More than 90 percent of all new cars licensed in Brazil each year are flex fuel. Every liter of fuel sold in Brazil includes 27 percent ethanol. Consumers have chosen to replace almost 40 percent of the country&rsquo;s gasoline needs with sugarcane ethanol, says Leticia Phillips, North America representative for the Brazilian Sugarcane Industry Association, UNICA. Ethanol use in Brazil has risen in the past two decades, and now is supported by the country&rsquo;s 2015 Paris Climate Summit commitment to reduce greenhouse gas emissions by 43 percent of 2005 levels by 2030. That goal supports Brazil&rsquo;s continued development and use of low-carbon, clean biofuels as part of RenovaBio, the country&rsquo;s new renewables policy. Even corn ethanol production in Brazil is growing, with the help of a U.S.-based agricultural group. But experts say it won&rsquo;t soon affect the amount of corn ethanol the U.S. sends to Brazil, our largest ethanol export designation. First Step RenovaBio is the first step in meeting the goals Brazil set at the Paris summit. The program brings predictability to the biofuels industry, and provides incentives and targets for the reduction of emissions. It mandates that Brazil fuel distributors gradually increase the amount of biofuels they trade each year to help cut carbon emissions. It&rsquo;s expected to be a game changer that will help stabilize the country&rsquo;s sugarcane industry and &ldquo;benefit global biofuels players,&rdquo; Phillips says. &ldquo;Brazilian consumers have enjoyed subsidized gasoline prices for many years, which weakens demand for ethanol. RenovaBio will alter this dynamic and encourage fuel distributors to boost sales of biofuels versus gasoline by requiring them to lend a hand meeting greenhouse gas reduction goals.&rdquo; Ethanol and bioenergy produced from sugarcane currently make up 15.7 percent of Brazil&rsquo;s energy mix, and have offset 600 million tons of carbon dioxide emissions. Reaching the Paris climate summit goals will require biofuels to supply about 18 percent of the country&rsquo;s energy mix by 2030. RenovaBio will assist in that goal and sets Brazil&rsquo;s renewable fuel policy apart from other programs across the world, Phillips says. &ldquo;Brazil fosters a diverse energy matrix that prioritizes renewable energy and encourages an innovative transportation fleet that can maximize biofuel consumption,&rdquo; Phillips says. &ldquo;It&rsquo;s a recipe for success when coupled with a biofuels industry that&rsquo;s committed to sustainability and continuous improvement.&rdquo; Brazil&rsquo;s president recently signed a decree that would regulate RenovaBio. According to the new guidelines, responsibilities will be shared between the National Energy Policy Council (CNPE), the National Petroleum Agency (ANP) and the RenovaBio Committee. The CNPE will be in charge of defining annual emission reduction targets in the country&rsquo;s fuel sales, the ANP will evaluate the criteria for the certification of biofuels and accreditation of its producers and the RenovaBio Committee will work as a technical support body for CNPE. The Committee will be responsible for conducting studies and public consultations, as well as monitoring Brazil&rsquo;s biofuels supply and production chain. The U.S. ethanol industry is keeping a watchful eye on the RenovaBio program and discussing with Brazilian officials how the program will operate, focusing on the establishment of a carbon trading market, says James Miller, president of Agriculture and Biofuel Policy Consulting, who consults with Growth Energy on its global market development and trade policy issues. &ldquo;We have some concerns on how that market might work, particularly given the fact there are other carbon trading markets that each have their own unique characteristics and pretty soon we could have a confusing situation,&rdquo; Miller says. Despite their concerns, Miller and Growth Energy are hopeful for the RenovaBio program and want to work with Brazilian officials to ensure the it melds well with other renewable fuel programs around the globe. &ldquo;We want to find ways to harmonize many elements of the RenovaBio program with similar programs that exist in other parts of the world,&rdquo; Miller says. &ldquo;We think this is a way to actually help Brazil grow its biofuel demand and I think we&rsquo;ll be a beneficiary of that, as well as Brazilian agricultural producers. &ldquo;I think ultimately what we&rsquo;ll see over the long term, given Brazil&rsquo;s policy they&rsquo;re trying to implement in RenovaBio, is demand may increase enough in Brazil that it will not only continue to make room for domestic ethanol production from both sugarcane and corn, but still be a very vibrant import market that the U.S. will be competing with other ethanol producers for.&rdquo; Opportunity in Corn While most of Brazil&rsquo;s ethanol production has relied on sugarcane, corn ethanol is growing. Because of Brazil&rsquo;s policies on renewable fuels, Summit Agricultural Group, an Iowa-based agribusiness, looked to the country as a candidate for a new corn ethanol facility. &ldquo;It became pretty clear to me in traveling Brazil that biotechnology, such as the advent of second crop over the last decade, was going to increase Brazil&rsquo;s ability to produce a significant amount of corn,&rdquo; says Bruce Rastetter, CEO of Summit Agricultural Group. &ldquo;In believing that, we thought a corn ethanol plant in Brazil made sense for us.&rdquo; Summit partnered with Fiagril Ltda of Brazil to build FS Bioenergia, Brazil&rsquo;s first large-scale corn ethanol plant. The ICM-designed facility is located in the center of Mato Grosso, Brazil&rsquo;s Corn Belt. Summit is the majority owner of FS Bioenergia. Rastetter views corn ethanol production in Brazil as a growing opportunity. He isn&rsquo;t surprised the corn industry in Brazil is looking for a new source of demand for its corn, with global corn prices being as depressed as they are. Ethanol is a &ldquo;very logical&rdquo; choice for that source of demand, he says. In the past few months, FS Bioenergia announced plans to develop a second corn ethanol plant in Brazil and a $100 million expansion of its first facility, which is expected to more than double capacity to 130 MMgy. The second facility is planned for Sorriso, Mato Grosso, Brazil, with a capacity of 160 MMgy. Brazil&rsquo;s push for renewable fuels aided Summit&rsquo;s movement into the country and is a primary reason FS Bioenergia is building a second facility, Rastetter says. &ldquo;We think the economics made sense. Brazil is truly a model for the U.S. to follow on ethanol consumption and having consumer choice at the pumps. Plus, you have a government who&rsquo;s stated goal is to dramatically increase ethanol use and production.&rdquo; Rastetter says Brazil&rsquo;s growing corn ethanol market won&rsquo;t hinder U.S. corn ethanol imports to the country. Production will take years to ramp up significantly, and RenovaBio will ensure demand for U.S. corn ethanol continues. &ldquo;I think as Brazil goes from 7 billion gallons per year in ethanol consumption to the 13 billion they want to reach with the RenovaBio program, there will be continued need over the next decade for U.S. corn ethanol exports to Brazil to supplement their demand for ethanol,&rdquo; Rastetter says. Import Tariff In August of 2017, Brazil implemented a 20 percent tariff on U.S. ethanol imports over a 600 million-liter-per-year quota. The Tariff-Rate Quota was based on Brazil&rsquo;s average annual ethanol imports from 2014 to 2016, Phillips says. Phillips points to a column in the April 2018 issue of Ethanol Producer Magazine, where she writes that the tariff was a result of China and Europe shutting down biofuel imports, making Brazil the only major market that was receiving excess ethanol supplies. This caused ethanol imports to Brazil to triple the amount imported in 2016. In her column, Phillips writes that the Brazilian government needed to act after imports spiked for two reasons. One, Brazil had to safeguard against displacing lower-carbon fuels with higher-carbon fuels, which would have been counterproductive to the goals set out in the 2015 Paris Climate Agreement. Second, the Brazilian sugarcane industry generates almost 1 million jobs and is still recovering from a financial crisis that prompted closure of about 20 percent of its sugarcane mills. The U.S. had been engaged in talks with Brazilian trade officials since Brazil first indicated it was considering a tariff. &ldquo;The beginning discussions weren&rsquo;t about the TRQ that was actually implemented, but the northeastern Brazilian ethanol industry originally proposed a significant tariff on all ethanol imports,&rdquo; Miller says. &ldquo;We were engaged in many discussions with the Brazilians as to why that would be bad policy. After months of talks, Brazil decided to implement the TRQ that&rsquo;s in place today and we&rsquo;ve continued to have discussion to get them to eliminate or modify that TRQ. Brazil is still our largest ethanol market irrespective of the 20 percent tariff.&rdquo; UNICA remains committed to removing trade barriers between Brazil and the U.S., as well as other major markets. Phillips says Brazil and the U.S. have made strides working together and she hopes the partnership will continue. &ldquo;As the world&rsquo;s largest ethanol producers and exporters, the United States and Brazil enjoy the benefits of trading renewable fuels,&rdquo; Phillips says. &ldquo;Together, our countries have created a global biofuels market providing clean, affordable and sustainable solutions to our planet&rsquo;s growing energy needs. Both countries need strong domestic markets, and we also intend to continue working collaboratively to remove trade barriers in international markets.&rdquo; Author: Tim Albrecht Associate Editor, Ethanol Producer Magazine 701.738.4922 talbrecht@bbiinternational.com

EAGLE EYE: FS Bioenergia, the first large-scale corn-only ethanol plant in Brazil, is the result of an international collaboration between Brazilian agribusiness Fiagril and U.S.-based Summit Agricultural Group. One more corn ethanol plant is propose

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ALL CORN: FS Bioenergia started production in Brazil in mid-2017. By early 2019, the plant will produce 130 MMgy of corn ethanol and 400,000 tons of feed rations for a growing livestock industry.

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AT THE PUMP: A consumer pumps fuel at a station in Brazil. Consumers there have chosen to replace almost 40 percent of the country's gasoline with sugarcane ethanol.

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CORN HARVEST: Farmers harvest corn in Mato Grosso, Brazil. FS Bioenergia, with majority owner Summit Agricultural Group, based in Iowa, is the only large-scale corn-only ethanol plant in Brazil.

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DOUBLE CAPACITY: FS Bioenergia recently announced a $100 million expansion of its corn ethanol plant in Lucas de Rio Verde, Mato Grosso, Brazil, which is expected to more than double capacity to 130 MMgy.

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FROM THE JUNE ISSUE: Brazil's ethanol industry continues to grow with the help of renewable fuel goals and international partnerships.   

All Eyes On Ethanol

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