20 years to the day… A historic moment for Mercosur and the EU, a new horizon for sugarcane.
Géraldine Kutas — posted 08/07/2019
20 years to the day of negotiations beginning, an agreement was reached on the EU-Mercosur deal. Cautious optimism had been growing for some weeks, but when the confirmation was received late on Friday 28thJune, it came nonetheless as a huge surprise. Here we are a week later, and as more details of the agreement are released, it is more important than ever to recognise the hard work that went into this deal. Of course, compromises and concessions were made by both parties. However, and most importantly, the agreement remains an incredibly strong testament to the mutual benefits of collaboration and the conviction that they outweigh the downsides by far.
From the perspective of the sugarcane industry, in an ideal world we would have welcomed higher zero-tariff quotas for sugar and ethanol, nevertheless we appreciate the delicate balancing act and limitations that the negotiators were faced with. As an industry we welcome the opportunity to better position our products with European industry and consumers within the wider context of increased trade.
The elimination of the €98 in-quota rate on 180 000 tonnes of sugar will provide European refiners better and more affordable access to high quality cane sugar and increase the choice for both consumers and the European food and drinks industry. Considering current EU sugar consumption sits around 17 million tonnes, the elimination of the TRQ on 180 000 tonnes of imports from Brazil remains comparatively minimal, and will not have a palpable impact on the European sugar industry.
We welcome the duty-free quota on ethanol for industrial use of 450 000 tonnes. This will provide the European chemical industry much better access to a sustainable feedstock and should support considerable growth in the sector. In parallel, the quota of 200 000 tonnes of ethanol for all uses (including fuel), with an in-quota reduced tariff (equal to 1/3 of the Most Favoured Nation tariff) will open up possibilities for the use of ethanol in other industries and applications. As one of the most carbon efficient and sustainable biofuels, this opens the door for sugarcane ethanol to support Europe’s push for the decarbonisation of transport.
As previously addressed, environmental concerns continue to circulate. However, it is important to note that a strict sustainability chapter has been outlined, with key elements such as a joint commitment to effectively implement the Paris Climate Agreement communicated early on. The sugarcane industry has already made its own strong commitments to sustainability and labour protections, and increased trade will certainly not impact these.
Placing this trade deal in the context of the wider Association Agreement, including the political and cooperation pillars agreed in principle in 2018, we are confident that increased possibilities for trade and cooperation will be of widespread benefit, and once again congratulate both Mercosur and the EU authorities on this momentous agreement.
Is a handshake in sight for EU-Mercosur?
Géraldine Kutas — posted 25/06/2019
EU-Mercosur negotiations have had their share of ups and downs over the past 20 years. However, since the beginning of the year, the new Brazilian Government surprised many with their strong pro-trade stance and have demonstrated an unexpected ambition to close the deal. Positive signals have raised hopes that the current negotiating round that started on 20 June in Brussels, could lead to a long-awaited breakthrough.
As a deal inches closer than ever, improved market access for sugar and ethanol have now reached the negotiating table. Some concerns remain in the EU, mainly around sustainability, but are they well-founded?
Before diving into the details, it is worth revisiting some of the many benefits the Mercosur deal offers for both sides.
Market access is a key win. The EU is set to gain improved access to emerging markets of over 260m+ consumers, with specific benefits for many of Europe’s critical sectors such as automotive, machinery, chemicals and pharmaceuticals, not to mention improved market access for agricultural and food producers, under the extensive protection of Geographical Indications for EU food and drink products. As the first major trading bloc that closes a deal with Mercosur, the EU would also have a first mover advantage, allowing EU businesses and products to establish themselves in Mercosur markets before other competitors move in. For Mercosur countries, on the other hand, it means improved access to an established market of 500m consumers and more importantly an opportunity to better integrate global supply chains.
In times such as these that see the world slipping back towards protectionism and with the multilateral trading order under fire, the EU-Mercosur trade deal would be a positive manifestation of the benefits of free and fair trade, based on a set of jointly agreed rules to suit both parties.
Environmental concerns on both sides are to be expected, but are they well founded?
It is natural for questions and concerns to arise in such a long-term negotiation, especially considering the current sustainability conversation in Europe. The risk however is that inaccurate information jeopardizes a deal based on free, fair and positive trade intended to benefit all parties.
In fact, the laws protecting the environment in Brazil are among the most stringent in the world. The sugarcane agro-ecological zoning, a piece of legislation adopted ten years ago, includes detailed restrictions for sugarcane cultivation. These cover limits to where expansion can take place (not the Amazon!), ban the clearance of native vegetation to plant sugarcane anywhere in the country which protects the native Cerrado (the Brazilian Savannah), and prioritise specific areas for sugarcane production such as those with reduced water needs or on degraded lands. In addition, the Brazilian forest code requires that at least 20% of any private rural property must be preserved with native vegetation. In the Amazon rain forest, this rises to 80%. Have we ever seen such legislation in Europe?
The Brazilian Sugarcane Industry Association (UNICA) is fully committed to these rules. Not only are the areas in which sugarcane is cultivated on average 2000-2500km away from the Amazon, but the industry is also aware that it is precisely these high sustainability standards that give Brazilian sugarcane its advantage. This commitment has allowed the Brazilian sugarcane industry to support significant decreases in Brazil’s greenhouse gas emissions to date, despite only covering 1% of the country’s land.
How could the EU-Mercosur deal impact Sugarcane production?
As an industry, sugarcane can ensure a high level of sustainability, certified by third-parties such as Bonsucro, the global standard for sustainable sugarcane production. UNICA’s members represent more than 60% of sugar and ethanol produced in Brazil, and already participate in a number of initiatives to ensure the sustainability of the industry, ranging from environmental conservation measures to improving labour conditions. We are confident that larger quotas for sugar and ethanol to the EU will therefore not lead to lower environmental and labour standards. On the contrary, it can only strengthen the sustainability of the sector.
We are confident that negotiators will find a compromise that will ensure mutual benefits for both parties from the EU-Mercosur deal. An agreement that will open doors to increased cooperation on a range of issues far beyond trade. Challenges do exist, but a rejection of the deal will not solve them – on the contrary. We are closer than ever to an unprecedented opportunity to work together for our mutual benefit and hope that this time, we can seize it.
UNICA announces Dr. Evandro Gussi as its new President and CEO
Géraldine Kutas — posted 13/02/2019
Today we are proud to announce the nomination of the new President and CEO of UNICA, Dr. Evandro Gussi. We are enthusiastic he will direct UNICA during exciting yet challenging times for biofuels, sugar and bioelectricity, in Brazil and around the globe.
A lawyer by training and a former professor, for the past four years Evandro served as a Member of Parliament for the State of Sao Paulo in the federal House of Representative in Brasilia. It was there that he had the pleasure to work with the sugarcane sector, successfully introducing the Renovabio program in Brazilian legislature. According to him, it was love at first sight. Since then, he developed a true passion for this innovative sector and he is committed to guide it towards a new cycle of growth.
Renovabio is a game changer in Brazilian biofuels history. This program will provide not only stability and predictability for biofuels producers to help Brazil fulfill its commitments in the Paris Climate Agreement, but it will also pave the way for countries around the world to follow suit. As Asia, Europe and the United States struggle to move forward with the decarbonization of transports, Brazil will continue to serve as an example and inspiration. Since its inception, UNICA has been on the forefront of the development of Renovabio, providing advises and support to the different entities involved in the program. We are proud Dr. Gussi is fully committed to do everything he can to make Renovabio a success and help the Brazilian sugarcane industry continue to prosper and show what can be achieved when hard work and innovation meet sound public policy. Fully aware of the challenges sugar and ethanol face abroad, Dr. Gussi will take any opportunity to engage with our stakeholders around the world to share Brazil’s successful experience, promote the environmental benefits and defend our sector from unfair trade policies.
We are excited to start this journey with our new President and CEO and we wish him a lot of sweet success.
Welcome to UNICA, Evandro!
An eventful year for renewables and climate change draws to a close
Géraldine Kutas — posted 17/01/2019
As we wind down towards the end-of-year holiday period, it’s time to take pause for our traditional reflection on the challenges and successes of the past year, and to take stock of opportunities and objectives for the year to come.
One of the major European legislative achievements of 2018 from was the final agreement on a new Renewable Energy Directive. Imperfect though it is, a positive outcome of REDII was maintaining and not compromising the 7% cap for first-generation biofuels, increasing the mandatory renewable energy share in transport, and establishing a target for the incorporation of second-generation biofuels, in the transport mix. An important win is that these targets can only be reviewed upwards and cannot be reduced. However we need to wait and see how the practical application of REDII will unfold, as implementation has been effectively put into the hands of member states.
The result of unstable regulations that has been the norm up to now (subsidies for solar panels, biofuels regulation, etc) has been a delay in implementing real mitigation measures. Important signals were sent with the publication of the EU’s bio-economy strategy and the long-term (2050) vision for a cleaner planet. But this talk needs to translate into action if we are to limit temperature increases to 1.5 degrees, and unfortunately the strategy and vision are shockingly short on ambition in terms of the concrete measures needed to achieve that. There is a vision, but no clear roadmap on how to get there.
Why? Partly, this is because it is difficult to reliably predict the technologies that will prevail, and therefore to invest in the right instruments. This makes is all the more difficult to engage those stakeholders who want greater clarity and certainty in order to invest in a future that is by definition uncertain. But clear incentives are required. It will be extremely hard to mobilise stakeholders to action without these predictable incentives.
These future uncertainties are also reflected at the political level. No-one knows what future elections will bring in a society that seems increasingly polarised, which could provoke drastic changes in approaches to climate change at the national and sub-national levels. We need to engage the whole society as much as we can to guarantee broad support for measures adopted and ensure that they are not reverted. But we also need to motivate, mobilise and encourage society at large to adopt the fundamental changes in habit that are required to help ensure a smooth transition toward a low-carbon economy. I personally believe that there is a groundswell of support from ordinary citizens for such measures – we only have to look at how innovative and vibrant many initiatives at the local level are as a testament to that fact. But such local initiatives won’t gain a critical mass and the necessary traction without the right and lasting policy framework.
It is really encouraging that, in 2018, bioenergy finally began to receive the recognition it deserves, and I look forward to that recognition increasing next year. As the International Energy Agency (IEA) has said, bioenergy makes up 50% of global renewable energy, so it’s high time that its potential, effectiveness and ready availability are harnessed. There’s no time to lose, the climate clock is ticking inexorably, and we need to promote the widespread use of bioenergy solutions, especially in heating and transportation.
Rather than decreasing, global emissions from the transport sector are growing fast. There is no one silver bullet for transport, and we certainly cannot afford to run down the clock and wait passively for one. The simple truth is that we need to use all the mitigating solutions that we already have at our disposal, of which biofuels is already playing a critical role in many jurisdictions. Brazil – a country that, according to the IEA, has the greenest energy matrix – has long led the way in successfully integrating renewable biofuels in its transport energy mix.
As a further significant step on that journey, Brazil recently adopted its Renovabio programme. This carbon-trading mechanism will not only help further reduce emissions from the whole transport sector, but is destined to keep the sector innovating in sustainable solutions. Last week production was launched of the first hybrid-flex-fuel vehicles (that run on electricity and ethanol), combining two of the best green-transport technologies for the climate, and we expect to see more transformative innovations like this coming on stream in the near future.
Innovation will be key. And the economics of any innovative solution need to make sense. Smart policy-making recognises the economic imperatives of stimulating innovation, and we hope to see much more of it in 2019.
I wish you all a very happy, peaceful and restful holiday season.
On the road to Katowice (COP24)
Géraldine Kutas — posted 26/11/2018
As COP24 approaches it is clear that we are nowhere near to being on track to meet the commitments made at Paris. Much more needs to be done just to meet those obligations, and even if we did, this still wouldn’t be sufficient to contain the rise in average temperatures to 1.5 degrees. There is therefore an urgent need in Katowice not only to adopt the robust package of decisions that will ensure the full implementation of Paris pledges, but also the additional measures that will be needed to keep the rise in temperatures within the target limit.
One of the stated objectives of the summit is to attain a balance in GHG emissions management, between cutting emissions and enhanced sequestration.
In that context, UNICA is proud to be able to present Brazil’s Renovabio initiative during COP24. As part of its commitments made under the Paris accord, Brazil’s Renovabio is a key strategic initiative for alternative fuels that aims at reducing Brazil’s total GHG emissions in the transport sector by 10% by 2028 on 2017 levels. Kicking off in 2020, it includes all biofuels (biodiesel, biogas, bio-kerosene), not just ethanol. Indeed, Renovabio establishes long-term guidelines based on a technology neutral approach, without applying any additional taxes or offering subsidies. As Renovabio is a state policy rather than a government programme it provides stability and predictability. It is a new performance indicator for biofuels producers that will improve processes and increase efficiency. It provides long-term guidelines for investments, and recognition of biofuel’s positive environmental externalities. Greater controls on production activities are required by its certification process. Under a double control system, producers’ production methods will be subject to official inspection as they apply for certification (required to participate in the programme). Fuel distributors will face financial sanctions for non-compliance with their obligations in terms of carbon intensity (CI) reduction. Obligations are therefore shared across the value chain -by producers, to ensure they produce sustainably, and by distributors, to ensure they achieve targets in terms of CI reduction.
The Renovabio initiative is expected to significantly enhance future perspectives for the industry, and stimulate healthier margins, leading to significant investments. According to the Brazilian Ministry of Mines and Energy, Renovabio is expected to save 847m tonnes of CO2-equivalent emissions, cut transport fossil fuel imports by some 300bn litres, and create 1.4m jobs on the back of an investment of some €323bn (US$368bn). Renovabio will promote new know-hows by rewarding efficiency gains in a technologically-neutral way. This will induce new investments in emissions reduction techniques, for example in biogas production, or the use of new cane varieties for sugarcane ethanol.
Sugarcane ethanol is an enabling technology that helps countries meet their climate commitments and cut transport emissions – 90% less GHG emissions than petrol. Sugarcane ethanol is widely deployed in Brazil, where more than 200 flex-fuel vehicle (FFV) models are available, 76% of the national feet and 95% of all new-car sales are FFVs. New E-Flex vehicles (running on electricity and ethanol) are now coming on line in Brazil, with tests on the Toyota Prius E-FLEX being concluded. VW Trucks and Buses Brazil said it will start test on an E-FLEX bus in six months.
Brazil is the world’s second largest ethanol producer, producing just under 30bn litres of ethanol annually. Domestic consumption accounts for 90% of that production, and exports amount to only 1.4bn litres a year. Brazil’s ethanol production is set to increase significantly over the next 10 years, rising to a projected 47.2bn litres by 2028. With sugarcane produced on only 0.5% of the national territory, Brazil can easily ramp up its production of sustainable ethanol, which neither competes with food or compromises native vegetation or forests – expanded ethanol production is projected for degraded pasturelands, which are being recovered for this purpose. This will help stabilise the soils of these degraded lands, capture more CO2in the carbon sink, and provide plentiful GHG-cutting sugarcane ethanol for transportation for other countries around the globe in our joint fight against transportation emissions.
It’s time to speed up on cutting transport emissions! Brazilian sugarcane ethanol can help fuel this global drive.
Géraldine KutasHead of International Affairs & Senior International Adviser to the President
Leticia PhillipsRepresentative, North America
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