The interaction between the sugar & biofuel industry...The interaction between the sugar & biofuel industry Plinio Nastari President, DATAGRO ... been at center of Brazil´s strategy

The interaction between

the sugar & biofuel industry

Plinio Nastari President, DATAGRO

Civil Society Representative at Brazil´s

National Council on Energy Policy (CNPE)

2017 EU Agricultural Outlook Conference Food & Farming

Brussels, December 18-19, 2017

Room De Gasperi, Charlemagne Building

Relevance of Biofuels in World Energy Consumption

Source: REN21, 2017.

Trends in World Ethanol & Biodiesel Production

Source: REN21, 2017.

World Ethanol Production, 2016 (fuel + non-fuel)

Source: Various compiled by DATAGRO

World: 106.1 billion liters

Billion liters

58,2

27,3

8,9 5,2

1,7 1,2 1,0 0,9 1,9

-

10,0

20,0

30,0

40,0

50,0

60,0

70,0

% of Ethanol in Otto cycle Fuel Consumption, 2016

Source: DATAGRO

9,9%

39,4%

3,5%1,5%

9,5%

12,4% 12,0%

3,2%

8,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

World Biodiesel Production, 2016

13,2

5,9

3,8

2,7 2,5

0,8

3,1

-

2,0

4,0

6,0

8,0

10,0

12,0

14,0


World: 32.0 billion liters

Billion liters

Sugar & Biofuel Feedstocks

Biofuels

Corn

Oilseeds + Palm + Tallow

Cellulosic Materials

Beets

Sugar

cane

World Corn Production, 2016

370,3

215,0

97,4

59,6 42,0

26,2 25,0 25,0 15,0

170,8

-

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0


Million tonnes

% of US Corn converted to Ethanol

23.4%

30.4%

35.1%

40.3%

40.0%

43.1%

36.8%

36.6%

38.4%

36.0%

37.9%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

200

220

240

260

280

300

320

340

360

380

400

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18

Production For ethanol

Mill

ion

to

nn

es

Source: USDA, RFA.

What would happen to grain markets if ethanol was not absorbing all this corn?

World Soy Production, 2016


120,4

108,0

57,0

14,2 10,0 9,4

4,0 3,7 3,4

18,8

-

20,0

40,0

60,0

80,0

100,0

120,0

140,0

Million tonnes

World Beet Production, 2016 113.0

51.4

33.5

19.5

14.0 13.3

8.1 5.5 4.3

14.7

0.0

20.0

40.0

60.0

80.0

100.0

120.0

European Union Russia USA Turkey Ukraine Egypt China Iran Belarus ROW

Million metric tonnes


World Cane Production, 2016 651.6

348.4

123.1

87.5

65.5 56.4

37.0 34.4 33.5

453.3

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

Brazil India China Thailand Pakistan Mexico Colombia Australia Guatemala ROW


Million metric tonnes

% of Brazil´s Cane converted to Ethanol

Source: DATAGRO

17/18e

29.9%

23.4%

46.7%

-

15,0

30,0

45,0

60,0

75,0

90,0

Mill

ion

tonn

es o

f Tot

al R

educ

ing

Suga

rs Sugar Anhydrous Hydrous

Brazil´s sugar cane production mix

Source: DATAGRO

40,8%40,9%

46,70%

59,2%59,1%

53,30%

35%

40%

45%

50%

55%

60%

65%

Sugar Anhydrous+Hydrous

Centre-South Brazil sugarcane mix for sugar (biweekly series)

Source: DATAGRO

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%1s

t H

Ap

r

2nd

H A

pr

1st

H M

ay

2nd

H M

ay

1st

H J

un

2nd

H J

un

1st

H J

ul

2nd

H J

ul

1st

H A

ug

2nd

H A

ug

1st

H S

ep

2nd

H S

ep

1st

H O

ct

2nd

H O

ct

1st

H N

ov

2nd

H N

ov

1st

H D

ec

2nd

H D

ec

1st

H J

an

2nd

H J

an

1st

H F

eb

2nd

H F

eb

1st

H M

ar

2nd

H M

ar

2012/13 2013/14 2014/15

2015/16 2016/17 2017/18

Adaptability through diversification: relevant mix flexibility over the years, and within a single year, reveals ability

to react to relative prices

1.7 1.7 2.3 2.5 2.5 2.6

2.9 2.9 3.0 3.1 3.2 3.6

1.0 1.1

1.2 1.3

1.7 2.1

2.4 2.9

4.0

4.7 5.0

5.4

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Industrial Fuel

China sets 2020 target for nationwide 10% ethanol blend

Chinese gasoline consumption is projected to increase by around 5.1% CAGR until 2024 to 200 bi liters.

It could mean building as many as 35 new plants each with 500,000 cbm per year of capacity to meet the demand.

China’s Ethanol Production Billion liters

China’s Gasoline Consumption Billion liters

China's ethanol production will rise 8.7% to 8.91 billion liters in 2017, of which 3.55 bi liters for fuel purpose (+12.5%, as the country implements measures to boost ethanol output, in a drive to encourage consumption of its huge corn stocks.

113 113

123 128

134 140

146 153

160 167

175 183

200

-

50

100

150

200

250

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

Source: DATAGRO

India new ethanol policy

India has set a target to blend 10% ethanol in all gasoline sold in the country. To encourage 2G ethanol, India plans to increase the blend mandate from 10% to 22.5%. While India does not allow ethanol imports for fuel proposes, imports are projected to increase in order

to meet industrial demand.

0.57

0.41 0.38 0.30

0.89

1.36

0.74

0.98 1.04

1.09

1.19

1.29 1.36

1.42

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2010 2011 2012 2013 2014 2015 2016

Supply Required volume to meet 5% blend

Fuel Ethanol Demand and Supply - India Billion liters

Source: DATAGRO

Russia aims 10% ethanol blend in 2020

To help its ethanol industry achieve 10% blend by 2020, Russia is prepared to lift a heavy $1.62 per liter excise tax currently levied upon domestic fuel ethanol by year’s end.

Such a move will stimulate production as the tax represents 90% of production price, and aims to bring investors to the table to help ramp up production.

The excise tax was used as means to avoid vodka being produced under the disguise of fuel ethanol.

Russia consumes almost 53 billion liters of gasoline annually.

40

42

44

46

48

50

52

54

56

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Russia’s Gasoline Demand

Billion liters

Source: EIA.

COP23-Fiji in Bonn Declaration of Vision, by 19 Nations representing over 50% of world population, 37% of world GDP + IEA + IRENA Bonn, November 16, 2017

Target for 2030 (2DS)

•% of Bioenergy in world energy demand must double.

•% of sustainable low carbon Biofuels in transport fuels, including sea and air transport, must triple.

Scaling up the bioeconomy is possible, given smart agricultural practices, better use of rural and urban waste, and proper policies.

• Innovation and efficiency in biofuel production and use have been at center of Brazil´s strategy for the use of low carbon sources of energy.

• RenovaBio is not subsidy, nor carbon tax.

• Applies to all biofuels: ethanol, biodiesel, biogas / biomethane, bio-kerosene.

RenovaBio is a regulation based on 2 pilars:

– Induction of energy efficiency in production and use of biofuels;

– Recognition of the capacity of each biofuel to promote carbon reduction.

Target

• Market-driven carbon pricing mechanism (endogenous, not exogenous determination), rewarding achievement of individual efficiency, not a common or equal coverage.

• Unleash market forces to implement and drive innovation for increased competitiveness in biofuel/bioenergy production.

• Stimulate continued demand growth, independent of government mandate.

• RenovaBio does not elect/predefine champions – expansion of bioenergy will be driven by energy-environmental efficiency and sustainable production.

Mechanism

• Voluntary certification of biofuel producers for their energy-environmental efficiency, based on life-cycle assessment (LCA), which will determine ability to request issuance of Decarbonization Credits (CBios);

• Financial institutions will issue Decarbonization Credits (CBios) to be freely negotiated at public exchange;

• Definition of long term country carbon reduction target for the fuel sector will lead to individual fuel distributor carbon reduction targets, to be met with acquisition of CBios.

• Energy Efficiency: MJ/cbm or tonne;

• Environmental impact: g CO2e / cbm or tonne;

g CO2 eq/cbm = g CO2e / MJ

MJ/cbm

• g CO2e / MJ differential between fossil & biofuel will define Grade for each biofuel producer.

Producer Voluntary Certification to receive a Energy-Environmental Efficiency Grade

Relevance of the distribution system

• Brazil can take advantage of its fuel distribution system for: – Hydrous Ethanol used as sole fuel, in fleet which is already 65% flex and growing,

– Anhydrous Ethanol blended at 27% v/v in all gasoline nationwide (E27) – Brazil has been using “mid-level blends” for a long time,

– Biodiesel blended in all fossil-based diesel nationwide (B8), going to B10 in March/18.

• Biofuel is SOLAR ENERGY captured, stored and distributed in an efficient, economical & safe manner.

Relevance of the distribution system

• Brazil can take advantage of its fuel distribution system for: – Hydrous Ethanol used as sole fuel, in fleet which is already 65% flex and growing,

– Anhydrous Ethanol blended at 27% v/v in all gasoline nationwide (E27) – Brazil has been using “mid-level blends” for a long time,

– Biodiesel blended in all fossil-based diesel Nationwide (B8), going to B10 in March/18.

• Biofuel is HYDROGEN captured, stored and distributed in an efficient, economical & safe manner.

Objective

• Stimulate & reward investments in efficiency / competitiveness, leading to lower costs & lower prices to consumers, and sustainable bioenergy expansion.

• A reward for those who do right, not punishment for doing wrong (use of fossil energy).

• Market-driven mechanism for carbon pricing.

• Stimulate private investment for expansion of energy-environmental efficient biofuel/bioenergy production.

• Legislation approved 24 days after introduction in both Houses of Congress (PLC 160/2017), on December 12, 2017.

Simultaneously addresses Public Policy objectives in the areas of

• Energy

• Environment

• Agriculture

• Industry

• Social & Economic Development

• Economy reform

Relevant strategy for achievement of

Brazil´s commitments before the

Paris Climate Agreement.

Can be applied to other countries, as well.

Current World Energy Demand: 533 EJ Modern Bioenergy is projected to rise from 22 EJ

Source (compiled from Table 2.1 and data on page 219 on IEA, World Energy Outlook

53 EJ

22 EJ

World Energy Demand, 2035: 720 EJ to 50 EJ in 2035 - WEO New Policy Scenario

Source (compiled from Table 2.1 and data on page 219 on IEA, World Energy Outlook

79 EJ

50 EJ

Area required in the world for bioenergy production is achievable with technology ready to implement

Recently, electric battery cars have

captured a lot of attention worldwide

But it is the Conceptual Vision

that will define the Technological Pathway adopted for Fuel & Auto Technology

Well-to-Wheel (WtW) Life-Cycle Assessment

or

Tank-to-Wheel (TtW)

Ethanol is a modern & efficient option (WtW)

Source: AEA , Brazilian Association of Automotive Engineering

0,50

0,70

0,90

1,10

1,30

1,50

1,70

1,90

0 20 40 60 80 100 120 140 160 180

Ener

gy C

onsu

mpt

ion

Ce

( MJ/

km)

Total Emission of GHG - E TGEE (gCO2e/km)

Ce x ETGGE - Energy Consumption (MJ/km) x Total Emission of GHG (gCO2e/km)

ICE Fossil/MH

ICE E100/MH

ICE HOF/MH

ICE Brazil E39-55

Hybrid Fossil EU

Hybrid E100

Electric EU

Electric Biomass

Ethanol Fuel Cell

2017

2030/MH

2040/MH

2017

2017

2040/PH

2017

2030/PH

2021

2017

2017

2040/MH/2G

2040/PH

2017

2030/PH

2040

2021

2027/MH

2040

2017

2021

2017

2025

2030/MH

2040/MH/2G

2017

20212030/PH2040/PH

2040/PH

2017

2025

2030/PH

2030

2021

2040Eth Fuel Cell

2030

2025

ICE-Internal Combustion EngineMH - Mild (Leve) HybridPH - Hybrid Plug-inEU - EuropeGreen- renewableC/ RBio - w/ RenovaBio

2022

20252030/MH

2040/MH/2G

2022

Hybrid Fossil Hybrid Ethanol


Total GHG Emission in gCO2e/km – 2017 & 2030


166

135144

104

139

82

129

80

45

20 2314 13 10 11

0

20

40

60

80

100

120

140

160

180


0,50

0,70

0,90

1,10

1,30

1,50

1,70

1,90

0 20 40 60 80 100 120 140 160 180

Ener

gy C

onsu

mpt

ion

Ce

( MJ/

km)



ICE Fossil/MH

ICE E100/MH

ICE HOF/MH

ICE Brazil E39-55

Hybrid Fossil EU

Hybrid E100

Electric EU

Electric Biomass

Ethanol Fuel Cell

2017

2030/MH

2040/MH

2017

2017

2040/PH

2017

2030/PH

2021

2017

2017

2040/MH/2G

2040/PH

2017

2030/PH

2040

2021

2027/MH

2040

2017

2021

2017

2025

2030/MH

2040/MH/2G

2017

20212030/PH2040/PH

2040/PH

2017

2025

2030/PH

2030

2021

2040Eth Fuel Cell

2030

2025


2022

20252030/MH

2040/MH/2G

2022




0,50

0,70

0,90

1,10

1,30

1,50

1,70

1,90

0 20 40 60 80 100 120 140 160 180

Ener

gy C

onsu

mpt

ion

Ce

( MJ/

km)



ICE Fossil/MH

ICE E100/MH

ICE HOF/MH

ICE Brazil E39-55

Hybrid Fossil EU

Hybrid E100

Electric EU

Electric Biomass

Ethanol Fuel Cell

2017

2030/MH

2040/MH

2017

2017

2040/PH

2017

2030/PH

2021

2017

2017

2040/MH/2G

2040/PH

2017

2030/PH

2040

2021

2027/MH

2040

2017

2021

2017

2025

2030/MH

2040/MH/2G

2017

20212030/PH2040/PH

2040/PH

2017

2025

2030/PH

2030

2021

2040Eth Fuel Cell

2030

2025


2022

20252030/MH

2040/MH/2G

2022



Electrification with Biofuels

• Eletrification with biofuels is environmentally clean & accessible.

• Electric battery car is clean only if source of energy is clean & it is also very expense, i.e. has low accessibility.

Electric Battery Cars are really clean?

Electric Battery Vehicles (EBVs) will fail due to infrastructure challenges, while

Fuel Cell Vehicles (FCVs) represent the real advance in electrification in mobility

62% of executives agree totally or partially that EBVs

will fail due to infrastructure challenges

78% of executives agree totally or partially that FCVs

represent the real advance in electrification in mobility

Concordam tofalmente 33%

Concordam parcialmente 45%

Neutro 16%

5% Discordam parcialmente

1% Discordam totalmente

Concordam tofalmente 22%

Concordam parcialmente 40%

Neutro 20%

12% Discordam parcialmente

6% Discordam totalmente

Source: 18th consecutive Global Automotive Executive Survey, Feb 2017

KPMG Global Automotive Executive Survey 2017

2-Degree Scenario: Transport Energy by Fuel 2010-2075

• Even with aggressive reductions in

travel growth, shifts to mass transport modes, strong efficiency improvements, and deep market penetration by vehicles running on electricity and hydrogen, there remains a large demand for dense liquid fuels in 2050 (80% of transportation fuel) and even in 2075 (50%).

Source: Fulton et al., Biofuels, Bioprod. Bioref. 9:476–483 (2015); doi: 10.1002/bbb.

Biofuels & Sugar

• Energy Agriculture has proven to be a sustainable, viable and beneficial complement to Food Agriculture.

• Biofuels provide stability to sweeteners & grains markets, absorbing surpluses, reducing price volatility, and enabling production where it would otherwise not be feasible.

• Biofuels contribute to energy independence, cleaner environment, lower GHG emissions, lower health costs, decentralized economic development and can represent a superior alternative for eletrification in transport.

Plinio Nastari [email protected] T +55 11 4133.3944 F +55 11 4195.6659

www.datagro.com

mailto:[email protected]

http://www.datagro.com/

PLANTING DATA HARVESTING SOLUTIONS

www.datagro.com +55 11 4133 3944

Next events

9 May 2018 (New York Sugar Dinner)

XII ISO DATAGRO New York Sugar & Ethanol Conference

New York Midtown Hilton

New York, NY

23-24 July 2018

Global Agribusiness Forum 2018

Grand Hyatt Sao Paulo

São Paulo, Brazil

Documents

The interaction between the sugar & biofuel industry...The interaction between the sugar & biofuel industry Plinio Nastari President, DATAGRO ... been at center of Brazil´s strategy