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Presentation on the role of biofuel production, consumption and trade for Latin America.Presentation given at the ICTSD Symposium on trade and climate change in Cancun, December 2010.
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Biofuels trade in Latin America:
Regional and Global Perspectives
The Role of Trade and Markets in
Addressing Climate Change and
Sustainable Development
Cancun, December 8th 2010
David Laborde – [email protected]
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Overview of the presentation
• Introduction
• Where do we stand? Trade pattern in Biofuels
• Opportunities and Remaining barriers
• How to make it works?
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Introduction
• Trade in Biofuels: New Hope or Phantom
Menace for mitigations
• All Biofuels are not equal
From Valin, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
TRADE PATTERN IN BIOFUELS
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Biodiesel
Production
(thds barrels a day)
Consumption
(thds barrels a day)
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009
Asia & Oceania
Africa
Middle East
Eurasia
Europe
North America
Uruguay
Peru
Paraguay
Honduras
Guatemala
Colombia
Brazil
Argentina
EIA, 2010
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006 2007 2008 2009
Asia & Oceania
Africa
Middle East
Eurasia
Europe
North America
Uruguay
Peru
Paraguay
Honduras
Guatemala
Colombia
Brazil
Argentina
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Biodiesel Net trade (thds barrels a day) 2009
-50
-40
-30
-20
-10
0
10
20
30
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Ethanol
Production
(thds barrels a day)
Consumption
(thds barrels a day)
0
200
400
600
800
1000
1200
1400
2001 2002 2003 2004 2005 2006 2007 2008 2009
Asia & OceaniaAfricaMiddle EastEurasiaEuropeNorth AmericaVirgin Islands, U.S.UruguayTrinidad and TobagoPeruParaguayJamaicaGuatemalaEl SalvadorEcuadorCubaCosta RicaColombiaBrazilBoliviaArgentina
0
200
400
600
800
1000
1200
1400
2001 2002 2003 2004 2005 2006 2007 2008 2009
Asia & Oceania
Africa
Middle East
Eurasia
Europe
North America
Virgin Islands, U.S.
Uruguay
Trinidad and Tobago
Peru
Paraguay
Jamaica
Guatemala
El Salvador
Ecuador
Cuba
Costa Rica
Colombia
Brazil
Bolivia
Argentina
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Ethanol Net trade (thds barrels a day) 2009
-20
-10
0
10
20
30
40
50
60
70
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Regional Production Pattern (2009)
Argentina39.9%
Brazil47.8%
Colombia9.8%
Guatemala0.0%
Honduras0.0% Paraguay
0.2%
Peru2.1%
Uruguay0.2%
Biodiesel Production - LAC
Argentina0.1%
Bolivia0.3%
Brazil94.6%
Colombia1.1%
Costa Rica0.3%
Cuba0.1%
Ecuador0.0%
El Salvador0.5%
Guatemala0.3%
Jamaica1.5%
Paraguay0.4%
Peru0.2%
Trinidad and Tobago0.6%
Uruguay0.0%
Virgin Islands,
U.S.0.1%
Other2.8%
Ethanol Production - LAC
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Regional markets vs World Markets:
Export structure of the large exporters
94.3%
4.0%
0.6%
0.9%0.2%
0.1%
5.7%
Argentina Biodiesel Exports (2009)
EU USA Brazil Peru China Rest of the World
F.O. Licht (2010)
28%
3%
3%
15%
0%
5%
3%
10%
33%
Brazil Ethanol exports (2009)
EU Costa Rica
El Salvador Jamaica
Colombia Trinidad and Tobaggo
Mexico USA
Asia
F.O. Licht (2010)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Regional markets vs World Markets:
Stronger regional involvement of smaller countries
0%
90%
6%4%
Ecuador Ethanol Exports (2009)
EU Colombia Peru Rest of the world
F.O. Licht (2010)
90%
10% 0%
Bolivia Ethanol exports (2009)
EU Peru Rest of the world
F.O. Licht (2010)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
OPPORTUNITIES AND
REMAINING BARRIERS
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Regional demand will grow
Country Biofuel Addition of biofuel
Argentina
Ethanol 5%
Biodiesel
7% on August 2010
10% since July 2011
Bolivia
Ethanol No goals
Biodiesel2,5% since 2007
20% on 2015
BrazilEthanol 25%
Biodiesel 5% since 2010
ChileEthanol Between 2-5% since 2008
Biodiesel Between 2-5% since 2008
Colombia
Ethanol10%
20% on 2012
Biodiesel
Till 8% by 2010
10% in Santander, Cesar
South, Antioch and West
of the country.
7% in Bogota in central
and eastern plains region.
Costa RicaEthanol till 2% by 2010
Biodiesel
EcuadorEthanol 10%
Biodiesel 2,5%
El Salvador Biofuel
Goal of replacing 15% of
the consumption of fossil
fuels.
Guatemala Biofuel
Goal of replacing 15% of
the consumption of fossil
fuels..
Country Biofuel Addition of biofuel
Honduras BiofuelGoal of replacing 15% of the
consumption of fossil fuels
JamaicaEthanol 10%
Biodiesel No goals.
México Biofuel No goals.
Nicaragua BiofuelGoal of replacing 15% of the
consumption of fossil fuels
Panamá Biofuel
Goal of replacing 15% of the
consumption of fossil fuels
10% of ethanol since 2009.
ParaguayEthanol 18 - 24%
Biodiesel 5%
Peru
Ethanol 7,8%
Biodiesel2% since 2009
5% by 2011
República
Dominicana
Ethanol 15% by 2015
Biodiesel 2% by 2015
Uruguay
Ethanol No goals.
BiodieselB2 by 2008 – 2011
B5 by 2012
FIESP-IICA, 2010
= x5 regional demand –
without Brazil - for biofuels
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Remaining barriers
• Remaining Barriers. Protection faced by LA
exporters
• But also:
• Domestic subsidies
• Export taxes structure (e.g. Argentina)
Biodiesel Ethanol
Africa 4.20% 24.22%
Asia 3.42% 85.89%
Europe 0.49% 37.60%
North America 3.09% 40.86%
Latin America 1.15% 57.72%
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
US and EU policies will matter too
Real Income effects of US and
EU mandates, %
-1.0% -0.5% 0.0% 0.5%
Brazil
CAMCarib
China
CIS
EU27
IndoMalay
LAC
SSA
US
Mandate
Mandate and trade liberalization
Mandate without sugarcane ethanol
Net Emissions Balance of US
and EU mandates (grCO2/MJ)
Al Riffai, Dimaranan and Laborde, 2010
-30 -20 -10 0 10
-20.8
-28
7.92
EU and US Mandates
EU and US Mandates and trade liberalization
EU and US Mandates without sugarcane ethanol
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
HOW TO MAKE IT WORKS?
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Define clear priorities
• Biofuels vs common sense:
• Kill two birds with one stone vs A bird in the hand is worth two in
the bush
• Environmental policy? Energy policy? Farm policy? Policy
Reduction Strategy?
• One rule in economy: One goal=one tool
• International and domestic inefficiencies (e.g. combination of
mandates and subsidies)
• Decisions to make about
• The type of biofuels, the type of feedstocks
• The scale of production & the degree of concentration
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Different economic costs:
A Peruvian Illustration
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Palm Oil -Commercial
Palm Oil - Small Holder
Jatropha Commercial
Jatropha Smallholder
Sugar Cane Ethanol (Coastal
Region)
Sugar Cane Ethanol
(Amazonian Region, including
small holders)
Ethanol made from molasses
(average)
US
D/lit
er
Laborde and Al Riffai, 2010 & FAO
Deforestation
Deforestation
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
• Domestic policy vs Regional policy
• Domestic policies will lead to “protectionist” behaviour
• Regional approach requires coordination
• Managing
• Small countries, Large countries
• Agricultural exporters vs Agricultural importers
• Biofuel exporters vs Oil exporters
• If Latin America, find a regional agreement (e.g. phasing
out of trade barriers and subsidies, sustainability criteria),
it can export the model to a global basis. Otherwise, it
will strongly undermine the possibility to reach a global
agreement