Brazil Promotes a Freer Global Biofuels Market

2 weeks ago 5

by Mario Osava (rio de janeiro)
Tuesday, November 05, 2024
Inter Press Service

RIO DE JANEIRO, Nov 05 (IPS) - Holding this year's presidency of the Group of 20 (G20) large industrial and emerging economies is allowing Brazil to push forward the dream of creating a global biofuels market without the current trade barriers.

Brazil is trying, at least since the beginning of this century, to free up global trade in ethanol, but so far without success. The scenario is more favourable now, with the worsening of the climate crisis and other countries joining the production and consumption of bioenergy.

Presiding the G20 this year, Brazil is in charge of the issues and projects to be discussed, creating working groups and promoting agreements, which will crystallise at the group's annual summit to be held on 18-19 November in Rio de Janeiro.

Luiz Inácio Lula da Silva's government has promoted social issues and included biofuels as a central aspect of the energy transition. Several of its proposals were approved in sectoral working groups or meetings of ministers, experts and civil society throughout 2024.

"The current context, driven by Brazil's more active leadership in the G20 and regulatory progress on alternative fuels, offers a more optimistic outlook for the country's success in expanding its biofuels market," summarised Rafaela Guedes, senior fellow at the Brazilian Centre for International Relations (Cebri).

"The focus is no longer limited to ethanol," she said in an interview with IPS in Rio de Janeiro. New products, such as sustainable aviation fuel (SAF) and bio-bunker for maritime transport, open up multiple markets and reduce the risk of dominant suppliers.

These are joined by biodiesel and green diesel, both derived from animal and vegetable inputs but different in their production process and properties, the latter being chemically identical to fossil diesel.

Then there is ethanol, already produced on a large scale, and biomethane, equivalent to natural gas and the product of refining biogas extracted from animal manure, and agricultural, urban and industrial waste.

All these products gained new regulations and incentives in Brazil through the so-called Future Fuels Law, passed by the legislative National Congress in September and effective from 8 October 2024.

The new legislation should attract investment and reduce trade barriers by defining rules and standards in a country that leads biofuel production and presents itself as "a supplier and also a strategic partner for innovation and energy security", said Guedes, an economist specialising in energy transition.

Fear of dependence

Ethanol thrived as a free trade fuel partly out of fear of being held hostage by a few producers. Brazil and the US account for around 80% of its global production, with 35.4 billion litres and 58 billion litres respectively in 2023.

Brazil tried to encourage production in countries with high production or potential for increased sugar cane planting, such as India, Cuba and Mexico, in order to lower barriers to international ethanol trade.

In addition to the fear of dependency, environmental and food security concerns remain another stumbling block. It is argued, especially in Europe, that bioenergy takes land away from food production.

That was the claim of Cuba, which until the 1980s was the world's largest exporter of sugar, but whose sugar cane production subsequently fell to the point where it is now practically limited to supplying the domestic market of 10 million inhabitants, who are suffering from a severe energy crisis.

But now India, previously reluctant, has joined ethanol production, as have other countries, since its consumption, blended with gasoline, has spread to more than 70 countries. Investment in biofuels has increased in order to reduce greenhouse gas emissions.

"This diversification of producers reduces the possibility of monopolies" and thus the fears of dependency, according to Guedes, who says growth in the production capacity of emerging countries and the consequent expansion of global supply are favourable factors for a freer global market for biofuels.

"India has invested heavily in biofuels in its energy security and emissions reduction strategy. Its policies of using agricultural waste to produce ethanol and biodiesel contribute to increasing its productive capacity, as a potential exporter in the medium term," she cited as an example.

Other Asian and Latin American countries are using their abundant biomass and organic waste resources to produce bioenergy, biomethane and green diesel, in what represents another model.

Inputs are waste, not food

Restrictions based on food security were also relaxed because biofuels are largely made from waste, whether agricultural, urban or industrial.

Second-generation (2G) ethanol, made from waste such as bagasse, is another solution. The United States and Brazil have plants producing it, which are set for rapid expansion.

In Brazil, Raizen, a large sugar and bioenergy producer with the participation of the British oil consortium Shell, has been operating its first 2G ethanol plants since 2015 and estimates that this technology can produce 50% more ethanol than a similar area planted with sugarcane.

Guedes also adds that the International Energy Agency has defined sustainable agricultural practices, such as crop-livestock-forest integration, which is expanding in Brazil, traceability in production chains and criteria for defining sustainable energy, which strengthen confidence in biofuels that benefit the climate.

These are policies that promote so-called low-carbon agriculture, preserve soil quality and ensure that Brazil's agricultural frontiers can expand sustainably and without affecting food security, she said.

Ambiguity

But Brazil's decision to promote biofuels, even internationally, causes bewilderment according to Pedro de Camargo Neto, a cattle rancher who leads a movement of agribusiness, that of large farmers, that seeks to reconcile his sector with environmentalism, after decades of stubborn antagonism.

"There is a conflict of interests, of split personality. If Brazil wants to lead in biofuels, it must rule out new oil exploration," he told IPS by telephone from Bandeirantes, a municipality in the central-western state of Mato Grosso do Sul, where he has a farm.

He criticizes the intention of Petrobras, the national oil company, to drill near the mouth of the Amazon River in search of oil deposits.

Large oil deposits are believed to exist in the Equatorial Margin in northern Brazil, an extension of the sea basin that already produces oil in Guyana and Suriname.

New and abundant stocks would make oil and gas cheaper, to the detriment of biofuels, argued Camargo, who has previously chaired the Brazilian Rural Society, a key farmers' group, and held top positions in the agriculture ministry.

"Brazil does not know what it wants," he said.

This is because it promotes a free and global market for biofuels, for economic and environmental reasons, and at the same time wants to become an oil producer, to the detriment of the climate and its own strategy.

The country currently ranks eighth in the world in oil production, with 4.3 million barrels (each holding 159 litres) per day on average in 2023.

The country should advocate international measures to make fossil fuels more expensive. This would enable a biofuels boom everywhere, with increased investment in a market in which Brazil is already a leader. Europe has already taken steps in this direction, Camargo said.

Oil exploration near the mouth of the Amazon is blocked by demands from the Brazilian Institute of Environment and Renewable Natural Resources, which considered Petrobras' evaluations and guarantees insufficient.

An authorisation or denial of exploratory drilling will be ‘technical', based on local environmental impacts, according to Environment Minister Marina Silva.

This is a mistake, according to Camargo, who calls for a broader assessment, not because of the local consequences, but due to the global climatic effects, i.e. greenhouse gas emissions, and because of the economic strategy of prioritising biofuels, which also favours the country's foreign policy.

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