1. Alfred Szwarc Workshop “Biofuels for Transport – Part of a Sustainable Future?” Oslo - May 14, 2008 The Brazilian Perspective

2.  UNICA (Sugarcane Industry Association) is based in São Paulo, Brazil, and is the largest organization of its kind representing the sugar, bioethanol and bioelectricity industry in Brazil.  UNICA’s more than 100 member companies represent over 50% of the ethanol and 60% of the sugar produced in Brazil.  UNICA has two international offices (US, EU) and is opening another one in Asia. About UNICA

3. Mission To spearhead the transformation of the traditional sugarcane industry into a modern and sustainable agribusiness sector.Priorities  Consolidate ethanol as a global commodity in the fuels sector;  Promote demand for fuel ethanol and create new applications & markets;  Foster large-scale production of bioelectricity for the Brazilian market;  Help member companies become benchmarks for socio- environmental sustainability;  Disseminate credible scientific data relating to the competitive advantages of sugarcane ethanol. About UNICA

4. Competitive Advantages of the Brazilian Sugarcane Ethanol

5. Hydrolysis SUGARCANE: Source of Energy Hydrolysis 1/3 JUICE 1/3 BAGASSE 1/3 STRAW SUGARETHANOL BIOELECTRICITY MOLASSES 165 kg/t 15%humidity 276 kg/t 50% humidity Source: UNICA Lignin Straw: tops and leaves of sugarcane Gasification, pyrolisis ?

6. The World of Sugarcane Approximately 100 countries could supply biofuels to many nations. Currently 20 oil producing countries hold the oil supply in their hands. Source: British Sugar

7. Sources: NIPE-Unicamp, IBGE and CTC Sugarcane Production in Brazil

8. Sugar, Bioethanol and Bioelectricity Plant in Brazil Bagasse Sugar cane field Distillery Sugar plant Ethanol storage tanks

10. Sugarcane in Brazil: harvested area, ethanol production and sugar production Source: IBGE (2007) and UNICA. Elaboration: UNICA. Note: * estimated Ethanol Sugar Area Annual growth rate 2.7% in the last decade While sugarcane area increased 85% since 90/91, ethanol has increased 130% and sugar around 350%

11. Grains* in Brazil: harvested area and production Source: IBGE (2007) Notes: 2008: estimated data.*Grains include rice, corn, wheat, soybeans and beans. Production of food doubled in the last decade mainly due to yield gains Production of grains Area

12. Evolution of oil and agricultural commodities prices Deflated values for March 08 with CPI - base 100 in jan/95 Oil Agricultural non-food raw materials Food Note: “Agricultural non-food raw materials” include cotton. wood. wool. timber and leather. Sources: FMI (2007) and US Bureau of Labor Statistics (2007). Elaboration: UNICA. In the last 10 years, while food prices increased by 36%, oil prices have risen by 500%

14. Sustainability and Land Use Changes Direct Effect (Forest Conversion)  UNICA acknowledges that the preoccupation for carbon stock release resulting from land use changes is legitimate.  No production of feedstock for biofuels or for any other uses must take place in sensitive areas where the stocks of carbon are substantial.  Sugarcane expansion in Brazil is taking place mostly in existing pasture areas, this may actually result in a carbon credit, not a carbon debt; further, food will be produced during crop rotation.

15. Sustainability and Land Use Changes Indirect Effect  New case against biofuels presented in recent studies.  However, currently none of the available models can provide a sound assessment of the reallocation of agricultural production in some countries due to the increase of biofuels feedstock production in other countries.  Models used in recent studies present numerous pitfalls:  Ignore the huge improvements in yields that are taking place in modern agriculture;  Assume that any crop production that is displaced by another one (for biofuels or not) will be necessarily reallocated in high biodiversity areas;  Adopt very simplistic assumptions that do not represent complexity of real world conditions.

17. Reducing Fossil Fuels Use & Recycling CO 2 100% Energy Self-Sufficiency Brazil’s sugar and ethanol plants generate their own electrical energy by burning bagasse and also produce surplus electricity that can be sold in the commercial power market.

18. Mitigating Global Warming GHG Reduction Several well-to-wheel estimates show that Brazilian sugarcane ethanol reduces emissions of greenhouse gases (GHG) by up to 90%, when used instead of gasoline.

19. Fostering Energy Efficiency The energy balance of Brazilian ethanol is 4.5 times better than that of ethanol produced from sugar beet or wheat, and almost seven times better than ethanol produced from corn.

20. Reducing Land Use Higher yields Sources: IEA – International Energy Agency (2005) e MTEC. Liters per hectare

21. Conventional Conventional + Cellulosic 1 hectare Sugarcane Juice + Molasses Sugarcane Juice + Molasses + Bagasse, Tops & Leaves Productivity 7,000 liters of ethanol 12,500 liters of ethanol... or more (7,000 L from juice + 5,500 L from bagasse and leaves) Increasing Productivity New sugarcane varieties Loss Reduction & New technologies Cellulosic ethanol

24. New Ethanol Markets  ethanol-powered buses & trucks (E95) and hybrids  flex-fuel - hybrids  flex-fuel motorcycles (E20 - E100)  Small aircrafts (E100) and regional aviation  Alcochemical industry: bioplastics  Fuel cells

25. Best Agricultural and Environmental Practices  Biological control to mitigate pests & low use of pesticides  No use of fungicides. .Sugarcane enhancement programs  Vinasse and organic residue compost as organic fertilizers. relatively low levels of soil loss: root system & sugarcane replantation every 6 years + rotation  Sugarcane fields in the C-S of Brazil require practically no irrigation.  Fertirrigation: vinasse application (a water-based nutrient-rich residue from ethanol production).  Industrial water use has been decliningsignificantly: less than 1m 3 /t.

26. UNICA’s Social-Environmental Agenda GREEN PROTOCOL: voluntary agreement between UNICA and the São Paulo State Environment Secretariat (June 04, 2007). Goals Anticipation of the legal deadline for the elimination of the practice of pre-harvest sugar cane straw burning: 2021  2014 where mechanical harvesting is currently possible / 2031  2017 where topography requires new harvesting systems New sugarcane areas must be harvest mechanically. Protection of river side woods Measures for soil and water conservation & atmospheric emissions reduction

27. “Green Protocol” Results (10 months after its signature)  Significant progress in mechanical harvesting: from 34% of the sugarcane harvested in the 2006/2007 crop to 47% in the 2007/2008 crop. The harvested area without fire burning increased to 657,000 hectares (60%), or the equivalent of 1 million soccer fields.  Voluntarily, 141 of 170 sugarmills from the state of São Paulo have already signed the Protocol  Maintaining 2007 levels of mechanization (550 new harvest machines) it is be possible to end burning prior to the Protocol deadlines.  Recently, 13,000 sugarcane independent suppliers, members of the Organization of Sugarcane Farmers of the Center-South Region (Orplana) signed a similar Protocol  the entire production chain of São Paulo State participates in this effort.

28. UNICA-FERAESP Protocol  Signed on February 10, 2006 with the objective to improve the working conditions of sugarcane workers and to evaluate and recommend best practices for the following areas: 1.Gradual elimination of the practice of outsourcing in the sugarcane manual cutting UNICA understands outsourcing has been a strong source of problems and is working towards its elimination by 2011. 2.Improvement in the transport & working conditions for rural workers. 3.Transparency in the systems of labor evaluation and payment in the production of sugarcane.

29. Social Responsibility Projects developed by UNICA Social Responsibility IBASE GRI Ethos Institute Project Tear World Bank Institute  Program of Social Responsibility and Sustainable Competitiveness  Sustainable Partnership Program Social Balance Program IBASE  Between 2003 and 2005 47 mills participated in the program  70 mills in 2007 GRI Report  10 mills in 2007 Indicator of Business Social Responsibility  First phase: 33 mills  Second phase: 30 mills Partneships: IDB/FUMIN / INST. ETHOS / UNICA  Usina Santaelisa Vale

30. Sugarcane Discussion Group - SDG  UNICA  Sugar mills  Suppliers  CI  TNC  WWF  SOS Mata Atlântica etc  GRI  Instituto Observatório Social Sugarcane Social-Environmental Agenda ARES (facilitator)  Working Groups  Task themes  Governance  External Communication Multistakeholder Process

31. ETHANOL: International Demand Very protected market in developed countries. Ethanol is classified as an agricultural product – high tariffs – as opposed to biodiesel that is classified as industrial “other chemicals” – US (2.5% + US$ 0.54/ gallon – EU (EUR 102/1000 l) Preferential access for some developing countries: CBI (US), ACPs (EU), LDCs etc Domestic Subsidies

32. Ethanol Certification – “The Babel of Certifications” Biofuels Certification Meó Consulting Team German Government Sustainable Production of Biomass Cramer Commission Dutch Government RTFO Renewable Transport Fuel Obligation UK Government National Compliance/Certifications SEKAB, GREENERGY Sweden, United Kingdom RTSB Round Table on Sustainable Biofuels Switzerland EU Directives European Union PBCB Brazilian Biofuels Program Certification Brazilian Goverment Ethanol Several certification initiatives are under discussion now How to attend to all certification discussions?

33. Certification of Bioethanol – UNICA’s View  Create a multilateral and multistakeholder forum for the certification of the ETHANOL as a global commodity. This process must consider the sustainability of all feedstocks and production processes involved: sugar cane, corn, wheat, sugar beats, forest and agriculture residues etc.  Should be based on the three elements of sustainability. The product must be economically feasible (preferebly without subsidies), environmentally sound and socially fair.  The process must follow the accepted methodology: create a forum → agree on general principles → define criteria → create indicators → implement monitoring systems.  Must consider sustainability of fossil versus renewable fuels.  Must consider the energy balance and the reduction of GHG emissions.

34. Final Remarks 1. Biofuels use will expand in the world. 2. Sugarcane is the most competitive feedstock to produce ethanol: higher yields, low costs (competitive at US$ 40 the barrel of crude) and very good energy and environmental performance. 3. Biofuels represent an opportunity for developing countries: land, water, sunlight, temperature, labor, potential genetic improvements (corn/wheat vs. sugarcane), incorporation of new technologies (crop rotation, agriculture-livestock integration, no-till). 4. Although the US and EU have set up new governmental programs to incentive the production and consumption of biofuels, the global ethanol market continues to be small and very volatile in the short term, due to tariff and non-tariff barriers and lack of commoditization. 5. Everyone`s challenge: ethanol traded as a global commodity.

35. www.unica.com.br alfred@unica.com.br Thank you