the demand in 2020
WHAT COMES NEXT
ETHANOL: ACCELERATED GROWTH OF THE FLEX FLEET
140
340 450
0
200
400
600
800
1.000
1.200
1.400
2011/12 2015/16 2020/21
Su
ga
rcan
e P
rod
uctio
n in (
MT
)
Sugar Anhydrous Ethanol Hydrous Ethanol
555 Million tons
886 Million tons
1,2 Billion tons
SUGARCANE DEMAND SCENARIO
To supply 50% of the country’s automotive fleet with ethanol (anhydrous+hydrous)
and maintain Brazil’s current share in world sugar market (~50%):
Increasing production
depends on the ability
to restore
competitiveness for
hydrous ethanol in the
domestic market
Source: UNICA. Note: the hydrous ethanol is pure sold at the pumps and used without modification by the flex-fuel vehicles,
then it competes directly with gasoline by the preference of consumers (this product is 4.9% water), the anhydrous ethanol is
blended with gasoline in proportions ranging from 18% to 25% (the anhydrous ethanol has a lower water content - 0.4%).
ASSUMPTIONS
Sugar exports: Maintenance of Brazil’s share of 50% in the global sugar market until 2020/21.
Ethanol domestic market: 50% of ethanol share in the total fuel consumption by the light vehicle fleet in 2020/21.
Ethanol exports: Gradual growth in ethanol exports, aiming to reach the estimated volume in the American mandate for “advanced
ethanol” (13.5 billion liters in 2020/21).
Non-fuel Ethanol: Projected demand of 5 billion gallons/year by 2020.
Elaboration: UNICA, Copersucar and Cogen (2012).
2010/2011 2015/2016 2020/2021
Sugar (million t) 38.0 44.8 51.1
% Exports (72%) (73%) (73%)
Ethanol (billion liters) 27.4 44.3 70.0
% Exports (7%) (8%) (20%)
Bioelectricity (GW average) 1.0 8.6 15.3
Share in Brazilian electric matrix (%) (2%) (13%) (18%)
Sugarcane production (million t) 620 1,206875
GROWTH SCENARIO IN THE SUGARCANE SECTOR (with restoration of the hydrous ethanol competitiveness)
1. A look at the current domestic market
2. The development of biofuels programs worldwide
3. Sustainability aspects
4. Final Remarks
OUTLINE
WORLD BIOFUELS PROGRAMS
Oil consumption
Current Mandates
In discussion
0
10
20
30
40
50
60
70
80
90
100
110
120
2004
2005
2006
2007
2008
2009
2010
20
11
e -
1,0
2,0
3,0
4,0
5,0
6,0
2003
2004
2005
2006
2007
2008
2009
2010
20
11
e
WORLD ETHANOL PRODUCTION AND EXPORTS
PRODUCTION X EXPORTS EXPORTS BY COUNTRY
Source: LMC. Elaboration: UNICA. Note: e - estimate
Billion liters Billion liters
Production
Exports
Brazil
USA
Others
Consumption Targets
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Biomass based diesel 1.89 2.46 3.03 3.79 3.79 3.79 3.79 3.79 3.79 3.79 3.79 3.79 3.79 3.79
Celulosic advanced 0.38 0.95 1.89 3.79 6.62 11.36 16.09 20.82 26.50 32.18 39.75 51.10 60.57
Non-celulosic advanced 0.38 0.76 1.14 1.89 6.62 7.57 9.46 11.36 13.25 15.14 17.03 17.03 17.03 18.93
Conventional 15.14 17.79 34.07 39.75 45.42 47.70 49.97 52.24 54.51 56.78 56.78 56.78 56.78 56.78 56.78 56.78 56.78
0
20
40
60
80
100
120
140
160
Bill
ion l
iters
Conventional
Non-celulosic advanced
Celulosic advanced
Biomass based diesel
Sources: EISA of 2008, U.S. Environmental Protection Agency (RFS-2), Final Rule.
US - RENEWABLE FUEL STANDARD 2
2022 mandate: +136
bln. liters, of which
58% must come from
advanced biofuel
EU LEGISLATIVE FRAMEWORK
10% of renewable energies in the transport sector by 2020 without specific
targets for certain renewable energy sources and without intermediate targets.
Source: based on the 27 NRAP . Elaboration: UNICA
Bill
ion
litr
es
Ethanol estimates according to the National Renewable Action Plans (EU 27)
0
2
4
6
8
10
12
14
16
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EU import tariffs on ethanol are 0.19 and 0.10 € /liter.
EU DIRECTIVE
MULTISTAKEHOLDER INITIATIVES
NATIONAL INITIATIVES (GOVERNMENTAL OR PRIVATE)
LCFS
Low Carbon Fuel Standard
Renewable Transport Fuel Obligation
RTFO
G8+5
Task 39
Liquid Biofuels from Biomass
INTERNATIONAL BODIES’
INITIATIVES
RTRS
Roundtable on Responsible Soy
RSPO
Roundtable on Sustainable Palm Oil
Bonsucro
Better Sugarcane Initiative
Equator Principles
CEN European
Committee for Standardization
Renewable Fuel Standard
RFS ISCC
Biofuel Quota Law- Ordinance for sustainability
requirements
GBEP
Global Bioenergy Partnership
RSB
Round Table on Sustainable
Biofuels
Rainforest
SAN Rainforest Alliance
BEFSCI Bioenergy and Food Security Criteria and Indicators
Source: UNICA. January 2012 (v.6)
GLOBAL NATIONAL
SUSTAINABILITY INITIATIVES FOR BIOENERGY: A “UNIVERSE” IN CONSTANT EXPANSION
REGIONAL INITIATIVES
VSE Verified
Sustainable Ethanol
FAO OECD IDB IFC IEA UNEP ISO
Green Protocol
Sugarcane Zoning
National Commitment
National Commitment for the Improvement of
Labor Conditions in Sugarcane
CBD
Substa-CBD
IFC Principles
BNS
Biomass Nippon Strategy
etha STAR
NEN NTA 8080
Greenergy Greenergy Brazilian
Bioethanol verification programme
PC 248
Sustainability Criteria for Bioenergy
Scorecard
IDB Biofuels Sustainability
Scorecard
Biomass Biofuel Sustainability
2BSvs RBSA
Abengoa RED Bioenergy
Sustainability Assurance
CSBP
Council on Sustainable
Biomass Production
Ethanol production in 100 countries would also enhance energy security by
reducing world reliance on only 20 oil producing countries.
British Sugar
WORLD SUGARCANE MAP
1. A look at the current domestic market
2. The development of biofuels programs worldwide
3. Sustainability aspects
4. Final Remarks
OUTLINE
Source Cana-de-
açúcar
Milho
(EUA) Trigo (UE)
Beterraba
(UE)
Feedstock Sugarcane Corn Wheat Beets
Energy balance (units of rewable energy
per unit of fossil fuel
input)
9.3 1.4 2.0 2.0
Productivity (liters/hectare)
7,000 3,800 2,500 5,500
GHG reduction (from US and EU
legislations)
61%-91% 0%-38% 16%-69% 52%
Advantages of sugarcane ethanol
*Note: reduction of avoided emissions with ethanol as a gasoline substitute and calculated according to life-cycle analysis. Source: World
Watch Institute (2006) and Macedo et al. (2008) – energy balance. Productivity: IEA – International Energy Agency (2005), MTEC, EU
Commission, EPA and UNICA. GEE: IEA – International Energy Agency (2004) and Macedo, I. de C. et al. (2004 and 2008). Elaboration:
UNICA
SUGARCANE ETHANOL ENVIRONMENTAL PERFORMANCE
Million Ha* LAND USE IN BRAZIL
* Area refers to 2010 civil year
Source: ICONE, ESALQ and IBGE. Elaboration: Cosan and UNICA.
Total Area Protected Area Arable Land Others
851 496 330 26
100% 58% 39% 3%
Pastures
Crop Land
Sugarcane
Other
9.5
2.9%
60
18%
159
48%
111
34%
Arable Land Others
Sugarcane
FOR ETHANOL
4.6
1.4%
0
4.000
8.000
12.000
16.000
70´s Today Future
Ethanol Productivity
SUGARCANE AGROECOLOGICAL ZONING IN BRAZIL
1. It excludes sugarcane
expansion in the most
sensitive biomes – e.g.
Amazonia and Pantanal.
2. It excludes sugarcane
expansion on any type of
native vegetation (Cerrados,
Campos, etc.)
3. Authorized areas for sugarcane
expansion: 64.7 ml hectares,
equivalent to 7.5% of the
Brazilian territory (Currently
0.9% of the area is used for
sugarcane)
Response to the process of mechanizing the
sugarcane harvest to eliminate burning;
Project to train and requalify 3,500 workers per
year for jobs in sugar mills and ethanol plants as well
as to work in other sectors;
Similar programs are now being adopted by the
mills.
The Green Protocol is a voluntary agreement established
between UNICA and the government of state of São Paulo to end
the use of fire in sugarcane harvesting and to adopt other
conservation measures, such as the protection of riparian areas.
260 thousand ha of riparian areas are already protected by the
sector and 70% of the cane is to be harvested mechanically in
harvest year 2011/12.
SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
SOCIAL AND ENVIRONMENTAL RESPONSIBILITY
A “trilateral” agreement - Government, Private
Sector and Labor Unions - which sets around 30 better
work practices that goes beyond legislation demand.
It is an agreement of voluntary participation where
verified companies will be placed in a “Positive List”
in the website of the General Secretary of the
Presidency of the Republic.
UNICA was the first agribusiness association in the
world to publish a sustainability report following the
Global Reporting Initiative Framework.
In its last version (2010) it achieved an “A+ Grade”.
Dissemination of the practice within the Sugarcane sector:
around 75 mills have now their own GRI Sustainability
Report!
GRI Sustainability Report
An international multi-stakeholder
certification of best sustainability
practices
SOME BONSUCRO MEMBERS
14 Brazilian mills
certified:
1.4% of global
surface under cane
1. A look at the current domestic market
2. The development of biofuels programs worldwide
3. Sustainability aspects
4. Final Remarks
OUTLINE
1. Consumer demand and public policies will drive increased use of
biofuels.
2. Key factors favoring the commoditization of ethanol:
Adoption of targets for the use of biofuels by a growing number of
countries
Global corporations from a wide range of sectors investing in ethanol
production, generating economies of scale and scope
Ethanol helps countries achieve emission reduction targets and mitigate
climate change, increasing energy security
Ethanol can be produced in more than 100 countries (energy
diversification and economic development factor)
FINAL REMARKS (I)
3. Factors preventing ethanol from becoming a global commodity:
Tariffs and trade-distorting measures
Excessive non-tariff barriers.
Proliferation of sustainability requirements
4. What needs to be done?
Repeal fallacious myths and inform about benefits to climate change mitigation
Elimination of trade-distorting domestic support mechanisms
Increased technical, scientific and economic cooperation between producing
countries
FINAL REMARKS (II)