23
| 15 BRAZIL’S BIODIESEL PROGRAM Introduction T esting and research into fuel derived from vegetable oil began in Brazil during the 1970s. For reasons having to do primarily with the petroleum market, and with factors af- fecting prices of petroleum derivatives as well as diesel fuel’s market share in Brazil’s transportation industry, these initia- tives fell short of making those fuels a part of the nation’s energy mix. In 2003, new life was breathed into these initiatives by the policies and program support of the Federal Government. These changes were enthusiastically welcomed by all of the various manufacturing, social and political stakeholders in the biodiesel supply chain, and their interest is still growing. In July of 2003, the President of Brazil called for stud- ies by representatives of the various agencies of the Federal Government for purposes of examining the economic, social and environmental feasibility of biodiesel production and use in Brazil. There followed a series of hearings to which were BRAZIL’S BIODIESEL PROGRAM Rodrigo Augusto Rodrigues 1 José Honório Accarini 2 1 Masters in Regulatory Economics, University of Brasilia, Adjunct Deputy Director to the Executive Office’s Chief of Staff and coordinator for the Interministerial Executive Committee on Biodiesel. 2 Masters in Economics, University of São Paulo, Adviser to the Executive Office’s Chief of Staff and Member of the Interministerial Executive Committee on Biodiesel.

Brazil’S BiodieSel prograM · 2014. 9. 30. · 1 4 | BiofuelS in Brazil: realitieS and proSpectS 3% by industry and other sectors. To meet the coun-try’s demand, Brazil imports

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  • |15�Brazil’SBiodieSelprograM

    introduction

    TestingandresearchintofuelderivedfromvegetableoilbeganinBrazilduringthe1970s.Forreasonshavingtodoprimarilywiththepetroleummarket,andwithfactorsaf-fectingpricesofpetroleumderivativesaswellasdieselfuel’smarketshareinBrazil’stransportationindustry,theseinitia-tivesfellshortofmakingthosefuelsapartofthenation’senergymix.

    In2003,newlifewasbreathedintotheseinitiativesbythepoliciesandprogramsupportoftheFederalGovernment.Thesechangeswereenthusiasticallywelcomedbyallofthevariousmanufacturing,socialandpoliticalstakeholdersinthebiodieselsupplychain,andtheirinterestisstillgrowing.

    InJulyof2003,thePresidentofBrazilcalledforstud-iesbyrepresentativesofthevariousagenciesoftheFederalGovernmentforpurposesofexaminingtheeconomic,socialandenvironmentalfeasibilityofbiodieselproductionanduseinBrazil.Therefollowedaseriesofhearingstowhichwere

    Brazil’SBiodieSelprograM

    rodrigoaugustorodrigues1

    Joséhonórioaccarini2

    1MastersinRegulatoryeconomics,UniversityofBrasilia,AdjunctdeputydirectortotheexecutiveOffice’sChiefofStaffandcoordinatorfortheinterministerialexecutiveCommitteeonBiodiesel.

    2Mastersineconomics,UniversityofSãoPaulo,AdvisertotheexecutiveOffice’sChiefofStaffandMemberoftheinterministerialexecutiveCommitteeonBiodiesel.

  • 1�0| BiofuelSinBrazil:realitieSandproSpectS

    invitedrepresentativesofscienceandtechnologyinstitutes,universities,vegetableoilmanufacturers, farmersand ruralworkers, automakers, auto parts producers, state govern-mentsandstatelegislatorsinvolvedinthetopic.Everyeffortwasmadetolearnaboutandevaluateinternationalexperi-enceintheproductionanduseofbiodiesel.

    These studies culminated, inDecember of 2003, in thepreparation of a Final Report presenting conclusions onbiodiesel’spotential formakingapositivecontributionto-ward resolving crucial Brazilian issues, such as helping toplace family farmowners (small ruralproducers)onabet-terfootinginsocietyasawholethroughjobcreationandincome which would result from their increasing inclusionin thesupplychain for thisbiofuel.Thiswould lessenthedisparities among different regions, save on hard currency

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  • |1�1Brazil’SBiodieSelprograM

    andreducethenation’sdependenceonimportedoil,whileincreasingtherenewablecomponentofBrazil’senergymix,workingtowardsabetterenvironmentandeasingtheburdenofhealth-relatedcostsbyreducingpollution-relatedillness,especiallyinthegreatmetropolitanareas.

    After considering this broad range of social, economic,environmental,strategicandevengeopoliticalbenefits,theFederalGovernmentpromptlyturnedtothetaskofdefininggoalsandtakingstepstowardtheintroductionofbiodieselintoBrazil’senergyfuelmix.Hence,onDecember6,2004,Brazil’sNationalBiodieselProgram(PNPB)cameintobeing.

    Theprogramcalledforanumberofdifferentstudies.Mea-suresweresetinmotionandactionswereimplementedwiththe goal of accommodating Brazil’s fuel-related legal andregulatoryenvironmenttotheadditionofbiodieselasanew-

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    comer.Taxsubsidiesweredesigned,throughthemechanismof theSocial FuelStamp, family farmsorganized,methodsoffinancingcreatedandstepstakentofostertechnologicaldevelopmentusingbothdomesticresourcesandthosearis-ing from international cooperation. Brazil’s own biodieselmarketwasorganizedaroundpurchaseauctions,pivotaltothisProgram.

    Brazil’senergyMixandBiofuelsMarket

    As shown in Chart 1, Brazil clearly stands out when itcomes to the renewable share (hydropower, biomass andethanol)ofthenation’senergymixcomparedtotheglobalaverage.Nevertheless,non-renewable sources (55.6%) stillpredominate, in the formof oil and oil products (38.8%),naturalgas(9.5%),coal(5.8%)anduranium(1.5%)anditsderivatives.

    Chart1–Renewableandnon-renewableSourcesinenergyMix

    Brazil(2006) World(2004)

    86,8%

    13,2%

    55,6%

    44,4%

    Renewable Non-renewable

    Originaldatasource:

    nationalenergy

    Balance(Ben-200�).

    Originaldatasource:

    nationalenergy

    Balance(Ben-200�).

  • |1�3Brazil’SBiodieSelprograM

    Uponexaminingthelightandheavyvehiclefuelmixfor2006,showninChart2,thehighrelianceondieseloil(52.2%)standsoutclearly.In2004,whentheNationalBiodieselPro-gramwasinitiated,thepercentagewasevenhigher(about54%).ThiswasafactorintheintroductionofbiodieselasanewfueltobolsterBrazil’ssustainableenergysecurity.

    Chart2–VehicleFuelMix:Brazil-200�

    NGV3,3%

    Gasoline27,3%

    AnhydrousAlcohol7,3%

    Ethanol9,9% DieselOil

    52,2%

    Chart 2 also shows renewable energy sources at 17.2%ofallfuelconsumption,withethanol(9.9%)andanhydrousalcohol(7.3%)–thelatterblendedwithgasolineinratiosrangingfrom20%to25%(E20toE25).Thegrowingratiosofbiodieseltodieselfrompetroleum,addedtotheincrementaluseofethanolinflex-fuelvehicles,havegraduallyraisedtherenewablefuelshareofthevehiclefuelmix.Assumingthesamerelativedistributionfoundin2006,theB2mixturewillraiserenewablefuels’sharefrom17.2%toabout18.2%.

    DomesticconsumptionofdieseloilinBrazilisabout40billionlitersperyear.Datafor2005showthat82.4%isusedfortransportation,14.6%consumedinagricultureandabout

    Originaldatasource:

    MinistryofMinesand

    energy(MMe)

    Originaldatasource:

    MinistryofMinesand

    energy(MMe)

  • 1�4| BiofuelSinBrazil:realitieSandproSpectS

    3%byindustryandothersectors.Tomeetthecoun-try’sdemand,Brazil importsfrom6%to8%of itsdomestic diesel fuel requirements – 2.4 billion to3.2billionlitersperyear.A2%blendofbiodiesel(B2)wouldrequire800millionlitersperyeartosup-plythedomesticmarket.ProductionrequirementsoftheB5mixtureaddupto2billionlitersannually.

    ReasoninganddirectivesguidingthenationalBiodieselProgram(PnPB)

    Asoilbecomesscarcerandenergymoreessentialtodevelopment,energysecurityisastrategicpur-poseoftheprocess,anditmustbeattainedusingalternativeenergysources.Intheshortandmedi-um-term,increasingproductionoffuelsfromrenew-ablesourcesisthemostviableoption,andrequiresmeeting broad sustainability requirements, on theenvironmental,economic,social,technologicalandstrategicfronts.

    Given its soil and climate, Brazil has vast po-tentialforproducingbiomass,andaddingvaluetotheseavailable rawmaterialsoffersasizable rela-tiveadvantage.Amongthemanysuchpossibilities,biodiesel is perhaps the most promising becauseenergydemandtendstoincreasewhiletheworld´seconomyexpands.

    Withinthiscontext,Brazil’sgovernmentglimpsedthepossibilitiesnowbecomingrealityofbolstering

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  • |1�5Brazil’SBiodieSelprograM

    itsenergysecuritywhilebenefiting family farmsandsmallruralproducersinthepoorerregionsofthecountry,bybring-ingthemintothebiodieselsupplychainwithenvironmentalandotherbenefitsaswell.

    This sums up the reasoning behind the Biodiesel Pro-gram,anditsgoalsarebeingattainedthroughtaxbreaksforcompaniespurchasingoilfeedstockproducedinthenation’spoorestregions.Tofitthisstrategytoamarketcontext,theblendingofbiodieseltopetroleum-baseddieselfuelingrad-uallyincreasingproportionswasgiventheforceoflaw.

    Brazilian biodiesel fuel is derived from renewable bio-mass to power compression-ignition internal combustionengines.Regulationsprovideforothertypesofpowercon-versioninwhichitcanpartiallyorentirelyreplacefossil fuels. Hence there is no shortage of pos-sibleapplicationsofbiodiesel fuel inurbanandhighwaytransportation,aswellaspassengerandcargoshipping,railways,generatorsandstation-aryengines.

    Brazil’sBiodieselProgramwasdesignedtograd-uallyconvergeonmarketmechanismsbymeansofincentiveswhichprovidefortheinclusionofpro-ducersinthepoorestregionsintothesupplychainforthisfuel,throughincentivesbasedonsupplyanddemand.

    Prominentonthedemandside isFederalLawNo.11,907passedJanuary13,2005.Thelawde-finesbiodieselasanewfuelinBrazil’senergymix,andasof January2008, requires a2%biodieselcomponentblendedto98%dieseloil,knownasB2.ByJanu-aryof2013,themixrequirementwillincreaseto5%(B5),

    hence there is no shortage of possible applications of bioDiesel fuel in urban anD highway transportation, as well as passenger anD cargo shipping, railways, generators anD stationary engines.

  • 1��| BiofuelSinBrazil:realitieSandproSpectS

    withpossibilities forhigherblendpercentagesall thewayuptopurebiodiesel(B100)byauthorizationoftheBrazilianPetroleum,GasandBiofuelsRegulator(ANP),whichisgivenregulatoryandfiscalcontrol,bythatsamelaw,overproduc-tionandsaleofbiofuels.

    Law11,907/2005thuscreatesacaptivemarketforbiodie-selinBrazil,whileFederalLawNo.11,116ofMay18,2005providesforabatementofsomeorallfederalexcisetaxesonbiodiesel,basedonthefeedstockusedtoproduceit,classofgrower-seller,regionaloriginoftherawmaterial,oracombi-nationofthesefactors.

    TheExecutiveBranchwasplacedinchargeofregulatoryenactmentsforLaw11,116,withthestipulationthattoben-efit from the tax breaks, biodiesel producers must have acertificate, knownas theSocial Fuel Stamp, issuedby theAgrarianDevelopmentMinistry(MDA)tobiodieselproducerslicensedtomanufactureandsellthisnewfuel,andwhomeetthefollowingadditionalrequirements:

    a) purchaseminimumpercentagesoffeedstockfromfam-ily-ownedfarms,rangingfrom10%intheNorthandMidwestto30%intheSouthandSoutheastregions,all the way to 50% in the Northeast and Semi-AridBadlands (based on average market shares of smallagri-producersinthoseregions);and

    b)enter intoagreementswith family farms, concerningprices,schedulesandtermsofdeliveryforrawmateri-als,andprovidethemtechnicalassistance.

    A100%rollbackoffederalexcisetaxesonfuelsisgrantedexclusivelyforbiodieselproducedfrompalmoil(dendê)intheNorth,orcastoroilintheNortheastandSemi-AridBad-lands,providedtheseoilscomefromfamilyfarms.Foroils

  • |1��Brazil’SBiodieSelprograM

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  • 1��| BiofuelSinBrazil:realitieSandproSpectS

    producedonothertypesoffarmsinthosesameregions,themaximumfederalexcisetaxabatementis32%.

    Biodiesel produced from feedstock grown on family-ownedfarmsisgivenpreferentialtreatmentinthetaxcode.Irrespectiveoftheoilseedorregion,iftherawmaterial ispurchasedfromtheseproducers,thefederaltaxabatementcomesto68%.

    Another important featureof the taxbreakapproach isthattotalfederaltaxesonbiodieselmayneversupplanttax-esonconventionaldiesel fuel.Anagreemententered intobytheFederalGovernmentandalloftheStatesinBrazil’sFederationinOctoberof2006,providesthatthestatevalue-addedtaxonbiodieselproductionandtrademaynotexceedtheratesassessedonpetroleumdieselfuel.

    Besides the full or partial rollback of federaltaxes,companiesthathavetheSocialFuelStampmay use that certificate to differentiate theirbiodiesel brandor origin in themarketplace, forthesealsignifiesthattheproducerabidesbytheprinciplesofsocialresponsibilityinmanufacturing.By these mechanisms, Federal Law 11,116/2005providedincentivessothatthesupplyofbiodieselwouldabidebythebasicprinciplesunderlyingtheNationalBiodieselProgram,fostersocialdevelop-ment and reduce regional disparities by creatingemploymentandincomeopportunitiesforsomeofthepoorestindustriesandregionsinBrazil.

    Another important feature of this program isthat it does not exclude any economic classes,technologicalapproachesorrawmaterials.ThisisbecauseBrazilhassufficientpotentialtomanufac-

    another important feature of this

    program is that it Does not excluDe any

    economic classes, technological

    approaches or raw materials. this is

    because brazil has sufficient potential

    to manufacture bioDiesel using a

    variety of processes anD feeDstocks

  • |1��Brazil’SBiodieSelprograM

    turebiodieselusingavarietyofprocessesand feedstocks,suchascastorbeans,palm,soybean,peanuts,oilseedradish,cotton, sunflower, jatropha, babassu, animal fat and usedoil. The economics of each alternative vary in accordancewithBrazil’sregionaltraits.

    TheFederalGovernmentbelievesthechoiceshouldbeleftuptotheeconomicactorsthemselves,butdoesrequirethatthebiodieselusedtomeetthelegalblendingrequirementsmeet physical and chemical specifications determined andrigorously inspectedby the federalagencyhaving jurisdic-tion, the Brazilian Petroleum, Gas and Biofuels Regulator(ANP).

    Accordingtotherulesoftheprogram,anyeconomicagentdesiringtoproduceandsellbiodieselmaydosoafterobtain-inginitialauthorizationfromtheANP.Anycompanybenefit-ing from this authorizationmustfile for a special registry

    Biodieselwith

    distinctproductive

    process:Castor

    bean,soybean,

    peanuts,cotton,

    sunflower,jatropha.

    del

    fimM

    arti

    ns/P

    ulsa

    rim

    agen

    s

  • 1�0| BiofuelSinBrazil:realitieSandproSpectS

  • |1�1Brazil’SBiodieSelprograM

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  • 1�2| BiofuelSinBrazil:realitieSandproSpectS

    listing with the Treasury Ministry as a biodiesel producer.Companiesthatqualifyfortaxbreaksintendedtofosterso-cialandregionaldevelopmentmust,inaddition,applyattheMDAforaSocialFuelStamp.

    BackgroundandCurrentStatusofthenationalBiodieselProgram(PnPB)

    ByDecemberof2004,thelegalandregulatoryprovisionsof the program were already in place, with another threeyearstogobeforetheB2mixturerequirementwasscheduledtotakeeffect(Januaryof2008).Tostandbyandexpectthemarkettoorganizeitselfnaturallydidnotseemthebetterpartofwisdomgiventheuncertaintiessurroundingpricestobechargedoffaithfulconsumers.

    It seemed appropriate, then, to bring about conditionswherebycompetitionamongsellerscouldputsuppliesonafeasiblefooting,therebysteepeningthe“learningcurve”intheproductionofthisnewfuelandinthelogisticssurround-ingitstransportation,blending,distributionandcommercialsale.ThisledtheFederalGovernmenttoorganizebiodieselpurchaseauctions.

    Theprimarypurposeofthesereverseauctionswastofos-terdevelopmentofadomesticbiodieselmarketandreduceasymmetriesininformationaboutcostsandpricinginastillincipientmarket.Intandemwiththiswasadesiretohurryalong the social development aspects and reductionof re-gionaleconomicdisparities.TheB2mixturerequirementwasthereforemoveduptoJanuaryof2006,butremainedcontin-gentuponvolumeschanginghandsatthereverseauctions,

  • |1�3Brazil’SBiodieSelprograM

    the purchase auctions have playeD a Decisive role in graDually consoliDating brazil’s bioDiesel market.

    whichwouldonlybeopentocompanieshavingtheSocialFuelStamp.

    Oneshouldobserve,however,thatthepurchaseauctionswereintendedasatransitionalmeasure,tohastenachieve-mentofthestatedpurposesandprovidefarmersandagri-culturalorganizations,industrialproductionanddistributionnetworks, with a transitional learning phase which wouldleadintofree-marketprocessesamongbiodieselproducers,distributors and refineries — the medium and long-rangeoutcometheNationalBiodieselProgramenvisioned.

    Thepurchaseauctionshaveplayedadecisiverole in gradually consolidating Brazil’s biodieselmarket.Theextenttowhichtheywereattractiveto industrycanbeseenbytheexcessofsupplyoverdemand, shown in Table1.Another impor-tantoutcomewastheaveragepricereductionbe-tweenthefirstandfourthreverseauctions,whichcameto9.1%innominalterms.Thisshowsthatthenation’sindustryhasbeenmovingalongthelearningcurveandofferingbiodiesel for saleatprices growing increasingly competitivewith conventionaldieselfuel.

    Theriseintheaveragepriceatthefifthreverseauctionshouldnotbeinterpretedasareversalofthattrend,forthatreverseauctionwasheldforthespecificpurposeofoffset-tingsmallshortfallsinbiodieselcontractedfordeliverydur-ingearlierauctions.Thisreducedthenumberofbuyers,thatreverse auction was only open to companies already fullyoperationalandhavingidlecapacitywithwhichtopromptlyoffsetthoseshortfalls.

  • 1�4| BiofuelSinBrazil:realitieSandproSpectS

    Table1-SummaryofBiodieselPurchaseAuctions

    AtthefivereverseauctionsheldbytheANP,therewere17successfulpurchasers (with24 industrialplants).Thesebuyerswillinturnsell885millionlitersofbiodieselthroughDecember, 2007. Producing that total volume will provideemployment opportunities for some 210,000 smallholderfamilies.

    Chart3showsthepercentagedistributionoverthetotalvolumechanginghandsatallfivereverseauctions.Thecom-binedshareforthetwopoorestregionsinBrazil(NorthandNortheast)willbe48.9%.Smallagri-producers’shareinthesalesofbiodiesel feedstockarrangedat these reverseauc-tionswillbe35%ofthetotal(310.5millionliters).

    Reverse Auction

    Date

    No. of Participants

    Volume Offered

    Volume Sold Delivery

    Timeframe

    Average net price of ICMS

    (R$/liter)Millions of Liters

    11/23/2005 8 92 70 January-December/2006 1.905

    03/30/2006 12 315 170 July/2006-June/2007 1.860

    07/11/2006 6 125 50 January-December/2007 1.754

    07/11/2006 25 1141 550 January-December/2007 1.747

    02/13-14/2007 7 143 45 Immediate 1.862

    TOTAL 885 --- ---

    Reverse Auction

    Date

    No. of Participants

    Volume Offered

    Volume Sold Delivery

    Timeframe

    Average net price of ICMS

    (R$/liter)Millions of Liters

    11/23/2005 8 92 70 January-December/2006 1.905

    03/30/2006 12 315 170 July/2006-June/2007 1.860

    07/11/2006 6 125 50 January-December/2007 1.754

    07/11/2006 25 1141 550 January-December/2007 1.747

    02/13-14/2007 7 143 45 Immediate 1.862

    TOTAL 885 --- ---

    Originaldatasources:

    AnPandMMe.

    Originaldatasources:

    AnPandMMe.

  • |1�5Brazil’SBiodieSelprograM

    Chart3–RegionaldistributionofReverseAuctionSales

    NortheastNorth SouthSoutheastMidwest

    37.9%

    11%

    17.7%16.7%16.8%

    Table2showscomparativedataessentialtoanyanalysisofthesocialandregionalimpactofbiodieselreverseauctionoutcomes. They show that of the total volume contractedfor,thesharecomingfromthetwopoorestregionsinBra-zil (North and Northeast) will be approximately 4.7 timestherelativefractionofbiodieselfeedstock(cotton,peanut,sunflower,castorbean,soybeanandpalmoil)theseregionsproducedin2004,whentheNationalBiodieselProgrambe-gan.Thesametableshowsthatsmallholderfamilies’shareofbiodieselfeedstockcontractedforatthereverseauctionsisnearly10timesthesmallagri-producers’proportionalcontri-butiontoBrazil’sGDP.

    Table2-SocialandRegionalimpactofthe5BiodieselReverseAuctions

    Originaldata

    source:Agrarian

    development

    Ministry.

    Originaldata

    source:Agrarian

    development

    Ministry.

    North and Northeast Region Shares Family-Owned Farm Share

    OilseedCropRevenue(Datafor

    2004)

    BiodieselProduction(Datafor

    2006/2007)

    AgriculturalGDP

    (Datafor2003)

    BiodieselFeedstock(Datafor

    2006/2007)

    10.3% 48.9% 3.6% 35%

    North and Northeast Region Shares Family-Owned Farm Share

    OilseedCropRevenue(Datafor

    2004)

    BiodieselProduction(Datafor

    2006/2007)

    AgriculturalGDP

    (Datafor2003)

    BiodieselFeedstock(Datafor

    2006/2007)

    10.3% 48.9% 3.6% 35%

    Originaldata

    sources:MdA

    andBrazilian

    Geographicaland

    Statisticalinstitute

    (iBGe).

    Originaldata

    sources:MdA

    andBrazilian

    Geographicaland

    Statisticalinstitute

    (iBGe).

  • 1��| BiofuelSinBrazil:realitieSandproSpectS

    Eventhoughscarcityofdataandtimeframesforcompari-sonherearehardlyideal,theseindicatorsneverthelessshowthat the purchase auctions have done their share toward

    helpingtheNationalBiodieselProgramachieveitsprimarygoalsof reducing regionaleconomicdis-paritiesandincludingagri-producerfamiliesinthebiodieselsupplychain.

    BiodieselsalesfiguresforBrazilalsoshowsig-nificantresults.TheB2dieselblendisalreadysoldat5,000distributioncentersoutof35,600intheentirecountry.AsofMayof2007,therewere27plantslicensedbytheANPtomanufacturebiodie-sel,withatotalinstalledcapacityof1.21billionlitersperyear.Another30units,withaggregatecapacity of 1.74 billion liters per year, have al-readyappliedfortheir licensesandshouldbeginoperatingbytheendof2007.Plantsbeingbuilt(7)and thoseat the feasibility studystage(25)add up to an annual manufacturing capacity ofsome1.65billionliters,andareexpectedtobeginoperatingbytheendof2008.

    Takingintoaccountonlythe27unitsalreadylicensed to manufacture biodiesel, their annualcapacity (1.21 billion liters) suffices to providethevolumenecessaryforthemandatoryB2blend(about800millionlitersperyear).Iftothisweadd the30units in thefinal stagesof licensingor undergoing expansion, aggregate manufactur-ingcapacityincreasesto2.95billionliters,whichismorethansufficienttomeettherequirementsfortheB5mixture(approximately2billionliters/year).

    bioDiesel sales figures for brazil

    also show significant results. the b2

    Diesel blenD is alreaDy solD at 5,000

    Distribution centers out of 35,600 in

    the entire country. as of may of 2007,

    there were 27 plants licenseD by the anp

    to manufacture bioDiesel, with a total

    installeD capacity of 1.21 billion liters

    per year. another 30 units, with aggregate

    capacity of 1.74 billion liters per

    year, have alreaDy applieD for their

    licenses anD shoulD begin operating by

    the enD of 2007.

  • |1��Brazil’SBiodieSelprograM

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    These data clearly show that the timetable could bemovedupontheB5mixturerequirements,orevenforblendsofmorethan5%,dulysupportedbyvehicletestsorANPau-thorization.Biodieselexportsareanotherpossibility,sinceprojectedmanufacturingcapacityforlate2008issomethinglike3.5billionlitersofbiodieselperyear.

  • 1��| BiofuelSinBrazil:realitieSandproSpectS

    ClosingComments

    Brazil’s National Biodiesel Program sets an ex-ample of public policy designed and implementedwithbroadparticipationinsupportoftheprimaryactorsinvolvedinthesupplychainforthisrenew-ablefuel.Brazil’sbiodieselmarketisenactedinlawandregulated,andalsosupportedbydifferentiatedtax incentives.It isprovidedwith instruments forfinancing the supply chain, research efforts andtechnological development in its agricultural andindustrial stages (including international coopera-tion), aswell as for testing componentparts andengineswiththediesel/biodieselblendinvaryingproportions, and for the organization of agri-pro-ducerfamilies.

    At the heart of Brazil’s Biodiesel Program is acommitmenttoprovidethemostefficientpossibleprotectiontotheweakestlinksinthesupplychain:familyfarmsandconsumers.TheSocialFuelStampprovidesdifferentiatedtaxincentivestocompaniesprocessing feedstock produced on family-ownedfarms and feedstock originated in the neediestpartsofthecountry.Attheotherendofthechain,physicalandchemicalspecificationstogetherwithtoughstandardsforinspectionareindispensableifconsumersaretohaveaccesstoqualityfuelandbe-comeconfidentsupportersofBrazil’spolicy–uniquethroughouttheworld–ofstrengtheninganenergymixwhichdailygrowscleaner,moresustainableandlessdependentonoil.

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    Given the resultsalreadyachievedandpoliciesputinplacebythenation’sBiodieselProgram,Bra-zil is in a position to enlarge and consolidate itsleadershippositionintheproductionanduseofre-newableenergyresources–especiallywithitsrela-tiveadvantagethroughavailabilityanditsdiversityofsoilandclimateconditions.Improvementstoag-riculturalmethodsanduseofareasextensivelyded-icated tocattleproductionare theprimarymeansBrazil has available to increase energyproductionfromsustainablesourceswithoutputtingcompeti-tive pressure on food supplies or putting a strainonsuchareasastheAmazonregion,whereoilseedcultivationforbiodieselmanufacturingcanbecar-riedoutindegradedareas,therebycontributingtotheirrecovery.

    Itisthusasustainabledevelopmentprograminthe broadest possible sense (environmental, eco-nomic,social,technologicalandstrategic),gener-ating agrarian income and employment, reducingeconomicdisparitiesamongregions,savingonhardcurrency,diversifyingsourcesofenergy,benefitingtheenvironment,helpingtorevitalizelocalandre-gional economiesandputtinghuman resources inthepoorestregionsintouchwithaboomingmar-ket.

    The outlook for Brazilian biodiesel on interna-tionalmarketsisalsofavorableandpromising.Thisis partly due to thegrowingdemand for biofuels,reinforcedbyincreasingpublicawarenessoftheen-vironmentalconsequencesofvehicleemissionsand

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    gainstobehadbyreplacingpetroleumproductswithalterna-tiveenergysources.Brazil’sdiplomaticmissionsarejoiningforcesinmultilateraleffortsaimedatcreatinginternationalmarketsforbiofuelsandjointlyestablishingtechnicalcodesandstandardsforthesealternativefuels.TheirpurposeistoenabletheBraziliangovernmenttocontributetowardtheseoutcomes, especially in view of Brazil’s pioneer efforts intheproductionandapplicationofrenewablefuelresources,withtheagriculturalpotentialofitsgeographiclocation,thevastnessofitsterritoryandthediversityofthenation’ssoilandclimate.Theidealistomakerenewablefuelsacommod-ityitem,andtoenterintobilateraltechnologicalcoopera-tionagreementswhichwillcontributetowardexpandingandconsolidatingmarketsforbio-basedfuels.

    Uni

    ca

  • |1�1Brazil’SBiodieSelprograM

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