WORLD ETHANOL MARKET/ O MERCADO MUNDIAL DO ÁLCOOL Opportunities and Challenges/ Oportunidades e Barreiras By Dr. Frank Rosillo-Calle Imperial College London FÓRUM ENERGIA E AMBIENTE Mudanças Climáticas : Impactos e Tendências nos Transportes UNICAMP, 5 Outubro 2004

CONTENTS/ CONTEUDO Summary/Sumário Types of ethanol/ diferentes categorias de álcool World ethanol production/ Produção mundial do álcool Main programmes/ Programas principais International ethanol market/ O mercado mundial do álcool Opportunities and challenges/ Oportunidades e barreiras The Market/ O Mercado PERSPECTIVES/ PERSPECTIVAS - Policy Incentives/ Políticas de estímulos –Feedstock tech, R&D/ Matérias-primas, PeD - Markets/ Mercados –Synthetic versus biofuels/ Combustíveis sintéticos vs. bioetanol - The FFVs/FLEX-FUEL Conclusions/ Conclusões

Types of ethanol/ diferentes categorias de álcool - by feedstock e.g. biological vs. synthetic - by composition/composição -- anhydrous vs. hydrous/ hidrous vs anhidrous -- Biological: grain, sugarcane, fruit, etc/ grãos, cana, frutas, etc Synthetic: derived from oil, gas or coal/ petróleo, gás, carvão mineral) End use/ Usos finais –Fuel, industrial, beverages/ combustível, bebidas…

Feedstock/Materia prima Sugarcane the most promising/cana é mais promissora - produced in 100+ countries - Exception: USA, EU and China Other: corn, cassava, sweet sorghum, potatoes/ maize, mandioca, sorgo sacarino, batata Sugar crops (70%, 2003; 80% 2010)

Main ethanol producers 2003/ Producao mundial de alcool World 38+ Bl (13 countries/países) Brazil 14.2 BL USA 10.6 BL (circa) EU c. 2.2 BL (incl. bioethanol-based ETBE+ Synthetic- incu ETBE a partir do álcool) Others, c.2 BL (Australia, Canada, Colombia, China, India, Mexico, Peru, South Africa, Thailand, etc) 35 countries interested

POTENTIAL/POTENCIAL World/Mundo =60-70 BL in 2012; 120 BL in 2020 (c.10% transport fuels) Brazil 22 BL in 2012 USA 20 BL (2012) EU 8-10 BL (2010) Canada1.33 BL 2010) China 10 BL (2010?) India 1.5 BL LA/AL 3-5 BL (Peru 1.2 BL; Colombia, 1 BL..)

INTERNT. MARTKET/O MERCADO INTERNACIONAL Need to create sizable production/ consumption centres (Brazil, USA, EU, China, India, Thailand)/ Necessidade de um mercado maior (produção e uso) Easy to transport long distances/Fácil de transportar distâncias longas Greater security/stability to possible shortfall in any country or region/ Maior seguridade e estabilidade

BRAZIL World largest potential/ Brasil tem o maior potencial mundial Exports: 2003 = 770 Ml; 2004 = 1.5 BL World export market c.7 BL (2012); Brazil could supply 4-5 BL –(JAPAN 1.8 (3% blend/mixtura) – c3BL(5% blend); China 5BL; EU 2- 5 BL

BRASIL destino das exportacoes em 2003 (ML) Americas (C, N +Caribe) 253.3(33%) Europa………………… (29%) Sul/Sudeste Asia +…… (28%) Africa……………………. 80.4(10%) America do Sul………… 2.3 Otras regioes………… (7.55%) (JournalCana

THE INTER. MARKET/ O MERCADO INTERNACIONAL PITFALLS WITH ETHANOL TRADE/Dificuldades 3 BL/yr traded globally/Mercado mundial New trade agreements (i.e. Brazil with China, Japan, India) Concern over supply (too inelastic)/Preocupação com fornecedores Unstructured, not standardised/Falta de estrutura Growing rapidly due to its potential contribution to transportation/ Acréscimo rápido pelo aumento da demanda A new global ethanol futures created in NY (by NY Board of Trade)

Trade barriers & high storage costs/Barreiras e alto custo de armazenagem It is relatively easy to set up a domestic ethanol fuel industry/ É fácil montar um programa de álcool Ethanol fuel is mostly aimed at the domestic market/ Álcool combustível é normalmente para o mecado nacional Market price does not reflect its real benefits/ O mercado não reflete todos os benefícios sociais Possible trading distortions (e.g. pressure from farmers and subsidies)/ Distorções do mercado Need for new investment & infrastructure/ Investimento e estrutura Market fluctuations (weather, currency devaluations, etc)/ Mudanças do mercado são constantes

FEEDSTOCK & TECH ISSUES/ MATERIA PRIMA EQUESTOES TECNOLOGICAS MAIN CHALLENGES: –Increase productivity /Aumento da produtividade –Reduce cots e.g. today c.60% of feedstock/Custos –Conversion technology is not the problem/Tec. de conversão não é o maior problema –Competition from synthetic fuels/ Competição com combustíveis sintéticos fósseis –Poor R&D funding/ P&D é pobre –Fragmentation, short term R&D/ P&D muito fragmentada e curto prazo –Lack of cooperation/ Pouca cooperação entre os centros de pesquisa –Lack of innovativeness/ Falta de iniciativas inovadoras

FEEDSTOCK TECH, CONT… Greater commitment from the private sector/Maior participação do setor privado e da indústria More industrial participation Greater attention to environmental issues/ Maior atenção as questões ambientais Greater use of by-products/ Maior utilização dos sub-produtos Explore new markets/possibilities aggress. –Hydrolysis of bagasse + co-firing –Ethanol from sugarcane leaves

POLICY/POLITICAS Growing demand mostly from Asia/Maior demanda na Ásia International trade increasing/ Maior crescimento do mercado internacional Increase international competition/Maior competição Importing countries (China, EU, USA, Canada, Japan..) more demanding Key driver: cost competitiveness/ Fator principal e o baixo custo International policy reforms (WTO)/ Reformas da OMC New opportunities (ethanol, sugar demand) Challenges: sweeteners, corn, synthetic fuels…

TECHNOLOGY TRENDS/ Tec no futuro No major breakthroughs/ Não vai haver novas grandes descobertas Blends in differing proportions/ Misturas Ethanol from cellulose containing material/ álcool a partir de material de celulose –Cost main obstacle/Custos - First cellulose ethanol commercial plant in Canada/ Planta comercial no Canadá - Japanese offer pre-design pilot plants. Perhaps 5+ years - genetically engineered microorganisms Sugarcane producing countries R&DD on cane rather than other cellulose material/ Cana deve ter papel fundamental

SYNETHETIC VS BIO, CONT.. R&D on synthetic fuels (oil, coal + n. gas) is gathering pace/ P&D em combustiveis sintéticos estão crescendo Fossil fuels are abundant, particularly coal/ Grandes quantidades de carvão mineral The quality of synthetic fuels is high These fuels quality is improving and will develop, eventually, into even higher and cleaner fuels/ Aumento na qualidade dos combustíveis sintéticos fósseis

Cont..// Other RE, will increase their contribution/ Contribuição das energias renováveis WE DRIVE ON INDUSTRIALLY MANUFACTURED FUELS. THE TECH IS CONSTANTLY IMPROVING UNDER CONSTANT SOCIO-ECONIMIC PRESSURES / Nós usamos combustíveis industriais. Esta tecnologia muda constantemente, devido a pressões sociais e econômicas

SYNTHETIC VS BIOFUELS Synthetic fuels will become increasingly important (alcohols, diesel and gasoline) They will not go away/ Os combustiveis sintéticos vão ter uma importância maior no futuro South Africa produces 40% (oil, coal and natural gas) –New plants are coming on stream in USA, Malaysia/ –This has major implications for biofuels/ Implicações para bio-combustiveis como o álcool, etc.

THE FFVs/FLEX-FUEL Idea from the USA Alternative Fuels Act of GM introduced the Flex-Fuel vehicles in the USA; Currently over 1.5 million vehicles in USA Brazil…. The FFVs-Fuel-flex is an intelligent engine

CONCLUDING/ Conclucoes…. Demand for ethanol fuel will increase/ Demanda para álcool vai aumentar e pode contribuir 10% da demanda mundial Few feedstock are economic/ Custos Need a truly international market/ Necesidade de desenvolver um mercado internacional de álcool Great potential for Brazil/ Grande possibilidade para o Brasil que pode se tornar líder mundial de exportação Synthetic fuels (coal & natural gas) will increase/ FFVs-Flex-fuel- opens new possibilities (fuel flexibility, economic. & environment)

MAIN REFERENCES Lew Fulton (2004) Biofuels for Transport – An International Perspective, IEA C. Berg (2004) World Fuel Ethanol- Analysis and Outlook ( ) MUITO OBRIGADO PELA SUA ATENÇÃO