Southern Hemisphere Spring Meetings in Brazil: Sugar, Ethanol, Biogas and Biodiesel—Whew!

Asia Aviation Fuel/Sustainable Aviation Fuel (SAF)BioChemicals/Renewable Chemicals BioRefineries/Renewable Fuel Production Brazil Business News/Analysis China Feedstocks Field/Orchard/Plantation Crops/Residues Marketing/Market Forces and Sales Methane/Biogas Not Agriculture Opinions Original Writing, Opinions Advanced Biofuels USA Other Conferences/Events Policy Presentations

November 13, 2019

Print This Article Share it With Friends

by Cácia Pimentel* (Advanced Biofuels USA) Brazilian Biofuels Market players have been busy in the past days, with various seminars and forums organized to discuss the economic and technological development of the sector. Brazil is well known for its clean energy matrix, mostly coming from hydroelectric dams and the well-established sugarcane ethanol industry. Biofuel production can greatly benefit from the soar of innovations in the field, especially those developed and adapted in the country.

Here are some highlights of the recent events:

S&P Global Platts, October 30th: Government representatives, academics and producers met in São Paulo to discuss the sugar and ethanol market. Global sugar consumption growth is slow, as campaigns against sugar intensify. Therefore, world supply is expected to rise by 5.2% in 2020-2021, led by India, EU, Russia and Brazil. India announced export quotas for 6 million tonnes for 2019-20 and gives export subsidy of $146-147/mt. Sugar stocks are increasing around the world and prices have been below cost of production for a long time. The extreme price brings a higher market volatility. The base case scenarios on global consumption and production growth of sugar shows the world will still be in an oversupply up to 2024-2025.

On the other hand, there is a growing global demand for ethanol. According to Beatriz Pupo, Biofuel Senior Analyst from Platts Analytics, 87% of biofuel demand comes from mandates. By 2020, global biofuels demand is estimated at 166 billion liters, mainly due to growing demand in China. Thus, the highest growth rates are expected in Asia, up from 8% against 3% in the rest of the world. The market expects that, in the long run, the mandatory share of ethanol in gasoline will grow, but consumption may sink due to the growth of electric vehicles.

In Brazil, ethanol demand as a component of or alternative to gasoline will continue to grow. There is potential for higher demand levels with a successful RenovaBio program implementation.

RenovaBio is a state policy that aims to outline a strategy to recognize the strategic role of all types of biofuels in the Brazilian energy matrix, both for energy security and for mitigating greenhouse gas emissions.

Unlike traditional measures, RenovaBio does not propose the creation of a carbon tax, subsidies or volumetric mandates to add biofuels to fuels. The Brazilian program establishes national emission targets for the fuel matrix, set for a 10-year period and a certification of biofuel production. This certification assigns different grades to each producer, in a value inversely proportional to the carbon intensity of the biofuel produced. The grade reflects the individual contribution of each producing agent to the mitigation of a specific amount of greenhouse gases, relative to its fossil substitute (in tons of CO2e).

These two instruments will be linked together with the creation of the CBIO (Biofuel Decarbonization Credit). It will be a financial asset, traded on the stock exchange, issued by the biofuel producer, based on the trades (invoice). Fuel distributors will meet the target by demonstrating ownership of the CBIOs in their portfolio.

VI Biogas Forum, October 31^st and November 1^st: Brazil is undergoing a major transformation of the energy market due to Pre-Salt Layer production, natural gas and new biogas and biomethane markets. There is a range of new legal statutes that may allow an investment wave for the next decade. However, there is no adequate preparation of the domestic market for the new reality of natural gas supply, there is no structural growth in demand. Petrobras is still controlling the whole market share, making it hard for potential new players.

But Biomethane seems to be a good alternative to increase biofuel use within the country, as biomass is also located in the Midwest of Brazil. To make this scenario possible, governmental incentive measures are important, such as the definition of auctions specifically regulated for biogas and biomethane for the Brazilian Midwest market. The successful use of solid waste and biomass as feedstock for biogas and biomethane conversion depends on the transformation of supermarket and other organic waste for large potential energy production. Monthly, the agriculture distributor CEASA generates around 100 ton of organic waste comprised mainly of vegetables and fruits that end as rotting waste, making it potential energy wealth or fertilizers.

Brazil's natural gas is still the 3rd most expensive in the world for the industrial consumer and, therefore, there is no incentive to use it. Conversely, biomethane in the form of biofuel would be widely used in the Brazilian market. The state of São Paulo alone has more than 60 sugar and ethanol plants with potential to generate biogas and biomethane from biomass, especially vinasse. But the transformation of solid waste and biomass into biogas and biomethane depends on specific public policies and a favorable business environment.

Biodiesel Congress in Florianopolis, from November 4^th to 7^th: One of the central topics of this congress was the potential for increasing biodiesel in Brazil's renewable energy matrix. Improving the regulatory framework for science, technology and innovation could certainly help in the growth of this branch of the energy industry. These standards allow the use of some legal instruments, such as grant agreements, for partnerships between the market and universities or public research companies. The generation of CBIOS certificates should encourage the manufacture of biodiesel by harnessing the biomass from the agricultural production of oilseeds.

Today, 11% biodiesel is added to diesel sold in Brazil, by legal mandate. The Petroleum, Natural Gas and Biofuels Agency (ANP) approved a gradual mandatory increase to 15% by 2023. This increase should bring positive results for the biodiesel production chain.

Biodiesel Congress President Bruno Laviola said biodiesel production hit a record high in 2018, reaching 5.34 billion liters, and is expected to exceed 6 billion liters in 2019, due to the legal stimulus to increase the percentage of biodiesel mixture from 10% to 11%. For Laviola, this means greater environmental gain, with reduced greenhouse gas emissions, resulting in more income and development for the country. Biodiesel could also generate economic, social and environmental impact.

Eduardo Soriano, General Coordinator of Strategies and Business of the Ministry of Science, Technology, Innovations and Communications (MCTIC), lists the main challenges of biodiesel today to increase its competitiveness. According to him, we need to value the co-products, such as glycerin, which is still produced for the domestic market only. Disruptive and enabling technologies, such as new materials, nanotechnology, the Internet of Things, etc., must be introduced in the production of biofuels. According to him, biodiesel can better interact with other production chains, such as biogas, and especially renewable aeronautical biofuels. The Brazilian Agricultural Research Corporation (EMBRAPA) explains that a soybean biorefinery can add more economic development if it is used not only to export raw grain, but also to produce biodiesel, electric energy and other bi-products, such as glycerin, lecithin and fertilizers.

Conclusion

In general, the speakers made it clear that RenovaBio recognizes the environmental performance of biofuels, as they help reduce emissions and are in line with the commitments made by Brazil in the Paris Agreement.

Brazil is expected to increase the share of sustainable bioenergy in the Brazilian energy matrix to approximately 18% by expanding biofuel consumption alone. Biodiesel has high capacity to generate CBIOs, because its production uses agricultural waste of oilseeds. There is a growing demand for biofuels in Brazil, making it necessary to expand the plants.

*Brazilian attorney, Cacia Pimentel is a PhD candidate in Political and Economic Law at Mackenzie Presbyterian University, Sao Paulo. She holds a Master of Laws from Cornell University, New York. She returns to New York in 2020 as a Visiting Scholar at Columbia University.

Photos: C. Pimentel