PERSPECTIVES FOR BIOFUELS IN BRAZIL

1. PERSPECTIVES FOR BIOFUELS IN BRAZIL Marco Antônio Almeida SecretaryofOil, Natural Gas andRenewableFuels BRAZIL – ASEAN COUNTRIES MEETING June, 18th. 2012

2. The Perspectives for Biofuels in Brazil Introduction Regulatory Framework and Public Policies for Ethanol and Biodiesel (Agro-ecological Zoning and Social Fuel Certificate) Uses in other sectors (P&D – Bioplastics / Biochemicals) Infrastructure Projects for Ethanol in Brazil International cooperation in bioenergy Final Remarks

3. Fuel Mix - 2011 and Recent Evolution * Automotive use only • Highlights: • Biodiesel growth; • Ethanol shortening. Source: MME (2011)

4. million m³ Ethanol for Internal Fuel Market Ethanol for Exports Ethanol Forecast (PDE 2020) 20.6 Closed Figures for 2011 2.0

5. Ethanol Use Benefits in Brazil Efective Economy of 1.6 billion boe or 2 years of the Brazilian oil production today* IN THIS PERIOD, DUE TO ETHANOL USAGE, IT WAS AVOIDED THE EMISSIONS OF 950 MILLIONS OF TONS OF CO2 * Considers Daily Production in Brazil of 2,200,000 Barrels of Oil per day

6. Biodiesel Forecast (PDE 2020) Only the natural growth of B5 will demand 3.8 billion liters in 2020 Million m³ Total oil and fatty acid produced Installed Capacity (2011) Demand Expected for B5 Source: MME / PDE 2011-2020/ (Biodiesel demand projection for B5)

7. Policy and Regulatory Framework • One of the Brazilian energy policy targets is to increase the share of biofuels in the national energy mix. • The main general instruments include: • Mandatory mix: ethanol (E18-25) and biodiesel (B5). • Stimulate flex-fuel fleet • Tax differentiation regime in federal level. • Line of credit for ethanol strategic buffer stocks (conceived to improve off-season supply conditions). • Public auctions for biodiesel market supply. • Agro-ecological zoning that orients and guarantees that raw-material production will take place only in suitable areas. The Brazilian government managed to conclude the sugarcane (2009) and palm oil (2010).

8. Biofuels are now treated as fuels inserted in the Brazilian energy mix and not only as an agriculture product. This understanding is boosted by the ethanol and biodiesel growing utilization, both in Brazil and abroad, that demonstrates the relevant role and potential of biofuels. • Both ethanol and biodiesel have an uniform treatment regarding their role in National Energy Policy. • The National Energy Policy Council (CNPE) has, from now on, authority to establish the directions for biofuels imports and exports in the same way that it already has for all oil derivatives such as gasoline, diesel and jet fuel. Recent Modifications on Biofuels Regulation

9. Biodiesel Policy • The mandatory policy of B5 is the most important incentive and it is guaranteed through trimestral public auctions; • Tax policy regime according to the region in which biodiesel is produced and also the type of agriculture that provides all or part of raw material; • The industry that buy, at least, a defined amount of raw-material from small agriculture receive a Social Fuel Certificate - SFC; • The amount of raw-material required differs depending on the agriculture region: • South, Southeast and Northeast – 30% • North and Midwest – 15% • 80% of the market is reserved to producers that owns a SFC • The government is now focusing on policies to induce the diversification of raw-materials for biodiesel production (palm oil, jatropha etc.).

10. Social FuelCertificateResults US$ / Family per Year Families Total Income of the Families due to Biodiesel Total Biodiesel Production m³ Source: MDA, MME (2011)

11. The BNDES launched PAISS (Joint Programme of Technological and Innovation Support for Sugarcane Sector), were selected from 25 companies that submitted 35 business plans, which will generate investments of about $ 3 billion. • The PAISS fosters research and development of cellulosic ethanol. If made ​​viable economically, the cellulosic ethanol could increase the productivity of the sector in more than 40%. • Among the entities who study the processes of production of ethanol from lignocellulose in Brazil, stand out: • CENPES - Petrobras; • Laboratório Nacional de Ciência e Tecnologia do Bioetanol (CTBE) - MCT; • Centro de Tecnologia Canavieira – CTC; • Embrapa Agroenergia; • Dedini S/A Indústrias de Base. New Uses in Other Sectors (P&D)

12. In 2011, the demand for non-fuel ethanol (other uses) has reached 1.1 billion liters. • It is estimated that demand for non-fuel ethanol (other uses) will reach 3.5 billion liters in 2020 (PDE 2020). • 14% growth rate. Bioplastics in Ten Years From Now

13. Land Use in Brazil Others 15 2% Arable Land Total Area Native Vegetation Available Pasture Agriculture Sugarcane 2009 Data Source: ICONE, ESALQ and IBGE. Elaboration: COSAN and UNICA

14. AgriculturalZoning Agricultural zoning as a guarantee for public and private investments and a recommendation of suitable areas for production Agrozoning for Soy, Sunflower, Castor, Palm, Cotton Seed etc. North Region Focus = arcofdeforestation Sugarcane Expansion with Agroecological Requirements Maximum allowed: 65 million ha or 7,5% of the territory (green areas) NortheastRegion Focus = coastareas Maximum allowed: 32 million ha or 3,7% of the territory (brown areas)

15. GO JATAÍ Out/16 2,0 Mm³ ITUMBIARA 0,8 Mm³ QUIRINÓPOLIS MG 5,2 Mm³ Dec/14 UBERABA APARECIDA q Out/14 TABOADO q 7,4 Mm³ / ano 2,3 Mm³ Out/13 q RIBEIRÃO MS 80 barcaças q PRETO ARAÇATUBA q Out/13 2,5 Mm³ 11,7 Mm³ Mar/13 PRESIDENTE EPITÁCIO 4,0 Mm³ SP RJ Out/14 PAULÍNIA 9,1 Mm³ Jul/12 ANHEMBÍ Ago/15 6,2 Mm³ 4 Mm³ 14,6 Mm³ Hidrovia GUARAREMA Dutos já licenciados Jul/14 REVAP RIO DE JANEIRO/ Out/16 BARUERI TERMINAL Dutos não licenciados PR ILHA D’ ÁGUA GUARULHOS Dutos de exportação 7 Mm³ CARAGUATATUBA 3,6 Mm³ Jul/13 Sistema de dutos existente Trecho já licenciado - exportação Dedicated Infrastructure for Ethanol Distribution 1800 km ofdedicated pipelines US$ 4.2 billions 16 Terminals

16. BioenergyInternationalCooperation Map of International Agreements on Bioenergy sign by Brazilian Representatives 77 countries Nearly 1/3 of the whole nations * Includes MoUs, partnerships and other agreements signed directly by any Federal Government Department or Agency or Public Enterprise. It was considered bilateral agreements, cooperation in third countries and agreements signed with economic or regional blocks.

17. Feasibility Studies on Bioenergy • Brazil has already financed feasibility studies on bioenergy projects in six countries in Central America and in six countries in Africa: • El Salvador, Haiti, Dominican Republic, Saint Kitts & Nevis, Honduras, Guatemala, Senegal, Guinea-Bissau, Guinea-Conakry, Liberia, Mozambique e Zambia. Angola and Tanzania are the next candidates. • Business models designed for these countries have demonstrated the economic, social and environmental viability of projects for sugarcane production and ethanol distilleries, production of vegetable oils and biodiesel, biomass power plants for electricity generation, and production of wood and pellets.

18. FeasibilityStudies – Honduras AgroclimaticZoning SoilZoning Climatic and SoilZoning HydrousDeficiency Rain Data HumidAreas Soil Evapotranspiration AverageTemperature SlopeAreas EnvironmentalZoning ProtectedAreas Areaswith Human Activities Final result: A biomass cogeneration project has been approved in Honduras and its Executive Project is to be finished soon. Similarly, Senegal, Mozambique and Zambia also have projects (ethanol and biomass) in the same phase.

19. FeasibilityStudies – Guatemala End result: Identification of suitable areas that will be checked later in field visits to assess the infrastructure and the vocation for the implementation of local productive arrangement for a particular type of project. Soil Zoning: Areas with suitability for cultivation Environmental Zoning: Areas without restriction and with less biodiversity

20. Global Bioenergy Partnership (GBEP) – Initiative proposed by the G8 and led by Italy, with Brazil later joined and acted as co-chair along with Italy. • In January this year, GBEP published the report "The Global Bioenergy Partnership Sustainability Indicators for Bioenergy", which presents the 24 selected indicators for sustainable production and use of bioenergy. • The GBEP sustainability assessment through the 24 proposed indicators will evaluate, in each case, the real contribution of a given project to improve the conditions of a country or locality, as well as interpreting to the environmental, social and economic impacts of their bioenergy production and use. Sustainability – Workon GBEP

21. Changes in the regulatory framework for biofuels in Brazil have been implemented to focus on the character of the energy aspect of biofuels and expanding Regulatory Agency powers; • Brazil supports the ethanol commoditization, with many countries producing and consuming the energetic; • There are investment opportunities in Brazil for the expansion of bioenergy production, both in new plants and in infrastructure; • International cooperation is of great importance to Brazil because the country defends biofuels as a driver for development in countries with low access to energy. • Even with the Presalt discoveries, Brazil preserve the compromise to have the cleanest energetic matrix within developed and developing countries. Final Remarks

22. THANK YOU! Marco Antônio Martins Almeida SecretaryofOil, Natural Gas andRenewableFuels e-mail: spg@mme.gov.br June, 18th. 2012