BRAZILIAN SUGARCANE ETHANOL Potential of Sustainability Willian Kimura, researcher

OUTLINE

1. Context

a) Economic

b) Social

c) Environmental

2. Case Study: Mitigation potential

3. Reflections and conclusions

2. CONTEXT

100% gasoline Ethanol used in

the gasoline

blend

27% anhydrous

+ 63% gasoline A

(sold in gas

stations)

Ethanol used

direct in the car

tank (sold in gas

stations)

Flex fuel technology: Possibility to use either gasoline or ethanol, in any proportion, to fill car tanks

Total Recoverable Sugar - TRS: Sugar content (1.76 kg of TRS produces 1 liter of ethanol)

1 gallon 3.78 liters 1 acre 0.40 hectare 1 US Dollar 3.50 Reais

DEFINITION AND CONVERSION FACTORS

Gasoline A Anhydrous Gasoline C Hydrous

Source: CONSECANA (2006)

North/Northeast (10%)

Source: CONAB (2016); UNICA (2016)

Center South (90%)

BIG FIGURES FROM THE SUGARCANE SECTOR

CURRENT SITUATION – SEASON 2015/2016

• Sugarcane production: 665.6 million tons

• Sugarcane area: 8.7 million ha (1.02% total area)

• Agricultural yield: 76.9 ton/ha

• TRS: 131.4 kg/ton of sugarcane

• Industrial yield: 5,725 liters of ethanol/ha (2x maize)

• Ethanol production: 30.5 billion liters

• 63% hydrous

• 37% anhydrous

• Sugar production: 33.5 million tons

• Bioelectricity: 20.2 TWh (10 millions houses)

a. ECONOMIC ASPECTS

THE SECTOR HAS BEEN FACING HARD TIMES

9

18 22

29

21

10

3 2 2 1 -2 -2 -3

-5

-14 -13 -9

-11 -9

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

Plant closed in Center-South Region

Source: UNICA (2015); CONAB (2016)

Estim

ative

350

400

450

500

550

600

650

700

750

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

(mill

ion

ton)

99

18

7

61

New Plant in Center-South Region Sugarane production (Brazil)

Estim

ative

HYDROUS MARKET DEPENDS ON GASOLINA PRICES

Source: EIA (2016); MDIC (2016); ANP (2016); BACEN (2016); Babcock et al. (2013)

0,8

1

1,2

1,4

1,6

1,8

jan

-10

abr-

10

jul-

10

ou

t-10

jan

-11

abr-

11

jul-

11

ou

t-11

jan

-12

abr-

12

jul-

12

ou

t-12

jan

-13

abr-

13

jul-

13

ou

t-13

(R$/

l)

Producer Brazilian Refinery Brazilian Import New York Harbor Ethanol Price

Gasoline Price = 70%

If 70%: Preference for ethanol

If 70%: Preference for gasoline

GASOLINE PRICE PREFERENCE OF COMSUMPTION IN FFV

b. SOCIAL ASPECTS

Source: UNICA (2015); CONAB (2016)

THE ENVIRONMENTAL PROTOCOL

SUGARCANE BURNING WILL BE FORBIDDEN

• Voluntary agreement in 2007

• 170 mills and 29 associations in São Paulo

State

• It represents more than 90% of the state’s

production

• São Paulo State represents 55% of the national

production

• Anticipation of the deadline to eliminate

sugarcane burning (for harvesting) from 2031

to 2017

• Significant environmental and health benefits

TRADE OFF BETWEEN ENVIRONMENTAL AND SOCIAL ISSUES

Source: UNICA & FERAESP (2015)

- 7%

- 12%

9%

CAGR

Project Renovação

(“RenovAction”):

aims to qualify former

sugarcane workers

Total people in

agricultural area:

reduced more than 85

thousand jobs

Sugarcane workers

(cane cutters):

reduced almost 2.5

times

Workers in

Mechanized area:

almost doubled the

jobs

c. ENVIRONMENTAL ASPECTS

IT IS FORBIDDEN SUGARCANE EXPANSION IN THE AMAZON BIOME

Source: MAPA (2009)

SUGARCANE AGROECOLOGICAL ZONING

• Exclusion of areas with native

vegetation;

• Exclusion of areas at the Amazon

Biome, Pantanal biome and Upper

Paraguay river Basin;

• Indication of areas with agricultural

potential without full irrigation (water

footprint);

• Indication of areas with slope lower than

12% (suitable for mechanization);

• Prioritize degraded and pasture areas.

REPLACING FOSSIL FUEL

Source: Macedo & Seabra (2008); MCTI (2015)

GASOLINE REPLACEMENT:

1.8 to 2.1 kg of CO2e

per liter of ethanol

(Reduction of 90%)

ETHANOL EXPORTED: It is not accounting for

Brazilian contributions

BIOELECTRICITY : Bioelectricity surplus:

430 kg CO2e/MWh

EMISISON FACTOR: Combined Margin

3. CASE STUDY:

MITIGATION POTENTIAL

SUGARCANE SECTOR PRODUCTION LEVELS

Source: : UNICA & Agroicone (2015)

INDEX 2014 STAGNATION 2030 EXPANSION 2030

Sugarcane production (Million ton)

630 731 1,015

Sugarcane areas (Million hectare)

8.7 7.7 10.7

Ethanol 2G consumption (Billion liter)

0 0.2 5.0

Bioelectricity

(TWh) 22 44 115

Ethanol consumption (Billion liter)

24.7 21.6 50.9

POSSIBILITY TO OFFSET 3 YEARS OF TRANSPORT SECTOR EMISSIONS

Source:

Mitigation Potential: Elaborated by Agroicone.

Transport Emissions: MCTI (2014), UNFCCC (2015), WRI (2015)

Annual emissions in

2012 (MtCO2e)

Total Brazil: 1,203

Transport sector

• Brazil: 200

• France: 132

• USA: 1.700

• China: 703

37 36 36 36 36 36 35 35 35 35 35 35 35 35 35 35

5 5 6 6 7 8 8 9 9 10 11 1 4 6 9 12 16 23

32 39

46 51

56 61

67 72

77

-

20

40

60

80

100

120

140

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

(mill

ion o

f tC

O2eq)

Stagnation Abroad Additional (Expansion - Stagnation)

Stagnation: 2015 to 2030: 668 mm tCO2e

Expansion: 2015 to 2030: 1.239 mm tCO2e

571 mm tCO2e additional

4. CONCLUSIONS AND

REFLECTIONS

GREAT POTENTIAL

• Financing program for ethanol storage and sugarcane renew (Pro-Renova)

• Tax incentive for improving car efficiency (Inovar-Auto)

• Return of the gasoline tax

• Allowed the increase of ethanol share in the gasoline blend

THE GOVERNMENT HAS MADE SOME POLICIES TO SUPPORT THE SECTOR

SUGARCANE SECTOR PLAYS A MAJOR ROLE IN THE BRAZILIAN INDC (COP-21)

• Expanding sustainable biofuel

• Increasing renewable source in power matrix

• Land use (compliance of Forest Code, avoid deforestation and restoring/reforesting 12 million ha of forest )

GREAT POTENTIAL

• Recent good policies but not enough

• Hard to accomplish the commitments (iNDC)

• The government should provide stability and a long term policies

Thank you!

WILLIAN JUN KIMURA | Researcher |

willian@agroicone.com.br

+55 11 3025-0500

REFERENCES • ANP (2016). National Agency of Petroleum, Natural Gas and Biofuels. Available at: http://www.anp.gov.br/?pg=59190&m=&t1=&t2=&t3=&t4=&ar=&ps=&cachebust=1332185105909

• Babcock; Moreira; Peng (2013). Biofuel taxes, subsidies, and mandates: impacts on us and Brazilian markets. Available at: http://www.card.iastate.edu/publications/dbs/pdffiles/13sr108.pdf

• BACEN (2016). Central Bank of Brazil. Available at: http://www4.bcb.gov.br/pec/taxas/port/ptaxnpesq.asp?id=txcotacao

• CONAB (2016). National Company of Food Supply. Available at: http://www.conab.gov.br/conteudos.php?a=1252&t=2&Pagina_objcmsconteudos=2#A_objcmsconteudos

• CONSECANA (2006). Council of Sugarcane, Sugar and Ethanol Producers of the State of São Paulo, Manual de Instruções,. 5ª edição. Piracicaba. Available at:

http://www.orplana.com.br/manual_2006.pdf

• EIA (2016). U.S. Energy Information Administration. Available at: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=eer_epmru_pf4_y35ny_dpg&f=m

• Environmental Protocol (2007). Available at: http://www.ambiente.sp.gov.br/etanolverde/files/2011/10/protocoloAgroindustriais.pdf

• Macedo, I.C.; Seabra, J.E.A. (2008). Mitigation of GHG emissions using sugarcane bioethanol. In. Sugarcane Ethanol, Peter Zuurbier and Jos van de Vooren (org). Available at:

http://sugarcane.org/resource-library/studies/Wageningen%20-%20Chapter%204.pdf

• MAPA (2009). Ministério da agricultura, pecuária e abastecimento. Zoneamento Agroecológico da Cana-de Açúcar - Expandir a produção, preservar a vida, garantir o futuro. Rio de Janeiro, RJ.

Available at: http://www.cnps.embrapa.br/zoneamento_cana_de_acucar/ZonCana.pdf

• MCTI (2014). Brazilian Ministry of Science, Technology and Innovation. Estimativas anuais de emissões de gases de efeito estufa no Brasil. 2 ed. Brasília. Available at:

http://www.mct.gov.br/upd_blob/0235/235580.pdf

• MCTI (2015). Brazilian Ministry of Science, Technology and Innovation. CO2 Emission Factors according to the methodological tool: "Tool to calculate the emission factor for an electricity system,

version 04.0 and earlier" approved by the CDM Executive Board. Available at: http://www.mct.gov.br/index.php/content/view/307492.html

• MDIC (2016). Ministry Of Development, Industry And Trade. Available at: http://aliceweb.mdic.gov.br/

• UNFCCC (2015). United Nations Framework Convention on Climate Change. National Inventory Submissions 2014. Available at:

http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/8108.php

• UNICA & Agroicone (2015). Cana de açúcar como ativo estratégico da agenda de mitigação de GEE brasileira. Ethanol Summit 2015. Available at:

http://agroicone.com.br/uploads/2015/07/ethanol-summit-agroicone-rodrigo-c-a-lima.pdf

• UNICA & FERAESP (2015). Project RenovAction. Qualification transforming lives - Report 2010-2015. Available at: http://www.unica.com.br/download.php?idSecao=17&id=22129468

• UNICA (2015). Brazilian Sugarcane Industry Association. Coletiva de imprensa BALANÇO DA SAFRA 2014/2015. Available at: http://unica.com.br/documentos/apresentacoes/

• UNICA (2016). Brazilian Sugarcane Industry Association. Coletiva de imprensa ESTIMATIVA SAFRA 2016/2017. Available at: http://unica.com.br/documentos/apresentacoes/

• WRI (2015). CAIT - Historical Emissions Data (Countries, U.S. States, UNFCCC). Available at: http://www.wri.org/resources/data-sets/cait-historical-emissions-data-countries-us-states-unfccc

CATTLE HERD AND LAND USE IN

BRAZIL GUSTAVO PALAURO, RESEARCHER

1. Cattle herd in Brazil

2. Land Use

3. Brazilian goal in Agriculture sector

Summary

1. Cattle herd in Brazil

Cattle herd in the Brazilian context

147

205 212

0

50

100

150

200

250

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Mill

ion

he

ad

s

Brazil has the largest commercial cattle herd:

212 million animals in 2014. Increased about 4% over the past decade (2004-14);

Source: IBGE - PPM

31%

22% 10%

9%

9%

5%

3% 10% India

Brazil

China

United States

European Union

Argentina

Australia

Other

Source: USDA (2015)

Cattle historical evolution in Brazil World cattle herd

Nearly 80% of Brazilian cattle is for beef production and it is

concentrated in the central region of the country Beef Cattle in Brazil Milked cows in Brazil

Source: IBGE – Censo Agropecuário Source: IBGE – Pesquisa Pecuária Municipal

Mato Grosso has the largest cattle herd in Brazil and is the biggest soybean

producer. Minas Gerais has the largest cattle herd for milk production

13%

11%

10%

10%

9% 7%

39%

Major states in cattle heads

Mato Grosso Minas GeraisGoiás Mato Grosso do SulPará Rio Grande do Sul

Mato

Grosso

Goiás Mato

Grosso do

Sul

Pará

Minas

Gerais

Rio

Grande do

Sul

TO

MA

PI

BA

SP

PR

SC

RJ

ES

AM

AP RR

AC

RO

CE RN

PB

PE

AL SE

Source: IBGE – Pesquisa Pecuária Municipal

Beef sector activity represented 15%

(US$ 54 billion) of the 2015 Brazilian

agribusiness GDP, while exports

reached US$ 5.9 billion in 2015;

Key end buyers of Brazilian beef in

2015: Hong Kong, Egypt, Russia, Iran

and China.

Importance in the Brazilian economy

One of the largest beef exporter;

Source: CEPEA (2016); ABIEC (2016)

Key points about beef sector

About 40% of the beef cattle is on the

complete production cycle;

Brazilian characteristic for raising cattle

in the extensive system (low yield);

In 2014, national beef production was

9.8 million tons;

About 80% of the Brazilian beef

production has the domestic market as

destination;

2. Land use

Agricultural areas:

70 million hectares of crops;

About 178 million hectares of

pastures.

Land use in Brazil:

native vegetation covers most part of the territory

Native vegetation:

Covers 66% of the national territory

or approximately 566 million

hectares.

Source: GTPS White Paper (2015); Britaldo Soares-Filho et al. (2014)

21

5

20

82

0

5

10

15

20

25

30

35

0

10

20

30

40

50

60

70

80

90

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

An

nu

al d

efo

resta

tio

n (

tho

usan

d k

m2)

Mil

lio

n h

ead

s

Annual deforestation Cattle herd

Legal Amazon Cattle herd and deforestation in Legal Amazon

Despite the increase of deforestation until 2004, in recent years the index has been decreasing,

while cattle herd has been increasing.

A process of improving per-hectare yields rather than expanding pasture.

Cattle herd x Deforestation in the Legal Amazon area

Source: IBGE – PPM (2015); INPE-PRODES (2015)

3. Brazilian goal in Agriculture sector

Cattle

intensification

• Restoration of degraded areas;

• Decrease in deforestation;

• Compliance with the Forest Code.

• Investment in Good Agricultural Practices (GAP);

• Improve yield in cattle production;

• Improving and maintaining pastures in good

condition;

• Releasing pasture areas to crop production;

Cattle intensification as a way for agricultural growth and

environmental compliance in Brazil

Brazil´s expectation to

release 17 million hectares

of pasture areas until 2030

to other land uses

(GTPS White Paper, 2015)

Brazilian agriculture´s goal

Brazilian

government is

focusing its efforts

to meet the targets

to tackle global

warming (COP 21)

Big opportunities for the beef sector

helping the country to achieve its goals,

proposed in the Paris Agreement:

• Recovery of degraded pasture;

• Helping to comply with the Forest Code;

• Civil society and NGOs have pressured the

beef sector against irregular practices, such

as buying cattle from deforested areas,

mainly in Legal Amazon area;

• Largest retailers conducing programs to

guarantee sustainable sourcing.

Thank you!

GUSTAVO PALAURO | Researcher

gustavo@agroicone.com.br

+55 11 3025-0500