BRAZIL: ENERGY & FOOD THE SUGAR CANE CASE. Fernando Moreira Ribeiro, Secretary General UNICA - Sugar Cane Industry Union, Brazil

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1 BRAZIL: ENERGY & FOOD THE SUGAR CANE CASE Fernando Moreira Ribeiro, Secretary General UNICA - Sugar Cane Industry Union, Brazil September 2007

2 BRAZILIAN FUEL ETHANOL HISTORY 1925 First tests using ethanol blends with gasoline

3 BRAZILIAN FUEL ETHANOL HISTORY Ethanol production (billion liters) Incentives, mandatory blends, new technologies 1975 PROÁLCOOL FIRST PHASE Mandatory blend and subsidies. Deregulation, Sugar Exports ETHANOL CRISIS at the end of the 80s Oil prices down. Brazilian government cuts support. Higher sugar prices affect ethanol production and sales of E-100 cars went down rapidly Anhydrous Hydrous Flex Fuel Global Market? 0 Source: Unica. 72/73 73/74 74/75 75/76 76/77 77/78 78/79 79/80 80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07e 1973 Oil crisis & low sugar prices PROÁLCOOL SECOND PHASE Fiscal incentives and tax exemptions for ethanol production and E-100 fueled cars. All gas stations must obligatorily sell ethanol. Low ethanol prices (65% of gasoline s) guaranteed at the pump FLEX FUEL Flex fuel vehicles begin to be sold.

4 BRAZIL: LOCATION OF PLANTS Amazon Rain Forest Wetlands Sugar cane Current plant Source: UNICA, IBGE and CTC. Plant in construction or in project

5 million hectares million t BRAZIL SUGAR CANE: HARVESTED AREA AND PRODUCTION Source: MAPA, Production (million t) Harvest area (million hectares)

6 ENERGY SUPPLY STRUCTURE 100,00% Non- renewable 87% 94% 80,00% Renewable 60,00% 40,00% 56% 45% 20,00% 0,00% 13% 6% Brazil (2006) World (2004) OCDE (2004) Source: Ministry of Mines and Energy (MME), BEN(2007).

7 Renewable Sources 44.8 % Hydroelectricity 14,8% Uranium 1,6% Coal 6,0% Wood and other Biomass 12,4% Sugar Cane 14,6% Petroleum and Derivatives 37,9% Other Renewables Sources 3,0% BRAZILIAN ENERGY MATRIX (2006) Natural Gas 9,6% All gasoline (sold at pump) contains today 25% of ethanol More than 350 industrial units capable of producing either ethanol or sugar Subsidy free Source: Ministry of Mines and Energy (MME), BEN(2007). 100% = millions [toe]

8 BRAZIL: MATRIX OF VEHICLE FUELS (2006) Gasoline C 34.6% Diesel 49,0% Diesel (total) 52.2% Gasoline A 27,3% Anhydrous Ethanol 7,3% Hydrated Ethanol 9,9% VNG 3,2% B2 3,3% Ethanol (total) 17.2% Note: B2 diesel blended with 2% of biodiesel; Gasoline A pure gasoline, before blending with anhydrous ethanol Source: Ministry of Mines and Energy (MME), BEN(2007).

9 FLEX FUEL VEHICLES (FFV) IN BRAZIL Through electronic sensors, the on-board computer recognizes the fuel and automatically adjusts the engine combustion parameters, without any interference whatsoever from the driver. Introduced in the Brazilian market on March These vehicles are designed to be fueled with gas, ethanol, or any combination of both (today from E25 to E100) Seven car brands and 49 models. 33,000 petrol stations all over the country with at least one dedicated E100 pump each. Source: ANFAVEA / UNICA

10 SUGAR CANE: PRIMARY ENERGY 1/3 syrup 608x10³kcal 1/3 bagasse 598x10³kcal 1718x10³kal 1/3 straw 512x10³kcal 1 BARREL OIL = 1386 x 10 3 KCAL 1 ton sugar cane 1,2 barrel oil 425 million ton of sugar cane 510 MILLION BARRELS OF OIL / YEAR Bagasse and straws represent an underused portion equivalent to two thirds of the plant s energy content

11 BRAZIL: AGRICULTURE VS. PASTURE AREAS hectares million Pastures (natural) Pastures (planted) Others Corn Soybeans Sugar cane Sources: Agriculture IBGE-Estatísticas do Século XX, IBGE-Sidra and IPEADATA- Historical Series. Pastures IBGE-Agricultural Census 1940, 1950, 1960, 1970, 1975, 1980, 1985 e 1995/96. Elaboration: Icone and Unica.

12 ITALY GERMANY SPAIN USA Brazil 8,5 million Km2

13 ILLUSTRATION OF THE BRAZILIAN POTENTIAL United States: the new Energy Bill forecasts 36 billion gallons a year by 2022: 136 billion liters of ethanol requires:20 m. ha of sugar cane 44 m. ha of corn European Union: proposals for a new Energy Policy for Europe (10% for the share of biofuels in gasoline and diesel in 2020): 14 billion liters of ethanol requires: 2 m. ha of sugar cane 5.6 m. ha of corn 2.4 m. ha of sugar beet 22 million ha 6,5% of current arable land or 11% of current pasture areas in Brazil! Assumptions: a) demand for petrol in the EU estimated from CERA (Cambridge Energy Research Associates); b) ethanol replacing 10% of gasoline in 2020; c) 1 hectare of sugar cane liters of ethanol. Sources: CERA, MAPA and IBGE. Elaboration: Unica.

14 FACTS Brazilian ethanol production billion liters of gasoline / equivalent 1.58 billion barrels of oil / equivalent = 12% actual Brazilian oil reserves

15 CONCLUSIONS BIOENERGY: FOOD AND ENERGY FOR A BETTER WORLD Remembering that we are only on the first stages of utilization of biomass.

16 Obrigado!