1. “Sustainable Bioenergy: Challenges and Opportunities” Suani Teixeira Coelho São Paulo State Secretariat for the Environment Deputy Secretary suaniteixeira@sp.gov.br Bonn, 12-13 October, 2006 Keynote address

2. Outline  Brazilian Ethanol Program  Ethanol Fuel (Social and Environmental Sustainability)  Replication of Brazilian Ethanol Program – Possible or not ?

3. Some Myths about Ethanol 1. Brazilian experience is unique; 2. incompatible with existing fleets; 3. low energy balances of biofuels; 4. high pollutant emissions; 5. competition with food for land, unsustainable practices, deforestation; 6. only subsidized production is possible; 7. energy efficiency alone would preserve oil resources and fulfill Kyoto targets.

4. The Brazilian Alcohol Program  The world largest commercial program on biomass 916 billion liters produced in 2005 – 2,5 billion liters exported)  Decision (1975) from Brazilian Federal Government to produce ethanol in addition to sugar (from sugarcane): objective of reducing petroleum imports (High prices).  High-octane fuel in vehicles, replacing lead and/or MTBE.  4,000,000 cars running on pure (hydrated) ethanol in Brazil  1,800,000 flex-fuel vehicles (both ethanol and gasoline, any blend)  all gasoline blended with (anhydrous) ethanol: 20 to 25% of ethanol in volume basis – gasohol  Nowadays - economically competitive to gasoline

5. Compatibility of Existing Fleets with Ethanol- gasoline Blend Source: ANFAVEA, 2005 Ethanol Content in the Fuel Carburetor Fuel Injection Fuel Pump Fuel Pressure Device Fuel Filter Ignition System Evaporative System Fuel Tank Catalytic Converter Basic Engine Motor Oil Intake Manifold Exhaust System Cold Start System ≤ 5% 5 ~ 10% 10 ~ 25% 25 ~ 85% ≥ 85% - - - - - - - - - - - - - - - - - - - For any vehicle NN - - - - - - - - - - - - - - - - - - - - - - - For relatively new fleets (10 ~ 15 years old) - - NN- - - - - - - - - - Brazilian Application - PN - - - - - - - - - - - - - - - - - - - - - Brazilian Application PN- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - USA Application PN - - -- - - - - - - - - - - - Not Necessary - Probably Necessary - - - - - - - - NN - - - - - - - - NN-

6. Ethanol Production Costs (Brazil)  Production costs: US$0.18–0.25 per liter of gasoline- equivalent: –average export price of ethanol (2001-2003): US$ 0.23 per liter  Initial investment for new plants: US$ 60 million (2005 prices) –40 new plants in São Paulo State; 100 in Brazil –Average processing capacity: 2.16 million tonnes of sugarcane per year –average yield 79.39 liters of anhydrous ethanol equivalent (82.86 liters of hydrous) per tonne of sugarcane (Sao Paulo = 100-110 liters/ha) –average price paid per tonne of sugarcane is US$11.4 (UNICA, 2005) –plant lifetime of 25 years –feedstock cost of US$ 0.143 per liter of ethanol –investment cost around US$ 0.017 per liter of ethanol. 2006  ALL NEW INVESTMENTS ARE PRIVATE

7. Brazilian ethanol international competitiveness Source: Nastari, 2005 updated Ethanol Learning Curve (Hydrated Ethanol)

8. Ethanol international competitiveness  WHY BRAZILIAN ETHANOL IS COMPETITIVE? –High agricultural/industrial yields  efficient technologies  150 different varieties of sugarcane for different types of soil –Use of renewable energy source in the process (only sugarcane bagasse for cogeneration) –Favorable energy balance 8-10:1

9. GHG emissions from different types of ethanol sources Sources: Macedo et. alii, 2004, UK DTI, 2003 and USDA, 2004

10. ~ 10% of total cultivated land ~ 1% of total land available for agriculture SUGAR CANE - 5 million ha - 60,000 producers - all-year-round harvest C-S (80% land) harvest: april/november N-NE (20% land) harvest: sept/march

11. Sugarcane Expansion and Land Use in Sao Paulo State 2005  São Paulo State: –Total territory: 24,800,000 ha –Used: 22,000,000 ha (cattle, agriculture, native forests and reforestation)  Cattle (2005): 10,000,000 ha  Orange (2005): 672,000 ha  Sugarcane: 3,700,000 ha (5.5 billion liters of ethanol and 17 million tones of sugar) Existing Environmental Legislation for Land Use – controls the use of Native Forest Land and Riparian Forests

12. Land use in Sao Paulo State – sugarcane crops

13. Sugarcane Expansion in São Paulo (1) Sugarcane vs food crops Source: São Paulo State Agriculture Secretariat-Database (www.iea.sp.gov.br)

14. Sugarcane Expansion in São Paulo (2) Sugarcane vs cattle Source: São Paulo State Agriculture Secretary Database (www.iea.sp.gov.br)

15. Cattle: Evolution in São Paulo State Source: São Paulo State Agriculture Secretary Database (www.iea.sp.gov.br) Trend to more intensive cattle-breeding

16. Control and Enforcement of Environmental Impacts on Sugarcane Ethanol Production  Legislation improved and enforced specially in the State of São Paulo (60% of all Brazilian sugarcane mills);  Discharge of effluents with high organic loads replaced by controlled fertirrigation practices (CETESB);  Harvest burning practices are being phased-out, through a strict legal enforcement;  Land use strictly controlled: preserving riparian forests and other natural ecosystems and avoiding deforestation;  Industrial sugarcane and ethanol plants have their atmospheric emissions controlled;  Spill offs and other accidents are rare and of low impact;

17. Social Aspects  Job creation (700,000 jobs in Brazil manly in rural areas)  Legislation – social/labor issues –For example: Forbidden manual harvesting of green sugarcane  Payments for rural workers on sugarcane crops are higher than other sectors

18. Agroindustrial models in Brazil Model%Trend Sugarcane bought from farmers and sugarcane produced by the industry 90Increase Sugarcane from outsourcing producers 5In expansion Sugarcane produced by cooperatives 5Decrease

19. Perspectives for the Replication of Brazilian Ethanol Program in Other Developing Countries

20.  Feasibility studies – production costs?  Technological aspects: –Existing technology for alcohol production: efficient and commercially available (Brazil). –Cogeneration process from bagasse  efficient systems commercially available (Mauritius/Brazil).  Local capacity building + infrastructure  Adequate policies (ex. Mandatory blend like in Brazil and Malawi)  Environmental aspects – sustainability is possible!  Opportunities from the Clean Development Mechanism  good option for developed countries, collaborating for the sustainable development of poor countries.

21. Biofuels, developed and developing countries Win-win situation for all !! Thanks! Obrigada!