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1
BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION
Joel Velasco
Chief Representative – North America www.unica.com.br
2
OUTLINE
•! Brazil’s Sugarcane Industry Today
–! Diversification to weather the global crisis
•! Key Elements of Energy Security
–! Fuel + Infrastructure + Prices = Security
•! Building Biofuels Markets
–! Meeting global demand sustainably
•! A Challenge…
–! Where greater research & analysis is needed
3 3
4
ABOUT UNICA
•! UNICA is the leading sugarcane industry association, representing +100 producers and mills in Brazil
•! Responsible for 60% of all ethanol and sugar production in Brazil
•! Emerging as a leader in the generation of bioelectricity already meeting 3% (and soon 10%) of Brazil’s electricity demand
•! International presence, now in Washington & Brussels, to engage in constructive dialogue
5 Source: Ministry of Mines and Energy BEN (2008).
Other renewables 3.0%
Petroleum 36.7%
Natural Gas 9.6%
Coal 6.0% Uranium
1.6%
Hydroelectricity 14.7%
Other biomass 12.4%
SUGARCANE IS #1 RENEWABLE ENERGY SOURCE
6
CURRENT PRODUCTION
Note: Estimates based on available data projections.
7
SUGARCANE DIVERSIFICATION
Note: Estimates based on available data projections.
8
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Liters per hectare AVERAGE PRODUCTION YIELDS
Source: IEA – International Energy Agency (2005), USDA (2008), MTEC, MAPA, ICONE, UNICA
Sugarcane (Brazil)
Beets (Europe)
Sugarcane (India)
Corn (USA)
Cassava (Thailand)
Wheat (Europe)
9
NET ENERGY BALANCE
0
1
2
3
4
5
6
7
8
9
10
Source: World Watch Institute, compilation of various sources.
Sugarcane (Brazil)
Beets (Europe)
Corn (USA)
Wheat (Europe)
Resulting energy for every unit of fossil fuel input
10
Note: Reductions represent well-to-wheel CO2-equivalent GHG emissions avoided from unit of ethanol compared to gasoline, calculated on a life-cycle basis.
-100%
-80%
-60%
-40%
-20%
0%
Ethanol from Grains (US/EU)
Ethanol from Sugar Beet (EU)
Ethanol from Sugar Cane (Brazil)
AVOIDED GREENHOUSE GAS EMISSIONS
Source: IEA – International Energy Agency (May, 2004), based on a review of recent articles.
Compared with “yesterday’s” gasoline baseline
11 11
12
FUEL: SUGARCANE ETHANOL IN BRAZIL
Sources: NIPE-Unicamp, IBGE and CTC
13 Sources: INPE Canasat
South-Central region
represents 87% of sugarcane harvest
FUEL: SUGARCANE ETHANOL IN BRAZIL
14
INFRASTRUCTURE: FLEX FUEL CARS & DISTRIBUITON
15
INFRASTRUCTURE: FLEX FUEL CARS & DISTRIBUITON
-
200
400
600
800
1,000
1,200
0
1
2
3
4
5
6
Mill
ion
s o
f L
ite
rs
Mill
ion
s o
f V
eh
icle
s
Accumulated Sales of Flex-Fuel Vehicles
Source: ANP & ANFAVEA
2008 2003
About 90% of new
cars sold are Flex Fuel Vehicles
16
JAN FEB MAR APR MAY JUN JUL AGO SEP OUT NOV DEC
Retail Gasoline (E-25) 2.521 2.509 2.510 2.528 2.533 2.517 2.497 2.486 2.480 2.479 2.488 2.504
Retail Ethanol (E-100) 1.586 1.584 1.581 1.663 1.668 1.513 1.401 1.359 1.339 1.320 1.398 1.489
R$ 0.85
R$ 1.10
R$ 1.35
R$ 1.60
R$ 1.85
R$ 2.10
R$ 2.35
R$ 2.60
R$ 2.85
Gasoline
Ethanol
Sources: 2007 data from ANP, UNICA, Reuters. NOTE: Note: Brazilian Gasoline has 25% ethanol content. There is no "pure" gasoline available in Brazil.
Pri
ce a
t th
e P
um
p (
R$/L
iter)
PRICES: CONSUMERS NEED TO SEE SAVINGS
17
0
20
40
60
80
100
120
140
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Oil
prices (
US
$/b
arr
el)
Gasolin
e a
nd e
thanol prices (
R$/L
iter)
Petroleum
Gasoline (E-25)
Ethanol (E-100)
Sources: IMF, IPEA, CEPEA/ESALQ, ANP
2005 2008
PRICES: CONSUMERS NEED TO SEE SAVINGS
18
500
700
900
1100
1300
1500
1700
1900
Millio
ns o
f L
iters
Gasoline
RESULT: GASOLINE IS NOW THE ALTERNATIVE FUEL
Ethanol
Source: ANP & UNICA
2000 2008 2003
19
Millions of Hectares (2007) %
total land
%
arable land
BRAZIL 851
TOTAL ARABLE LAND 354.8
1. Total Crop Land 76.7 9.0% 21.6%
Soybean 20.6 2.4% 5.8%
Corn 14.0 1.6% 3.9%
Sugarcane 7.8 0.9% 2.2%
Sugarcane for ethanol 3.4 0.4% 1.0%
Orange 0.9 0.1% 0.3%
2. Pastures 172.3 20% 49%
3. Available area Total arable land – (crop land + pastures)
105.8 12% 30%
RESULT: 1% OF ARABLE LAND DISPLACES 50% GASOLINE
Sources: IBGE, UNICA
20 20
21
Petroleum
4,252 MT
(184.9 BGJ)
Ethanol 36 MT
(0.96 BGJ)
Sunflower 31 MT
Biodiesel 3.2 MT
(0.12 BGJ)
Castor Seed 1.4 MT
Soy 214 MT
Notes: Million tons, 2005. Data for palm, gasoline, diesel, LPG and Kerosene is from 2003. BGJ = Billions of Giga Joules Sources: FAO, Oil World, F.O. Licht, LCM, EIA. Elaboration: Icone and UNICA.
Rapeseed 47 MT
Gaso-line
1237 MT (53.8 BGJ)
Diesel 1077 MT (46.1 BGJ)
Total (Energy Equiv.) = 115.7 BGJ 1.1 BGJ
Palm 8 MT
LPG 391 MT
(11.9 BGJ)
Kerosene 92 MT (3.9 BGJ)
Sugar Cane 1,292 MT
Corn 702 MT
Wheat 628 MT
WORLD FUELS PRODUCTION
Renewable energy represent less than 1%
FOSSIL RENEWABLE
SOURCE FUEL FUEL SOURCE
22 Source: FOLicht, Secex, USITC, European Comission, LMC. As prepared by UNICA
ETHANOL TRADE VS. PRODUCTION
Only about 10% of total production
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2007
Billio
ns o
f L
iters
10%
23
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Biomass-based Diesel 0.50 0.65 0.80 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Non-celulosic Advanced 0.10 0.20 0.30 0.50 0.75 1.00 1.50 2.00 2.50 3.00 3.50 3.50 3.50 4.00
Celulosic Advanced 0.10 0.25 0.50 1.00 1.75 3.00 4.25 5.50 7.00 8.50 10.50 13.50 16.00
Conventional Biofuels 4.00 4.70 9.00 10.50 12.00 12.60 13.20 13.80 14.40 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00
0
5
10
15
20
25
30
35
40 B
illi
on
s o
f G
all
on
s
!
!
L
OWER
GH
G
U.S. RENEWABLE FUELS STANDARD (RFS, gallons) Represents about 7% of US gasoline market in 2008
Source: EISA of 2008, Dept of Energy, ITC; E-10 Blend Wall Limit based on EIA’s projections of gasoline consumption and do not include bottleneck and other infrastructure concerns.
24
U.S. MARKET FOR ETHANOL BLENDING (E-10)
75 – 100%
50 – 74%
10 – 50%
0 – 10%
2007 2008
Source: Hart Energy
SHARE OF E-10 MARKET
25
U.S. MARKET FOR ETHANOL BLENDING (E-10)
75 – 100%
50 – 74%
10 – 50%
0 – 10%
2007 2008
Source: Hart Energy
SHARE OF E-10 MARKET
26
JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
2006 11,781,907 19,511,078 35,844,984 24,348,429 16,584,532 29,619,991 123,698,512 96,976,443 63,914,158 92,664,383 34,809,105 40,281,740
2007 51,864,071 31,018,239 23,948,426 40,199,519 49,094,678 35,929,933 81,845,382 71,883,705 38,371,822 19,767,472 11,127,527 15,137,438
2008 18,743,314 54,057,559 31,289,855 44,744,455 71,679,118 72,262,873 107,003,322 105,842,403 105,499,734 41,374,565
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
Source: (*) Brazil’s Ministry of Trade (SECEX) though the end of September 2008 (includes direct $0.54 tariff and via CBI $0.30 dehydration charge.)
MONTHLY EXPORTS TO NORTH AMERICA
2006 2007 2008
590 MGY 470 MGY 650 MGY*
27
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
2004 2005 2006 2007 2008
Source: U.S. International Trade Commission. Note: 2008 Data through the end of September.
COST OF U.S. IMPORT LEVY
*
YTD
28
OUR MESSAGE
29
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Biomass-based Diesel 0.50 0.65 0.80 1.00 1.00 1.00 1.00
Non-celulosic Advanced 0.10 0.20 0.30 0.50 0.75 1.00 1.50
Celulosic Advanced 0.10 0.25 0.50 1.00 1.75 3.00
Conventional Biofuels 4.00 4.70 9.00 10.50 12.00 12.60 13.20 13.80 14.40 15.00
Status Quo 0.66 0.44 0.75 0.98 1.41 1.45 1.45 1.62 1.78 1.80
Parity 0.80 1.50 2.70 3.26 3.33 3.64 3.95 4.00
No Tariff 0.85 2.10 3.10 4.64 5.00 5.56 6.40 6.50
0
5
10
15
20 B
illi
on
s o
f G
all
on
s
IMPACT ON IMPORTS BASED ON POLICY CHANGES
By 2015, Brazil could exports between 1.5 to 6.5 billion gallons
Source: UNICA, EISA of 2008, Dept of Energy, ITC
30 30
31
INDIRECT EFFECTS Emissions that may be
forced by the use of a product via market, policy
mediation, or otherwise
LAND USE CHANGE
DIRECT EFFECTS Emissions directly attributable to
the production of a product
Oil Prices
Foreign Policy Shift Currency
Financial Speculation
U.S. Policy Shift
Emergence of Technology Socio-Political Shifts
Weather
Commodity Supply & Demand
War
Indirect effects as leakages?
32
LAND USE CHANGE
Indirect effects as leakages?
A Latte
Wrapper
Water
Coffee
Energy
= 1 liter
Sugar Cup
208 liters per cup
142.8 liters
Milk
Lid
33
Soybean
Corn
Sugarcane
Other
Pasture
Available
ARABLE LAND
355 M hectare 42%
USES OF ARABLE LAND
Sources: IBGE 2007 Data, UNICA
LAND USE CHANGE
If the goal is GHG reduction, where’s the target?
34 Sources: IBGE, INPE/DETER, UNICA
LAND USE CHANGE
Deforestation not driven by just agriculture…
30,651
14,309
10,498
8,389
1,857 1,299
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1990-2006 2000-2006
Deforestation
Soybean
Sugarcane
35
2 METERS
3 METERS
2 METERS
3 METERS
1 METER
1 METER
4 METERS
22-36
tons C/ha
3-5
tons C/ha
5-7 years
Source: Polo de Biocombustivel (Weber Amaral) from various sources.
ABOVE & BELOW GROUND CARBON UPTAKE
36
Annual tons carbon per hectare
3-8 t C/ha 22-36 t C/ha
CANE VS. PASTURES: CARBON UPTAKE
Source: Polo de Biocombustivel (Weber Amaral) from various sources.
37 Source: http://www.wageningenacademic.com/Default.asp?pageid=58&docid=16&artdetail=sugarcane&webgroupfilter=&
FOR FURTHER READING
New book on Sugarcane from Wageningen University
38
39
U.S. ETHANOL SPREADS
Spread with Regular Unleaded Gasoline
Source: EIA, JP Morgan
40
U.S. ETHANOL PRODUCTION VS. SPREAD
Will production continue despite negative economics?
Source: EIA, JP Morgan
41
0
50
100
150
200
250
300
350
400
450
500
Soybean
Corn
Sugarcane
Note: 1) 2007 * - estimated data ; 2) Sugarcane include cane destined for ethanol production, sugar production and other uses (animal feed, spirits, etc)
Sources: IBGE, UNICA
1982 2007
PRODUCTIVITY OF TOP THREE CROPS
Yields continue to improve in Brazil
42
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
'00
0 h
a
an
d '0
00
to
n
Food Production
Area
Sources: IBGE, UNICA NOTE: Note: 1) 2008 is estimated data; 2) Grains include rice, corn, wheat, soybeans, etc.
Brazil’s food production volumes
doubled in the last decade mainly in last two decades
1990 2008
FOOD AND LAND DYNAMICS
43
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Are
a (
'000 h
a)
Eth
anol (m
m liters
) S
ugar
('000 t
on
)
Ethanol
Sugar
Area
Sources: IBGE, UNICA
Brazil’s sugarcane ethanol volumes
have increased 130% and sugar more than 350% in two decades
1990 2008 2003
SUGARCANE AND LAND DYNAMICS
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