Multiple-Authorship blog platform on issues related to sugarcane cultivation and industrial applications
Today, Brazilian President Dilma Rousseff is visiting Washington, D.C. to strengthen the relationship between two of the Western Hemisphere’s biggest nations. But as with any successful relationship, compromise is key on important issues, and President Rousseff plans to discuss several three issues critical to the global ethanol trade with President Obama.
America’s Renewable Fuel Standard
The issue: The Renewable Fuel Standard (RFS) is significant for both America and Brazil’s ethanol industries, and is a central topic for President Rousseff’s visit. The U.S. Environmental Protection Agency (EPA) identifies sugarcane ethanol as an advanced biofuel because it reduces emissions 61 percent compared to gasoline.
Between 2012-2014, over one billion gallons of sugarcane ethanol flowed from Brazil to U.S. vehicles, and while sugarcane ethanol comprised only two percent of all renewable fuel consumed by Americans, it provided nearly 15 percent of the U.S. advanced biofuel supply. EPA’s recent RFS proposal significantly reduced target volumes for advanced biofuels below Congressionally mandated levels, but increased requirements for advanced biofuels in 2015 and 2016.
Our position: Americans deserve access to the cleanest possible fuels, but reducing RFS target volumes threatens the future of U.S. ethanol supplies. EPA should protect the RFS’ integrity by maintaining volume requirements for advanced biofuels, and should guard against using the regulatory process to impose anti-competitive requirements on foreign biofuels.
Climate Change and Transportation Emissions
The issue: Brazil and the U.S. must consider transportation sector emissions as negotiators work toward an international climate change agreement at December’s COP21 conference in Paris. The World Energy Council reports fossil fuels currently represent 63 percent of all global emissions, with transportation fuel generating 28 percent of total U.S. emissions and 17 percent total Brazilian emissions.
Transportation emissions aren’t limited to ground transport however, and biofuels must become viable alternatives to aviation fuel. The international aviation industry is committed to growing at a carbon-neutral rate until 2020 then reducing emissions 50 percent by 2050, but biofuel production and consumption must expand to achieve this goal. The U.S. and Brazil have cooperated on technological innovation exchange since 2011, and numerous commercial and military flights have since demonstrated the potential of aviation biofuels.
Our position: Ethanol is arguably the cheapest option available to replace fossil-based transportation fuel at large scale. Some commercial technologies can reach virtually zero emissions, and every gallon of biofuel creates long-term climate benefits and short-term public health benefits. The U.S. and Brazil must work together to develop solutions on a global scale, including incentive policies (tax or environmental) to encourage production and consumption, or private sector cooperation to drive investment and innovation.
Bilateral Cooperation to Benefit Both Countries
Brazil and the U.S. are proof pragmatic public policy can create economic growth and environmental benefits. Earth has an urgent need for low-carbon, sustainable transportation fuels, and as the two biggest ethanol producers and exporters in the world, our countries have much to share in experience and technology with other nations.
As the world’s two largest ethanol producers, Brazil and the U.S. have a responsibility to collaboratively build a global biofuels market providing clean, affordable, and sustainable solutions to the planet’s growing energy needs. Brazil’s government and sugarcane ethanol industry are committed to not only expanding the mutually beneficial relationship with America, but to growing the international biofuels market.
Here we are! The ILUC file is finally over and now it seems that no one wants to hear more about biofuels, especially the Commission.
However, biofuels are alive and kicking and there has been evidence of their presence in the past few weeks!
During his opening speech at the EU Sustainable Energy Week, Commissioner Cañete focused on energy efficiency and didn’t even mention biofuels, but he emphasized that the transport sector should be prioritized, particularly through the adoption of ever stricter CO2 emissions standards for vehicles.
In addition, the Commission released the RES progress report showing that the penetration of renewables in transport has been very slow so far, reaching 5,7% in 2014 and concluding that introduction of higher blends of biofuels will be necessary to put biofuels back on track. After all, Cañete declared that “achieving our 10% target of renewable energy in transport [by 2020] will certainly be challenging, yet feasible.”
At the conference on decarbonisation of road transport, on 18 June, biofuels were not on the agenda, but the biofuels industry – and not only them luckily! – made it loud and clear that a post-2020 energy framework should include targets for renewables in transport. I was actually pleased to see that after the conference Commissioner Cañete used again the #biofuels hashtag for the first time in some weeks in one of his tweets. To get clarity of the post-2020 biofuel policy we would however need a bit more than a hashtag, Mister Commissioner!
These are all little hints that we shouldn’t lose hope and still find the energy to advocate for balanced policies on biofuels and decarbonisation of transport post-2020.
UNICA is fully committed to engaging in the next months for a ‘decarbonisation of transport’ policy that includes all options available on the market. If we want to reduce our transport emissions, we will need a diverse mix of fuels and technologies. We can’t just rely on electric vehicles only - just like we cannot rely only on biofuels. Let’s aim for a realistic, greener fuel mix for 2030.
As you can see from the pic below, I had the chance to meet Mr Cañete at EXPO during his visit to the Brazilian Pavilion and hopefully my message came across!
Commissioner Arias Cañete, Dr. Roberto Rodrigues and Géraldine Kutas discussing in front of the sugarcane at the Brazilian Pavilion (Expo Milan).
The Brazilian Sugarcane Industry Association (known by the acronym “UNICA”) issued the following statement regarding changes to Brazil’s tax policy on imported ethanol. It should be attributed to Elizabeth Farina, UNICA President.
Brazilian President Dilma Rousseff yesterday signed a decree creating tax parity between domestic and imported products, including ethanol.
Ethanol produced in Brazil is subject to a range of federal taxes with revenue allocated to social security, including the social participation program (PIS) and social security financing contribution (COFINS) on domestic production. Today’s action by President Rousseff will level the playing field between Brazilian sugarcane ethanol and imported biofuels by subjecting foreign renewable fuels to comparable taxation and should not be confused with an importation tariff.
Today’s decree raises the PIS and COFINS on a number of imported products, including ethanol. These taxes will increase from the current 9.25 percent to 11.75 percent (2.1 percent PIS and 9.65 percent COFINS). Imported ethanol was exempted from the same level of taxation as domestic products in 2013, but this action resulted in accumulated costs for domestic producers with no commensurate costs for foreign producers.
It is important to note the PIS and COFINS paid on ethanol imports will turn into a credit for the importer, which may then be used to pay other tax debts or be reimbursed by the Brazilian government, having the effect of anticipated taxes that would already be collected.
Brazilian sugarcane producers have long been strong advocates of removing trade barriers and creating tax parity for renewable fuels. Today’s action continues that tradition. Working together, the United States and Brazil have built a thriving global biofuels trade benefiting both countries, and we look forward to continued progress toward shared environmental and economic goals.
I recently attended a conference in Brussels on the negotiations of the Environmental Goods Agreement (EGA). The negotiations, which were mandated by the 2001 Doha Declaration, were launched on a plurilateral basis in July last year by a group of WTO countries (accounting for around 86% of the world trade in green goods) including the European Union. It aims to remove tariff and non-tariff barriers to trade for “green goods and services”.
What are we talking about when referring to environmental goods? There is no clear definition yet. In effect, everything that helps us ‘green’ our economies, from wind turbines, water treatment filters to recycling equipment and air quality monitors could be considered an environmental good. It is estimated that global trade in environmental goods amounts to nearly $1 trillion annually.
So far, already six rounds of negotiations have taken place, with the next round scheduled for next week, from 15-19 June. Quite disappointingly, ethanol is not part of the list of green products falling under the scope of the agreement. The biggest challenge of the negotiations is indeed about deciding on the list of products and, by now, already 650 tariff lines and more than 2,000 products are under consideration. Every country promoted a list of products, but ethanol was not part of any of the lists suggested, despite its proven environmental benefits.
Brazilian sugarcane ethanol reduces GHG emissions by 90% on average compared to gasoline and it achieves among the highest GHG emission savings compared to fossil fuels even when land use change factors are accounted for.
My doubts of course are on the credibility that such project will have if products like ethanol are not included in the list and if new countries do not joint. Countries in EGA are in fact already part of lower tariff schemes. So further reducing tariffs may not have a huge impact on GHG emissions reduction, I’m afraid! In the case of ethanol, tariffs are generally very high (0.19€/liter) in the EU. Tariff reductions, then, would have the potential to yield extraordinary environmental benefits.
During the conference, both Trade Commissioner Cecilia Malmström and Climate & Energy Commissioner Miguel Arias Cañete emphasized the positive impact that EGA could and should have in the fight against climate change and made reference to Europe’s role “as major exporter of clean technologies”.
However, contrary to the Commissioners’ words, it seems to me that, as it stands, the EGA will lead to a list of products selected in a somewhat arbitrary manner, rather than on the basis of their environmental benefits. The EGA looks more, for the time being, like a platform for the negotiating parties to advance their exporting interests when it comes to green technologies than a tool to fight climate change.
Trade is not a zero-sum game. If the EGA negotiating parties are serious about making legitimate progress towards addressing global warming, then they would have to widen the list of liberalized products to include all goods that deliver environmental advantages, such as ethanol.
We’ll certainly monitor with great interest the next two rounds of negotiations next week and in July, when the negotiation parties should narrow down the list of products.