Driving with Liquid Driving with Liquid Solar Energy: The Solar Energy: The

Brazilian Experience Brazilian Experience with Biofuelswith Biofuels

Clovis ZapataClovis Zapata

Research AssociateResearch Associate

BRASSBRASS

Cardiff UniversityCardiff University

Presentation OutlinePresentation Outline

The importance of Biofuels;The importance of Biofuels; The Brazilian Ethanol The Brazilian Ethanol

experience;experience; The Brazilian Biodiesel The Brazilian Biodiesel

Program;Program; Conclusion;Conclusion;

The importance of The importance of BiofuelsBiofuels

Economic;Economic; Environmental;Environmental; Social;Social; Cultural.Cultural.

The Ethanol History in The Ethanol History in BrazilBrazil

1925 ford model T

The History of Ethanol in The History of Ethanol in BrazilBrazil

1925, first experiences with 1925, first experiences with ethanolethanol

1932, E5 blend was introduced1932, E5 blend was introduced 1944 E42 was used 1944 E42 was used 1975 the 1975 the proalcool proalcool was was

introducted.introducted.

The The ProalcoolProalcool

Focus on the internal macroeconomic Focus on the internal macroeconomic effects of the oil crises. effects of the oil crises.

11stst phase (1975-1979) E22 blend phase (1975-1979) E22 blend 22ndnd phase (1979-1986) E100 phase (1979-1986) E100

1986 96% new vehicles sold were E1001986 96% new vehicles sold were E100 33rdrd phase (1987- ) Decline. phase (1987- ) Decline.

The ProalcoolThe Proalcool

1993 – E20/E22 Legal Blend.1993 – E20/E22 Legal Blend. 2003- FlexiFuel Technology.2003- FlexiFuel Technology. The system allows the vehicle to function The system allows the vehicle to function

with ethanol, gasoline or any mixture of with ethanol, gasoline or any mixture of both. This eliminates the uncertainty of both. This eliminates the uncertainty of choosing gasoline or ethanol fuelled choosing gasoline or ethanol fuelled vehicles. vehicles.

Ethanol and gasoline Ethanol and gasoline vehicles sold in Brazil vehicles sold in Brazil

(1975-2005)(1975-2005)

0200400600800

100012001400160018002000

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

year

New

Veh

icle

s (

x 1

000)

Gasoline

Ethanol (E100+flexfuel)

Policy instrumentsPolicy instruments -The Brazilian state-owed Petrobras was forced to -The Brazilian state-owed Petrobras was forced to

purchase a minimum amount of ethanol; distribute and purchase a minimum amount of ethanol; distribute and supply ethanol in ry single gas station in the country supply ethanol in ry single gas station in the country (29.000 filling stations).(29.000 filling stations).

-Subsidies in the form of low rate interest loans to -Subsidies in the form of low rate interest loans to companies willing to enter the ethanol production companies willing to enter the ethanol production market market

-Ethanol prices at the pump were established at 59% of -Ethanol prices at the pump were established at 59% of the gasoline price, as the government controlled the the gasoline price, as the government controlled the prices of gasoline for the consumer (ethanol engines prices of gasoline for the consumer (ethanol engines consumed an average of 30% more); consumed an average of 30% more);

-The partial subsidy for the producer was financed by -The partial subsidy for the producer was financed by the taxation of gasoline. the taxation of gasoline.

-VAT tax reduction for ethanol fuelled cars. -VAT tax reduction for ethanol fuelled cars. -The World Bank provided support of US$ 200 million -The World Bank provided support of US$ 200 million

to support the program.to support the program.

Economic resultEconomic result Ethanol for automotive fuel purposes has provided Ethanol for automotive fuel purposes has provided

savings of up to US$ 60,74 billion, in constant savings of up to US$ 60,74 billion, in constant dollars of 2005, to the Brazilian government. If dollars of 2005, to the Brazilian government. If external debt interest rate is included in the external debt interest rate is included in the calculations the figures add up to US$ 121.26 calculations the figures add up to US$ 121.26 billion. Nastari et al. (2005) billion. Nastari et al. (2005)

Creation of 1 million direct jobs and several million Creation of 1 million direct jobs and several million indirect ones, mostly in deprived rural areas of indirect ones, mostly in deprived rural areas of Brazil. Brazil.

to produce the same amount of energy, ethanol in to produce the same amount of energy, ethanol in Brazil was able to generate 152 times more jobs Brazil was able to generate 152 times more jobs than oil production. than oil production. However the quality of the jobs However the quality of the jobs must be questioned. (Magalhães et al 1997). must be questioned. (Magalhães et al 1997).

Environmental EffectsEnvironmental Effects

PolutantPolutant GasolinaGasolina VW (E100)VW (E100) Ford (E100)Ford (E100)

COCO 100%100% 43%43% 57%57%

HCHC 100%100% 36%36% 76%76%

NOxNOx 100%100% 87%87% 79%79%

LeadLead 100%100% ZeroZero ZeroZero

Source: (BEP, 2005)

Emissions reduction with E100

Other important issuesOther important issues Kioto Protocol - Clean Development Mechanism - Kioto Protocol - Clean Development Mechanism -

CDM. CDM. The calculus is CDM is directly dependable The calculus is CDM is directly dependable the biomass density per hectare the biomass density per hectare vis-à-visvis-à-vis the the original vegetation. According to Ribeiro (1997), original vegetation. According to Ribeiro (1997), the areas were sugar cane is planted would grant the areas were sugar cane is planted would grant Brazil a net benefit in terms of CO2. Brazil a net benefit in terms of CO2.

The negative externalities of ethanol are related The negative externalities of ethanol are related to the production process. to the production process.

Vinhoto. Vinhoto. This by-product must be properly This by-product must be properly treated and transformed into fertilizer. treated and transformed into fertilizer.

Burning of sugarcane plantations after the cane Burning of sugarcane plantations after the cane was extracted. This causes polluting emissions, was extracted. This causes polluting emissions, soil nutrient loss and erosion. soil nutrient loss and erosion. (MMA, 2003)(MMA, 2003)

Ethanol learning curveEthanol learning curveSource: NastariSource: Nastari

1

10

100

0 50000 100000 150000 200000 250000 300000Ethanol Cumulative Production (thousand m3 )

(200

4) U

S$

/ GJ

Ethanol prices in Brazil Rotterdam regular gasoline price

trend (Rotterdam gasoline prices) trend (Ethanol prices)

19862004

2002

1999

1980

1990

1995

Future PerspectivesFuture PerspectivesEmbraer ethanol-fueled Ipanema cropdusting aircraft.

The Ipanema is the first series production aircraft in the world coming out of the factory certified for flying with ethanol.

The Biodiesel ProgramThe Biodiesel Program

The Establishment of 11 refineries; The Establishment of 11 refineries; The adoption of a minimum 2% biodiesel The adoption of a minimum 2% biodiesel

blend in petrol diesel; blend in petrol diesel; The insertion of small scale suppliers in the The insertion of small scale suppliers in the

biodiesel supply chain; biodiesel supply chain; Subsidies for local producers, with tax Subsidies for local producers, with tax

differentiation related to the types of differentiation related to the types of oilseeds used the size of the producer and oilseeds used the size of the producer and the location. Small producers receive the location. Small producers receive greater tax exemptions;greater tax exemptions;

Creation of a Social Fuel Seal, to certify Creation of a Social Fuel Seal, to certify fair trade principles.fair trade principles.

ConclusionConclusion

Ethanol in Brazil would not have been Ethanol in Brazil would not have been successful without massive subsidies. successful without massive subsidies.

The economic and environmental The economic and environmental outcome was positive (Dependency on outcome was positive (Dependency on the international prices of petrol and the international prices of petrol and sugar).sugar).

The Biodiesel program has been The Biodiesel program has been based on different concepts but the based on different concepts but the result is not clear yet.result is not clear yet.