Recent report highlights competitive advantages of Brazilian ethanol with
the end of trade barriers in the U.S. (Photo UNICA/ Ronira Fruhstuck)
Brazilian sugarcane ethanol is likely to increase its market share in the United States in coming decades, according to the report “The Future of Ethanol”, produced by Rabobank's global Food & Agribusiness Research and Advisory Department and released in the beginning of March. In the 14 page document, Rabobank points out that the end of the US$0,54 tariff imposed by the U.S. on every gallon of imported ethanol for more than 30 years, in addition to the existence of a mandate for the consumption of renewable fuels in the U.S., create a favorable scenario for the commercialization of sugarcane ethanol in that country.
“We believe that the expiration of the U.S. import tariff on ethanol represents a significant opportunity for the Brazilian cane industry in the medium and long terms” says Andy Duff, Manager of Food and Agribusiness Research for Rabobank in Brazil.
The President of the Brazilian Sugarcane Industry Association (UNICA), Marcos Jank, points out that beyond the opening of U.S. borders to the Brazilian biofuel, global efforts to cut greenhouse gas emissions (GEEs) represent another advantage for sugarcane ethanol. “What really matters is using the least amount of fossil fuels while producing the highest quantities of renewable energy, something that sugarcane ethanol does extremely well compared to other raw materials,” he explains.
Renewable fuel consumption in the U.S. is projected to reach 136 billion litters annually by 2022. Of this, 79 billion liters must be so-called “advanced biofuels,” a category restricted to biofuels capable of reducing greenhouse gas (GHG) emissions by at least 50% compared to gasoline. This is a positive aspect for Brazilian sugarcane ethanol, rated an advanced biofuel by the U.S. Environmental Protection Agency (EPA) because it reduces GHG emissions by up to 90% compared to gasoline.
While stressing the potential for exports of the Brazilian product to the U.S., Duff believes that, in the short term, the country is likely to focus on production for domestic use. “In the next few years, the Brazilian ethanol industry will likely work to keep up with rising domestic demand, which will continue to grow as a result of the ongoing expansion of the flex-fuel vehicle fleet,” he explains. Flex vehicles already represent more than half of all cars on the road in Brazil, or about 13 million units. By 2016, the percentage is expected to rise to 71% of all light vehicles.
UNICA estimates that in order to increase exports, meet rising domestic demand and maintain Brazil’s current 50% share of the global sugar trade, it will be necessary to double the production of sugarcane from the current 555 million tons to 1,2 billion tons by 2020.