Monday, 2nd July 2012
Jose Virgilio Enei of Machado,
Meyer, Sendacz e Opice Advogados says Brazil has the potential to
become a major ethanol exporter, as long as it overcomes a few obstacles first.
The biofuel market in Brazil is largely dominated by ethanol, including its
hydrous and anhydrous products, with residual room for biodiesel, which
accounts for 5 per cent of overall biofuel volume production and is produced
from crops such as soy, pinhão manso and mamona.
In 2011, total sugar cane production reached a record 620 million tons in
Brazil, resulting in 38 million tons of sugar (using 45 per cent of the sugar
cane produced) and 27 billion litres of ethanol (using the remaining 55 per
cent).
The US and Brazil are the largest producers of ethanol globally, producing 34
billion litres and 27 billion litres in 2008 respectively, followed distantly
by France, with 1.2 billion litres in the same year. As a reference, biodiesel
production is much more equally distributed: Germany leads production with 2.2
billion litres, followed closely by several other countries such as France, the
US, Brazil and Argentina.
Brazilian sugar cane and ethanol production has more than doubled in the last
decade, but despite this substantial growth our domestic market still absorbs
most of the ethanol produced. Less than 7.5 per cent (approximately 2 billion
litres) of the ethanol produced in Brazil last year was exported. The main
export destinations are the US (141 million litres), Japan (68 million litres)
and the Netherlands (19 million litres).
Barriers to entry
Although Brazilian ethanol has been mostly serving the country’s domestic
market, there is huge exporting potential in the future as global markets
migrate to cleaner sources of fuel and are willing to reduce their oil
dependency by increasing their mixing requirements. Brazilian ethanol is more
competitive than biodiesel and can satisfy these goals, but the demand for
sugar cane ethanol is still modest due to local subsidies for corn ethanol in
the US, despite the relaxation of former importation quotas, and non-tariff
barriers in the European Union.
In the EU, biofuels only satisfy applicable mandatory mixing or use
requirements if their production, inside or outside the territory of the EU,
meets certain sustainability criteria. These include the requirement that gas
emission savings are at least 35 per cent (or 60 per cent as of 2018), and that
these biofuels are not cultivated from land with a high biodiversity value or
land with high carbon stock, such as forestry or wetlands. It may not suffice
that biofuels are produced in non-biodiverse land, if, by doing so, they
displace other cultures that then end up moving to protected areas.
The Brazilian government, with the support of industry associations such as
Unica, is making efforts to overcome the above-mentioned barriers for global
markets. In this regard, bills have been proposed to Congress in order to
create an official sustainability certification for ethanol produced in Brazil,
as well as to prohibit the cultivation of sugar cane in rich biodiverse areas
such as the Amazon or the Pantanal. These proposed laws, if approved, could
help exporters to evidence fulfilment of sustainability criteria set by the
European Union and other international markets.
This article is based on a presentation made by Jose Virgilio Enei at
Latin Lawyer’s Third Annual Oil & Gas Conference in São Paulo in May.
(Latin Lawyer 02.07.2012)
(Notícia na Íntegra)