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Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development,

Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development, Industry and International Trades Ministry of Mines and Energy Washington - March, 2006. Economic Agents of Sugar Cane Industry. Sugar Cane Agriculture Phase.

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Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development,

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  1. Ethanol in Brazil: a successful experience Ministry of Agriculture, Livestock and Food Supply, Ministry of Development, Industry and International Trades Ministry of Mines and Energy Washington - March, 2006

  2. Economic Agents of Sugar Cane Industry Sugar Cane Agriculture Phase Sugar and Alcohol Industrial Phase • 50 thousand sugar cane growers • 346 Industrial Plants Regulatory Domain: Ministry of Agriculture Regulatory Domain: Ministry of Mines and Energy / ANP (National Petroleum Agency) Gas Stations • 32,030 Gas Stations sell alcohol. • (92% of total gas stations in Brazil) • Mercado de Preços Livres Fuel Distributors Exporters • 160 Operating Distributors • Only distributers may blend ethanol with motor gasoline • 2.38 Billion litters exported in 2004 Fonte = MAPA – MME – MDIC - 2005

  3. Why BIOFUELS? • Environmental gains - carbon sequestration - lower emission levels in consumption • Renewability - short production cycle - man-controlled process • Economicaspects - new demand component - impacts on trade balance • Socialaspects - jobs creation - income deconcentration

  4. BIOFUELS: a natural aptitude in Brazil 30o N Trop. Câncer Equator Trop. Capricórnio 30o S

  5. Why choosing ETHANOL? • Renewable: • Zero Carbon Balance • Not dependent of petroleum • Large scale of production • High miscibility with gasoline and it is a perfect substitute for tetraethyl lead • Oxygenated Compound: • Reduces row emission • Low toxic • Sulfur free

  6. Why choosing SUGAR CANE? • Exceptional life cycle balance (the production of 1m³ of alcohol allows for the reduction of 2.6 tons of CO2). • Highly favorable energetic balance. • Increases in industrial efficiency, with lower sugar production costs. • Improvement in sugar quality. • Market diversification and the reduction of oil dependency.

  7. Why choosing SUGAR CANE? (continuing) • Equivalent energy: 1 ton / sugar cane = 1.2 barrel / oil. • Energy distribution: 1/3 on sugar juice, 1/3 on bagasse, and 1/3 on straw. • Process otimization allows to transform mills into thermoelectric plants. • Possibilities: straw and bagasse burning or gasification, or alcohol production by hydrolysis.

  8. Physical productivity comparison Source: MAPA

  9. Current Matrix of Vehicle Fuels Diesel 2005 53.9% (*) VNG 2.9% Gasoline A 26.2% Anhydrous Alcohol Hydrated Alcohol 8.7% 8.3% Share of Regular Gasoline(1) 26.2% + 8.7% =34,9% Share of alcohol 8.7 + 8.3  17% (1) The gasoline available in Brazilian Gas Stations is added with 25% of alcohol. Source: ANP; ABEGAS – 2006 Elaborated by MME - 2006

  10. ALCOHOL FUEL HISTORY IN BRAZIL

  11. Alcohol with motor gasoline: 80 years of experience First tests using ethanol blended to gasoline 1979: vehicles manufacturers started selling 100% hydrous alcohol cars

  12. Brazilian Automotive Market by Fuel Kind Great share of alcohol cars: more than 80% Sales of new alcohol cars fallen

  13. Brazilian Experience: nowadays… 1) Since 2003, 31 new models of Flex-Fuel Vehicles, by nine automakers: it can use any mixture of gasoline and alcohol, from 0 to 100%, without any action of car driver. 2) In December-2005, Flex Fuel vehicles sales represented 73% oftotal light vehicles sold (2003-2005: 1,245,201 units).

  14. Nowadays: Brazilian Automotive Market by Fuel Kind Start of Flex-Fuel Sales Brazilian Light Vehicles Market Sales 5% 100% 20% 80% 60% 73% 40% 20% 0% jan/03 jun/03 nov/03 abr/04 set/04 fev/05 jul/05 dez/05 Flex (Alcohol or Gasoline) Alcohol (Pure) Gasoline Diesel Source: Anfavea - 2006

  15. Sugarcane: Cropped and Preserved Areas due to Technological Improvements productivity Productivity (tons/hectares) preserved area Area ( thousand hectares) cropped area 1 ton of sugarcane = 80 liters of alcohol 1 hectare of sugarcane = 6 m3 of alcohol Source: CIMA

  16. The success of the ethanol replacing gasoline... Total economy of 1,09 billion boe or 22 months of the present Brazilian petroleum production This curve shows how much gasoline would be necessary to satisfy the fuel demand for light vehicles supposing the non-existence of the Brazilian Ethanol Program IN THIS PERIOD, THE USAGE OF ETHANOL FUEL IN BRAZIL HAS PREVENTED THE EMISSON OF 615 MILLION TONS OF CO2 Source: Ministry of Mines and Energy Brazilian Energy Balance – 2005 and Laura Tetti – USP – 2002

  17. ETHANOL as a new commodity... • Good business for tropical countries • Challenges to overcome: - regular supply (short-term) - predictable prices - guaranteed supply (long-term)

  18. How to start a program of blending ethanol with gasoline? • Infrastructure installations and logistic; • Technical and formal questions • Economic questions; • Instruments for supply garanty; • Fiscal questions • Consumer reaction GENERAL RULE: • There isn’t any general prescription to launch such a program. Each Country has to design its own model.

  19. Conclusions: • Ethanol can be an excellent business, specially that traditional sugar cane producers; • Producing and blending ethanol with gasoline are simple tasks, if all the process is carefully planned; • Brazil learned with its own mistakes. The other countries don’t need to do the same; • We are interested in share our experience, specially because we need the help of other suppliers to organize the market.

  20. Thank you! Contacts: Ministry of Agriculture, Livestock and Food Supply: daa@agricultura.gov.br Ministry of Development, Industry and International Trades Phone: 55 (61) 2109-7293 Ministry of Mines and Energy Phone: 55 (61) 3319-5106

  21. Incentives established by the Pro-Alcohol at That Time • Alcohol price lower than gasoline price • Guaranteed remuneration to the producer • Tax reduction for hydrous alcohol cars • Loans for alcohol producers to increase their capacity • Gas stations were obligated to sell alcohol • Maintenance of strategical alcohol stocks

  22. Problems and solutions of a alcohol-fueled cars Ignition difficulties during cold weather Auxiliary gasoline tank Metal corrosion (tank, exhaust pipe, fire injection bomb components) Substitution of tin and iron for aluminium and stainless steel Drying of plastic and rubber parts (pipes in general) Substitution for more resistent materials and the use of additives Increase in compression rate, R&D and subsidies to consumers during the program’s initial phase. Consumption increase (alcohol’s heating capacity is 30% lower than gasoline’s)

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