Biofuel prices: Drivers and underlying assumptions. Céline Giner OECD Trade and Agriculture Roundtable on the Cost of Biofuels March

Transcription

1 Biofuel prices: Drivers and underlying assumptions Céline Giner OECD Trade and Agriculture Roundtable on the Cost of Biofuels March

2 Biofuel prices: drivers and underlying assumptions Background: Modelling framework OECD Trade and Agriculture Directorate 2

3 AGLINK-COSIMO and the Outlook AGLINK-COSIMO model: Global coverage Temperate zone agricultural commodities: Crops Crop products Meat commodities Dairy Biofuels Medium-term projections published annually in the OECD-FAO Agricultural Outlook:

4 Why modelling biofuels in AGLINK-COSIMO? Increased links between energy and agricultural sectors Development of biofuels has been driven by policies Role for the OECD and the FAO in assessing the impacts of policies on: agricultural and biofuel markets achievement of policy objectives (GHG mitigation including land use changes)

5 Basic Characteristics of the Modelling Approach Issue: Ethanol Biodiesel 1st-generation biofuels Additional demand for cereals, sugar crops By-production of animal feed Additional demand for vegetable oils 2ndgeneration biofuels Use in motor vehicles Biofuel support policies Exogenous path Low-level blends and FFVs demand is induced by the ethanol / gasoline price ratio - Mandates - Trade barriers (tariffs) - Tax concessions - Direct subsidies same Overall share in diesel fuels induced by the biodiesel/diesel price ratio same

6 A major challenge: production costs

7 World ethanol and biodiesel markets: an overview OECD Trade and Agriculture Directorate 7

8 Growing importance of biofuels

9 Links between biofuels and agricultural markets 35% Share of feedstock used to produce biofuels in global production 30% 25% 20% 15% 10% 5% 0% Sugar cane Coarse grains Sugar beet wheat Vegetable oils

10 World biofuel prices

11 Key drivers and underlying assumptions 1/ Crude oil prices 2/ Policies 3/ Availability of second generation biofuels OECD Trade and Agriculture Directorate 11

12 1/ Crude oil prices Crude oil prices affect biofuel and agricultural markets : 1/ Fossil fuels are directly linked to crude oil prices effect on the demand for biofuels 2/ Energy: important share in agricultural production costs and is required in the conversion of feedstock to biofuels effect on the supply of biofuels OECD Trade and Agriculture Directorate 12

13 1/ Crude oil prices OECD Trade and Agriculture Directorate 13

14 2/ Biofuel policies Production and use is driven by: - Renewable Fuel standard (RFS2) Final Rule in the US - Renewable Energy Directive in the EU: OECD Trade and Agriculture Directorate 14

15 European Union ethanol market

16 European Union biodiesel market

17 3/ Availability of second generation biofuels Development of second generation biofuels depends: - on the advancement of R&D in coming years - on current investments - on the continuation of biofuel policies / mandates OECD Trade and Agriculture Directorate 17

18 Key uncertainties Evolution of policies in major OECD countries Development of new technologies Export potential of developing countries especially Brazil Sustainability criteria

19 For more information Trade and Agriculture Directorate Visit our website: Contact us: Follow us on 19

20 Representation of support policies Direct support to producers: It generates a wedge between wholesale and incentive price directly enters supply response Import tariff: It generates a wedge between world and domestic prices directly enters price transmission Tax credit: It generates a wedge between wholesale and retail prices directly enters price link Blending obligation: It creates a lower bound to blending shares enters the blending share equations Biofuel targets: Not a measure that drives private decisions ignored

21 Principles of the biofuel modules (1/2) Production of ethanol and biodiesel Production capacity building, capacity use Depending on biofuel prices and production costs (crop prices) and related support measures Dynamics of supply response Crop use / by-product output in fixed but dynamic proportions -2 nd generation biofuel production is exogenous

22 Principles of the biofuel modules (2/2) Fuel use of ethanol 3 different levels (additive, low-level blend, ffv) Shares depend on ethanol-gasoline price ratio and related support measures, blending obligations Neat fuel (or E85) share also depending on the FFV share in vehicle fleet Fuel use of biodiesel Simpler representation depending on biodieseldiesel price ratio and related support measures, blending obligations

23 US ethanol

24 US ethanol

25 Brazil ethanol

26 Ethanol production and use in 2021

27 Biodiesel production and use in 2021