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Energy Policy 35 (2007) 5393–5398

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History and policy of biodiesel in Brazil

Gabriella P.A.G. Pousa, Andre L.F. Santos, Paulo A.Z. Suarez�

Laboratorio de Materiais e Combustıveis, Instituto de Quımica, Universidade de Brasılia, CP 4478, 70919-970 Brasılia-DF, Brazil

Received 20 March 2007; accepted 9 May 2007

Available online 12 July 2007

Abstract

Historically, during petroleum shortage, vegetable oils and their derivatives have been proposed as alternatives to petroleum diesel

fuel. Since 1930, different approaches have been proposed by Brazilian’s universities and research institutes, including the use of neat

vegetable oils (pure or in blends) or their derivatives, such as hydrocarbons obtained by thermal-catalytic cracking and fatty acids’

methyl or ethyl esters (nowadays known as ‘‘biodiesel’’) produced by alcoholysis. Recently, the external dependence on imported diesel

fuel and the present petroleum crisis have increased the discussion in Brazil in the sense of starting to use alternatives to diesel fuel,

biodiesel being the main alternative for a large petroleum diesel substitution program.

r 2007 Elsevier Ltd. All rights reserved.

Keywords: Brazil; Biodiesel; Renewable energy

1. Brief history of usage of oils and fats as fuel in Brazil

The first record of the use of vegetable oils as liquid fuelsin internal combustion engines is from 1900 when RudolfDiesel used peanut oil (Shay, 1993). However, because ofits low cost and easy availability, petroleum became thedominant energy source and petroleum diesel was thendeveloped as the primary fuel for diesel engines. None-theless, petroleum and its derivatives fuels have periodi-cally been through short supply and, consequently, thesearch for alternative energy sources has emerged (Parente,2003; Schuchardt et al., 1998; Zanin et. al., 2000). Thus, inthe 1930s and 1940s, neat vegetable oils were used in dieselengines under an emergency situation (Ma and Hanna,1999). At that time, the pyrolysis of different triglycerideswas also used for liquid fuel supply in different countries.For example, hydrocarbons were produced in China by atung oil pyrolysis batch system and used as liquid fuels(Chang and Wan, 1947). Another approach proposed atthis time was the use of fatty acids’ ethyl or methyl esters,obtained by transesterification or alcoholysis of vegetable

e front matter r 2007 Elsevier Ltd. All rights reserved.

pol.2007.05.010

ing author. Tel.: +5561 33072162.

ess: psuarez@unb.br (P.A.Z. Suarez).

oils (Chavanne, 1937, 1942) or esterification of fatty acidscombined with transesterification of triglycerides (Keim,1945). Furthermore, the petroleum international crises inthe 1970s and 1990s, as well as an increasing concern aboutthe depletion of the world’s non-renewable resources andenvironmental awareness, provided new enthusiasm in thesearch for renewable fuel sources (Hill, 2000; Parente,2003; Schuchardt et al., 2001).In Brazil, this history was not different. During the 1940

decade occurred our first attempts of energy exploitationfrom oils and fats in internal combustion engines. Indeed,there are reports of many studies about the use of neatvegetable oils, such as babassu, coconut, castor seed andcotton seed (for instance, see Borges, 1944), or hydro-carbons produced by their thermal-catalytic cracking (Otto,1945). It is worth mentioning that during the Second WorldWar the exportation of cottonseed oil, which was the mainvegetable oil produced in Brazil at that time, was forbiddenin order to force a drop in its price and, thus, to makepossible its use as fuel in trains (Chemical & MetallurgicalEngineering, 1943), which is probably the first govern-mental program concerning the use of biofuels.Afterwards, in response to the petroleum shortage

during the decades of 1970 and 1980, Brazil’s FederalGovernment created in the 1980s a program called

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PROALCOOL (Goldemberg et al., 2004), which imple-mented and regulated the use of hydrated ethanol as fuel(engine’s adaptations were needed to use this fuel) andanhydrous ethanol that could be blended with petroleumgasoline. It is important to mention that since 1980 no purepetroleum gasoline is used, only the ethanol/gasolineblends is being used as fuel in Brazil. The ethanol contentin those blends started as 5% and has been increasedduring the three decades of PROALCOOL and actuallyvaries from 20% to 25%.

During this petroleum crisis mentioned above, theproduction of vegetables oils with carbureting purposesplan (PRO-OLEO) was also created, elaborated by theNational Energy Commission, through Resolution No. 007dated October 22, 1980. It was expected a 30% mixture ofvegetable oils or derivatives in diesel and a full substitutionat long term. At that time, the transesterification (alsoknown as alcoholysis) of several vegetable oils, resultantsof agricultural activities and the extractive sector, wasproposed as a technological alternative. Unfortunately,after the drop of petroleum prices in the internationalmarket, this program was abandoned in 1986.

At the end of 20th century, the Federal Governmentrestarted the discussion about the use of biodiesel, andmany studies were made by inter-ministerial commissionsin partnership with universities and research centers. In2002, ethanolysis of vegetable oils was considered as themain route to a petroleum diesel substitution programcalled PROBIODIESEL. This program was presented bythe Ministry of Science and Technology (MCT) and byDecree No. 702 dated October 30, 2002. Until 2005, thesubstitution of all diesel consumed in Brazil by B5 (a 5%biodiesel and 95% diesel blend) and within 15 years by B20(a 20% biodiesel and 80% diesel blend), using fatty acidsethyl esters (Vigliano, 2003), was suggested. Althoughethanolysis has technological limitations when comparedwith methanolysis, it was the chosen route due to Brazil’sgreat ethanol production. In that period, biodiesel stoppedbeing a pure experimental fuel and so began the initialphases of industrial production when the first industry ofesters from fatty acids was installed in Mato Grosso Statein November 2000, starting a production of 1400 ton/month of ethylic ester from soybean oil (Sant’anna, 2003).

It is important to highlight that the use of biofuels is notonly an economical and secure alternative to fossil fuels butit also has many favorable environmental and socialaspects: (i) biodiesel is biodegradable and harmless; (ii) itcan be produced from renewable materials; (iii) ethyl ormethyl fatty acid esters contain no sulfur; (iv) biodieseldecreases soot emission considerably (up to 50%);(v) biodiesel emits about the same amount of CO2 that isabsorbed during cultivation of the oilseed; (vi) it does notcontain any of the carcinogens found in diesel oil;(vii) biodiesel is not considered a hazardous material;(viii) there are numerous social and economic advantagesfrom its use, particularly in developing countries such asBrazil; (ix) biodiesel represents a suitable outlet for

vegetable oil industry, serving as an important tool formarket regulation; and (x) it increases engine lifetimeowing to a superior lubrication capability (Parente, 2003;Schuchardt et al., 1998; Ramos et al., 2003; NBB, 2004).

2. Current biodiesel policy in Brazil

Brazil’s Federal Government created an Inter-ministerialWork Group, by the Presidential Decree dated July 2,2003, which was in charge of presenting studies on theviability of using oil, fats, and their derivatives as fuel andindicating the necessary actions for its implementation. Inits final report, on December 4, 2003, this commissionconsidered that biodiesel should be introduced immediatelyin the Brazilian energy matrix and recommended that:(i) the use should not be mandatory, (ii) there should not bea preferential technological route or raw material for theproduction of biodiesel, and (iii) the social–economicdevelopment of the poorest regions should be included.To implement these suggestions, an Executive Inter-Mini-sterial Commission (CEIB) was created by the PresidentialDecree dated December 23, 2003. This Commission wascomposed of 14 ministries and coordinated by the CivilHouse and had a Managing Group as executive unit, whichis coordinated by the Ministry of Mines and Energyand composed of representatives of 10 ministries andmembers from the Brazilian National Agency for Petro-leum, Natural Gas and Biofuels (ANP), the BrazilianAgricultural Research Corporation (Embrapa), the Brazi-lian Development Bank (BNDES), and the Braziliansemipublic petroleum corporation Petroleo Brasileiro S/A(PETROBRAS). One year later, the National Program ofProduction and Use of Biodiesel (PNPB) was launched insolemn session at the Palacio do Planalto (Governmentseat) on December 4, 2004, its main objective being toguarantee the economically viable production of biodiesel,and its major goal being social inclusion and regionaldevelopment.The most important action from PNPB was the

introduction of biofuels derived from oils and fats in theBrazilian energy matrix by means of Law No. 11097 datedJanuary 13, 2005. In this law, the optional use of B2 untilthe beginning of 2008 is foreseen; after that year, B2 will bemandatory. Between 2008 and 2013, it will be possible touse blends up to 5% of biodiesel, and after this period B5will be mandatory.In its article 4, this law defines biodiesel as a ‘‘biofuel

derived from renewable biomass for use in engines ofinternal combustion with ignition by compression or forgeneration of another type of energy, that can partially ortotally substitute fossil fuels’’. According to this definition,there is no restriction in regard to the technological routeof choice for biodiesel production, it being possible to useas biodiesel the products obtained by the transesterifica-tion, esterification and pyrolysis processes. However, theANP, in resolution ANP 42 dated November 24, 2004,regulated only the use of methyl or ethyl fatty acids’ esters,

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which can be prepared by transesterification or esterifica-tion (ANP, 2004). By this resolution, 26 parameters werespecified for pure biodiesel (B100): aspect, density, kine-matics viscosity, water and sediments, flash point, estercontent, distillation, carbon residue, sulfated ash, totalsulfur, sodium plus potassium, calcium plus magnesium,phosphorous, copper corrosion, cetane number, cold filterplugging point, acid index, free glycerin, total glycerin,monoglycerides, diglycerides, triglycerides, methanol orethanol, iodine index, and oxidation stability.

Recently in resolution ANP 15, dated July 17, 2006, thespecifications for diesel and diesel/biodiesel blend (B2) forroad use were established, as also the rules for commercia-lization in all national territories and the economic agents’obligations concerning the product quality were defined. Inthis resolution, eight parameters were established in orderto control the quality of diesel and diesel/biodiesel blend(B2): oxidation stability, composition, volatility, viscosity,combustion, copper corrosion, contaminants, and lubricity(ANP, 2006).

The current diesel consumption in Brazil being approxi-mately 40 billion liters per year, the potential market forbiodiesel is currently 800 million liters, being able toachieve 2 billion liters up to 2013. Due to its greatbiodiversity and diversified climate and soil conditions,Brazil has different vegetable oils sources, includingsoybean, coconut, castor seed, cottonseed, palm trees,and others. Undoubtedly, since Brazil is today the secondlargest soybean producer in the world and has a well-developed soybean-processing industry, this source occu-pies a prominent position in the development of vegetableoil-based fuels. However, in semi-arid northeast states andin Amazonian states, castor seed oil and palm-tree oils,respectively, seem to be the alternatives of choice. Indeed,castor culture appears to be excellently adaptable to semi-arid lands, which will promote a sustainable agriculture inthe poorest Brazilian region. On the other hand, extra-ctivism of native palm trees in Amazon rainforests, as wellas palm trees growing in already degraded areas, willprobably represent a good alternative in order to promotea sustainable occupation and social and economic devel-opment. In this sense, the Brazilian Government’s plans touse the PNPB also for developing familiar and sustainableagriculture where underdeveloped areas is critical.

The tributary rules for biodiesel use referring to Federalcontributions were established by Law No. 11116, datedMay 18, 2005, and Decrees No. 5297, dated December 6,2004, and No. 5457, dated June 6, 2005. It was determinedthat these tributes were to be charged only once and thatthe contributor is the industrial producer of biodiesel, theincident value being equal to that collected in theproduction of diesel from petroleum. In order to promoteregional and social–economical development, three distinctlevels of reduction of these tributes were established,according to the oil seeds acquired by the industry:(i) 100% reduction in the case of castor seeds (Ricinus

sp.) or palm tree (Elaeis sp.) produced in the north and

semi-arid northeast by familiar agriculture; (ii) 67.9% forany raw material produced by familiar agriculture, regard-less of the region; and (iii) 30.5% for castor seeds or palmproduced in the regions north, northeast, and semi-arid bythe agro-business.Biodiesel producers who acquire raw material in

productive arrangements that include familiar agriculturewith a purchase guarantee receive the social fuel label. Thislabel, regulated by the Ministry of Agrarian Developmentin the Normative Instructions numbers 01 and 02, datedJuly 5 and September 30, 2005, guarantees for industriesnot only fiscal exemptions, but also better conditions forfinancing from BNDES and other public banks. Severalindustries have already acquired the social label, such asAgropalma S/A and AMAPALMA S/A. Indeed, thosebiodiesel industries have made a contract with familiaragriculturists (Association of Comunitary Developmentfrom Ramal Arauai), compromising themselves to buypalm produced by this familiar agriculture group from thenorth region.In order to stimulate the biofuel market before the

beginning of the obligatoriness of its use, biodiesel auctionswere idealized, under the responsibility of ANP, wherePETROBRAS ensures to purchase the necessary volume ofbiodiesel for B2 from industrials with the social label. Untilnow there have been five auctions, from November 23,2005 to February 15, 2006, when up to 885 millions liters ofthe biodiesel were commercialized, which are more than the800 millions liters necessaries to ensure the B2 blend. Thisis certainly a guarantee of the beginning of biodieselmarket in Brazil. Table 1 shows the amount of biodiesel(in m3) purchased in these five auctions, as well as theaverage prices (in R$/m3), the maximum reference prices(in R$/m3), the number of companies that participated inthe auctions, and the delivery date (ANP, 2007).Unfortunately, producers do not report biodiesel pro-

duction costs, so it is difficult to distinguish productioncosts from company profits. In a work by Barros et al.(2006), the production costs for biodiesel obtained fromdifferent raw materials (soybean oil, palm oil, castor oil,cottonseed oil and sunflower oil) by each Brazilian regionwere estimated, considering: (i) raw material productioncosts, (ii) oil production cost, and (iii) biodiesel productioncost (see Fig. 1).The set of measures that the PNPBManaging Group has

been taking establishes the rules to the production andconsumption of biodiesel in Brazil. As a result, thebiodiesel productive chain is being structured, not onlyby the many small installations for proper consumptionthat emerged after 2000, but also in commercial scale. It isworth mentioning that the first commercial scale industry,located in Cassia—MG, received, from ANP, the author-ization for operating, on March 24, 2005, and at the sameday the commercialization of B2 began in a gas station inBelo Horizonte—MG. Since 2 years, ANP has authorizedthe operation of five industries in several Brazilian Statesand more than 4000 gas stations are commercializing B2.

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Table 1

Biodiesel auctions results

First auction Second auction Third auction Fourth auction Fifth auction

11/23/2005 03/30/2006 07/11/2006 07/12/2006 02/14/2007 and 02/

15/2007

Number of participating companiesa 4 6 6 25 3

Volume of biodiesel sold (m3)a 70,000 170,000 50,000 550,000 45,000

Maximum reference price (R$/m3)a 1920.00 1908.00 1900.00 1799.56 1904.51

Average selling price (R$/m3)a 1890.00 1859.65 1828.97 1747.26 1853.19

Delivery datea January–December/

2006

July/2006–June/

2007

January–December/

2007

January–December/

2007

February–December/

2007

Exchange rates American dollar

(US$)/Brazilian real (R$)b1/2.238 1/2.195 1/2.185 1/2.191 1/2.100

Exchange rates euro (h)/Brazilian

real (R$)b1/2.640 1/2.669 1/2.793 1/2.783 1/2.755

aBased on ANP (2007).bBased on BC (2007).

Fig. 1. Estimated biodiesel production costs by region, in US$/L (source: Barros et al., 2006).

G.P.A.G. Pousa et al. / Energy Policy 35 (2007) 5393–53985396

Furthermore, five more industries are under regulationprocess and 24 others are being installed or designed.

Another action of PNPB was the creation of a researchnetwork involving scientists from university and researchinstitutes from all Brazilian regions (Suarez et al., 2006).The aim of this network is to develop science andtechnology for all the biodiesel production chain.

3. Brazilian energy market and possible impact of biodiesel

The Brazilian internal energy market is shown in Fig. 2.As one can see in this figure, differently from othercountries, renewable energy sources represent almost onehalf of the energy supply, and biomass has become thesecond most important source of energy in Brazil. Theintroduction of biodiesel in the Brazilian energy market

will certainly reduce the use of fossil fuels and increase theuse of biomass.Fig. 3 shows Brazil’s demand and production of

petroleum and diesel from 1989 to 2005. It is clear fromthis figure that, although there has been an increase in theconsumption, the decline in petroleum importation wascaused by a significant growth in internal production. Onthe other hand, diesel consumption increased considerablyand Brazilian diesel production is being complemented by adirect importation of diesel fuel. Indeed, although theincreasing production of petroleum in Brazil has beensignificant, external dependence on diesel has been quitestable in the last decade. Since 80% of diesel consumptionis due to public and goods transportation (BEB/MME,2006), the increasing or maintenance of external depen-dence of this fuel would probably become dramatic to the

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Fig. 2. Internal energy offer in Brazil—year 2005 (source: BEB/MME, 2006).

1500

11500

21500

31500

41500

51500

61500

71500

81500

91500

1988 1991 1994 1997 2000 2003 2006

Year

Am

ou

nt

(10

3 m

3)

petroleum consumption petroleum production imported petroleum

200

10200

20200

30200

40200

1988 1991 1994 1997 2000 2003 2006

Year

Am

ou

nt

10

3 (

m3)

diesel consumption diesel production imported diesel

Fig. 3. Petroleum and diesel market in Brazil (source: BEB/MME, 2006).

G.P.A.G. Pousa et al. / Energy Policy 35 (2007) 5393–5398 5397

Brazilian economy in the case of any further shortage inthe international diesel market. In this sense, the partialsubstitution of diesel fuel by biodiesel will not onlycontribute to social and agricultural development but alsobe important in order to diminish Brazil’s externaldependence on this fossil fuel.

4. Final remarks

The Brazilian government is very engaged in thebiodiesel program, which seems to be an irreversibleprocess. In this sense, the use of biodiesel in Brazil willprobably provide financial and environmental benefits tothe country, specially diminishing our dependence onimported diesel fuel and increasing the agriculturaleconomic segment.

One of the main objectives of the Brazilian biodieselprogram is to promote social and regional development in

the most economically underdeveloped areas, like north-east semi-arid and Amazonian regions. Indeed, thegovernment policy trend is to provide social inclusion, byincluding familiar agriculture as a partner to biodieselproducers. Despite fiscal and financial federal subvention,it is not certain that familiar agriculture will be able tocompete with agribusiness to ensure the supply of rawmaterials. Probably, more than subvention, the govern-ment should provide technical and social assistance tothose agricultures in order to organize their business andprepare them to be competitive as biodiesel feedstocksuppliers.

Acknowledgments

GPAGP and ALFS express their appreciation forfellowships granted from CNPq and FBB. PAZS thanksCNPq for research fellowships.

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