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.