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A Greener Deal with Ethanol

Emily Rees — posted 18/12/2019

Ursula von der Leyen has left no doubt; the European Green Deal is to become the legacy of the 2019 – 2024 European Commission. The ambition is clear and decisive: to decarbonise Europe. New targets see at least 50% of emissions cut by 2030 and carbon neutrality achieved by 2050.

The climate crisis requires urgent action and achieving decarbonisation will require immediate changes. We cannot afford to leave ethanol, which holds the expeditious potential to reduce greenhouse gas emissions and diversify energy supplies, out of the mix. Ethanol can produce 90% less lifecycle emissions than conventional fossil fuels and stands to play a critical role in reaching Europe’s targets.   

This will be a real test for the new Commission and ambitions might be frustrated should the Green Deal not include the full spectrum of all available technologies, including sugarcane ethanol. The European Green Deal will redefine the landscape in which all policies are developed, not least those focusing on health, energy, transport, environment and agriculture. This is set to be a Just Transition, one that transforms and benefits all aspects of European society. 

Health: The Green Deal explicitly links citizens’ health with environmental health. Improving air quality is an easy example of ethanol’s versatility. How? Blending petrol with higher levels of ethanol such as E20 adds oxygen to the gasoline and reduces particulate matter from the tailpipe exhaust, providing cleaner air and better quality of life for Europeans.

Energy: The implementation of the Clean Energy Package is a short-term priority for the European Commission and Member States. Kadri Simson, the new Energy Commissioner ,will be tasked to evaluate existing legislation and decide whether it is up to the standard required to meet more ambitious climate targets. A possible review of the renewable directive and renewable targets in the transport sector could again see ethanol play a more prominent role; rolling out an E10 baseline across the EU would already reduce road transport emissions by up to 15 million tonnes, in full compatibility with most existing vehicles on the road today.

Transport: One of the priorities of the Green Deal is the decarbonisation of the transport sector. It is mentioned as a specific initiative and priority. As the Emissions Trading System will be extended to the maritime and aviation sectors and the European Commission might again revise the CO2 emissions performance legislation for cars, Europe will need to increase the uptake of sustainable and alternative transport fuels. Flex fuel vehicles, already 74% of the entire light vehicle fleet in Brazil, can run on either gasoline or pure ethanol, further reducing emissions. With the introduction of new Hybrid Fuel Flex options, which also include an electrical powertrain, the potential to cut emissions is only increasing. 

Environment: The Commissioner for Environment, Virginijus Sinkevicius will lead on the zero-pollution ambition which will require a cross-sectoral approach. Where ethanol replaces fossil fuels it leads to a significant reduction of NOx and particle emissions. In addition, ethanol is also widely used as a solvent and is increasingly being used as a renewable alternative to fossil-based chemicals in products stimulating the uptake of bioplastics.

Agriculture: Agriculture Commissioner, Janusz Wojciechowski will contribute to the zero-pollution ambition and ensure that agriculture and food production contribute to our climate, environmental and biodiversity goals. In Brazil, ethanol production occupies only 1.4% of arable land and largely contributes to the reforestation goals set out by the Paris Agreement. As of January 2020, Brazil’s RenovaBio programme will further incentivise low-carbon ethanol production and use through tradeable carbon credits whilst guaranteeing a deforestation-free supply chain. These are examples of how agricultural policy can play its role in meeting decarbonisation targets. 

Europe’s Green Deal is not just about ambitions, it is also aspirational. Europe wants to be a leader in climate action and to do so it will need to use all the solutions available to accelerate this transition. Biofuels are already playing a critical role in many countries, and as Member States roll-out higher blends of renewables in standard petrol, ethanol is demonstrating its potential at the heart of Europe. 

UNICA congratulates the new European Commission and wishes the Colleges best of success in collectively reaching the EU’s ambitious climate goals in the years ahead. 

Brazilian Sugarcane Ethanol Can Help America Achieve Its Climate Goals

Géraldine Kutas — posted 31/08/2019

The Renewable Fuel Standard (RFS) is a vital component of the Environmental Protection Agency’s (EPA) policy to enhance America’s energy security and reduce the impact of transportation emissions on the environment. As global leaders in search for clean, renewable options, the Brazilian Sugarcane Industry Association (UNICA) has been a strong supporter and contributor of the RFS program since its inception. The industry is committed to continuing to help the RFS achieve its carbon saving goals.

Brazilian sugarcane ethanol is one of the most climate-friendly biofuels available in the market today. In fact, in 2010, the EPA determined that Brazilian sugarcane ethanol achieved an average reduction in lifecycle green-house-gas (GHG) emission of 61% compared to a gasoline baseline, making it an advanced biofuel.

The EPA has published proposed renewable fuel standards for 2020 and biomass-based diesel volume for 2021. We continue to support the implementation of the RFS program, but there are certain elements of the proposal that we believe the EPA should review. As our comments to EPA show, Brazilian sugarcane producers’ top tier recommendations are a increase in projection for imports for Brazilian sugarcane ethanol imports that are closer to the volumes expected from Brazil in 2019, and the implementation of an incentive multiplier program to help reduce the shortage of advanced biofuel.

Sugarcane Ethanol Available in 2020 Will Be Much Greater Than Current Projections

We believe EPA has underestimated the amount of Brazilian sugarcane ethanol actually imported in 2018. Reports suggest that in 2018, Brazil’s ethanol production reached more than 8 billion gallons, a 9% increase compared to 2017 production levels. Historically, we know that when the market conditions are right, Brazil can supply the Unites States with large volumes of advanced biofuel, and this is the case today.

The Agency suggests that only 60 million gallons of imported sugarcane ethanol will be reasonably available on the U.S. market in 2020. We believe EPA needs to increase this projection, as it is based on incomplete numbers from the U.S. Energy Information Administration (EIA). EPA’s own data monitoring system (EMTS) shows that, in 2018, over 76 million gallons of Brazilian sugarcane ethanol generated D5 RINs and current data already shows that more than 67 million D5 have been generated from imported sugarcane ethanol so far in 2019. The U.S. Census Bureau also shows the same 76 million gallons of Brazilian sugarcane imported in 2018. The pace of imports in 2019, coupled with market intelligent and projections, suggest that Brazil will export to the U.S. close to 135 million gallons that will generate D5 RINs in 2019. Thus, the RFS’ projections should reflect these considerations and use this number a a basis for sugarcane ethanol imports from Brazil in 2020.

Global Industry Trends Are Reshaping the Market for Sugarcane Ethanol

EPA could strengthen the proposal by taking into account important global trends that are likely to increase quantities of Brazilian sugarcane ethanol available for import in 2020. First, recent changes in Japan’s biofuel policy that allow for the use of corn-based ethanol will result in a greater amount of sugarcane ethanol available for shipment to other markets, including the United States. By 2020, said impact will be obvious, and the U.S. will be seeing availability of higher volumes of sugarcane ethanol than in recent years.

The second global factor to consider is the low price of sugar. As a result of lower market prices, Brazilian producers have expanded ethanol production. When prices are low mills tend to distill more sugarcane into ethanol. UNICA is not expecting any change in the market that would substantially hinder Brazil’s ethanol export capacity in 2020, therefore EPA should count on this trend to increase its projection of sugarcane ethanol imports for that year.

Lastly, we encourage the EPA to recognize that the competitiveness of sugarcane ethanol could increase in the short-term as there is a possibility that the U.S. biodiesel tax credit might not be extended, as it has been the case for the past three years.

Given these trends we believe EPA should considerably increase its imports projections for sugarcane ethanol from Brazil. Brazil has shown that when market conditions are right—as they are now—the industry can deliver significant amounts of clean, climate-friendly ethanol to U.S. consumers.

Incentive for Continuous Improvement

Brazilian sugarcane ethanol producers encourage the constant advancement of sustainable practices throughout the industry. In order to empower continuous improvement in GHG performance, the EPA could adopt a new incentive multiplier program for the most climate-friendly biofuels. Specifically, we recommend an approach that would help reduce the advanced biofuel shortage by allowing producers to generate an additional amount for every 10% reduction in their lifecycle GHG emissions below 50%.

As the global market for ethanol increases, Brazil will continue to be a strong ally in America’s quest to meet its clean energy goals. Brazilian sugarcane producers are willing and proud to contribute to the increased use of advanced biofuels in the EPA’s RFS program. We hope the Agency keeps on the path to fostering the production and use of as much advanced biofuels as the market can deliver.

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!