Years of innovation and hard work have established the United States as the world’s largest producer and exporter of ethanol. It’s an achievement worthy of pride, and American biofuel producers are eager to build on that record by supplying a growing share of the world’s low-carbon transportation needs. In the past, that quest was shared by Brazil. The two nations enjoyed strong, free trade relations, while working collaboratively to support the efficient distribution of climate-smart fuels around the world. No longer.

Years of increasingly protectionist trade policies, along with blind spots in U.S. fuel policy, have allowed Brazil to unfairly eat into U.S. markets, without contributing greater value to customers or the climate. The shift gained speed after 2017, when Brazil first instituted a 20 percent tariff on U.S. ethanol imports. Then, in 2019, Brazil’s new program RenovaBio, went into effect. Similar in ways to the U.S. Renewable Fuel Standard, RenovaBio aims to promote renewable energy in the transportation sector. But unlike the RFS, the program prioritizes Brazil’s domestic industry over carbon reduction. In fact, despite years of effort, Brazilian officials have refused to approve or certify imports from a single U.S. ethanol producer.

In contrast, the U.S. has rolled out the welcome mat for Brazilian ethanol. Aside from free access to our markets, Brazilian sugar cane ethanol enjoys preferential status under California’s Low-Carbon Fuel Standard (LCFS), and it qualifies as an advanced biofuel under the RFS. As a result, Brazilian producers can pocket lucrative premiums in U.S. markets, even when competing against American-made ethanol that delivers similar lifecycle emissions reductions.

The impact on trade has been profound. By 2022, U.S. exports to Brazil fell to 56 million gallons, down from 660 million gallons in 2017. At the same time, Brazilian producers export a growing share of sugar cane ethanol—to capture extra value under our own domestic climate policies—while burning their own corn-based ethanol at home, where it gets special treatment. That shuffling of resources hurts American producers and creates inefficient trade flows and needless shipping, actively undermining global climate goals.

So how do we restore balance?

First, U.S. diplomats must take an unapologetic approach to challenging Brazil’s patently unfair trade practices. Fortunately, the U.S. Senate recently confirmed strong leaders to spearhead that effort: U.S. Department of Agriculture Under Secretary for Trade and Foreign Agricultural Affairs Alexis Taylor and United States Trade Representative-Chief Agricultural Negotiator Doug McKalip. Growth Energy met with both on the topic of Brazil this February, and I’ll be participating in a delegation trip to Brazil this spring.

Lawmakers are pushing too. A February letter to President Biden from a bipartisan coalition of U.S. Senators emphasized that, “American industry should not be subject to prohibitive tariff and non-tariff barriers while Brazilian ethanol producers enjoy duty-free access to our market and biofuel programs.”

The second step towards balance requires regulators to take a closer look at outdated models of lifecycle emissions. Unfortunately, the EPA is not only relying on lifecycle modeling from more than a decade ago, but by law, corn-based ethanol—regardless of the carbon intensity measurement—cannot be classified as an advanced biofuel, putting the U.S. ethanol industry at a disadvantage.

Meanwhile, programs like California’s LCFS impose an unjustified higher land use penalty on U.S. ethanol—again, ignoring decades of hard data from DOE’s Argonne National Laboratory and USDA—while continuing to favor the carbon intensity of Brazilian agriculture. Given the impact on the Amazon and the industry’s burning of eucalyptus trees to fuel their production facilities—an emerging trend with troubling implications—that imbalance in treatment undermines the very purpose of the RFS and LCFS.

We cannot allow Brazilian ethanol producers to game the system merely to steal markets away from U.S. competitors, both here and abroad. Growth Energy will continue to make this fight a priority for U.S. diplomats. We’re grateful to our supporters in Congress, the Biden administration and our industry partners. Together, we are committed to ensuring that U.S. investments in innovation, from carbon capture to climate-smart feedstocks, will be recognized and valued in Brazil and around the world.

Emily Skor
CEO, Growth Energy
202.545.4000
eskor@growthenergy.org

PRINTED IN MAY EPM