From feedstock to fuel – the Latin American experience

Publication September 2015


Summary

Biofuel is produced from living matter, and so is considered a renewable energy. Its emissions are lower than fossil fuels, and thus a viable alternative in the transition to a low-carbon economy. Derived from feedstock and capable of production by the rural population, biofuels can generate a significant amount of revenue, and when oil prices are at their peak, provide a welcome, cheaper fuel option.

The origins of biofuel

The popularity of biofuel rose with the advent of ethanol, an alcohol product which can be created from almost any plant-based material such as corn, sorghum, potatoes, wheat, sugar cane, and biomass such as cornstalks and vegetable waste. Biodiesel, another type of biofuel, is obtained from oil derived from plants, animals or cooking. Ethanol or biodiesel can be used alone or blended with gasoline or diesel, respectively, for use as a motor fuel, subject to the specifications of automobile engines and industrial facilities. This increases overall efficiency and reduces greenhouse gas emissions.

Biogas is a different form of biofuel and has been used for centuries in micro-scale or household projects in developing countries such as China and India. It is created as a by-product of decomposing plant and animal waste in environments with low levels of oxygen – for example, landfills, waste treatment facilities, and dairies. Made up of primarily methane and carbon dioxide (greenhouse gases), biogas can be used for transportation, cooking and electricity.

Biofuel in Latin America

Latin America has grown its bioethanol and biodiesel production rapidly during the past decades. Currently, Brazil, Argentina, Colombia, Paraguay and Costa Rica have the largest production of biofuel in the region. While some countries have more experience in biofuel production than others, the climatic advantages the region benefits from suggest that biofuel production could be increased in the years to come. In this article, we will examine the approach taken by Brazil, Argentina, Colombia and Mexico.

Brazil – a world class leader

Brazil has been a producer of sugar cane since its colonisation, but first started producing ethanol from sugar cane in the late 1920s. Around 1970, with the rise in oil prices, the Brazilian government decided to prioritise the ethanol industry. So, in 1974 it implemented a National Alcohol-based Fuel Program which has proven successful. This required the co-operation of various Brazilian government institutions and Brazil’s NOC (national oil company) Petrobras to provide public subsidies, tax breaks and fixed prices. It was also necessary to instigate legal mandatory blending and create a distribution network to get the fuel produced to gas stations. Furthermore, it required sugarcane planters to commit to increase their production; research centres such as EMBRAPA (the Brazilian Agricultural Research Corporation, a state-owned research company), to develop new technologies to make the plan feasible; the automobile industry to design ethanol-friendly automobiles and later, flex-fuel vehicles; and automobile drivers to purchase the new cars. As a result, by the mid-1980s, most new cars sold in Brazil ran exclusively on ethanol; and today, ethanol accounts for about 40 per cent of the fuel consumed in the country.

However, it has not been all smooth sailing for the Brazilian ethanol industry; in fact, over the last five years the industry has experienced a rough patch. The El Niño and La Niña weather conditions affected sugar cane production, government aid was reduced, and the legal mandatory percentage of blending for the ethanol anhydrous was decreased from E25 to E20. In turn, 2009 and 2011 were difficult years for the industry with a production of approximately 597 million tonnes and 559 million tonnes respectively (according to the International Agriculture Organisation of Brazil). After this drop in production figures, the Brazilian government took steps to prioritise ethanol production again. In 2013, the government re-increased the legal mandatory percentage of blending for the ethanol anhydrous to E25 and started working towards attracting new investment in this field. As a result, it has been estimated that the production of sugar cane will reach 590 million tonnes for the 2015/2016 harvest – 18.6 million tonnes more than the last cycle. It is also expected that the industry will recover and keep growing, not at the rate it started, but rather at a more stable pace of around 3 per cent per year. Current legal mandatory blending in Brazil for gas products is up to a maximum of 27.5 per cent which was adopted in March 2015.

Today, Brazil’s ethanol industry is one of the most advanced in the production of biofuels. In fact, according to the Economic Commission for Latin America and the Caribbean (ECLAC), Brazil is the second largest producer of ethanol worldwide. It operates modern equipment, applies the latest technology trends and uses cheap and residual sugar cane. All of which means Brazil produces a high quality product at a relatively cheap price. Moreover, in 2010, the United States Environmental Protection Agency (EPA) designated Brazilian sugar cane ethanol as an advanced biofuel due to its 61 per cent reduction of total life cycle greenhouse gas emissions, including direct and indirect land use change emissions.

In addition, Brazil recently opened a new generation ethanol facility located in Piracicaba city, in Sao Paulo which will enable a 50 per cent increase in production without having to increase the harvest area. It is estimated that the production capacity of the facility will be 42 million litres of ethanol 2G annually, produced from the bagasse of the sugar cane, with a reduction of 15 times the emissions of carbon dioxide produced in ordinary facilities.

As well as ethanol, Brazil is a major producer of biodiesel. According to the ECLAC it is the fifth largest producer of biodiesel in the world, using soybeans, animal tallow and cotton seed as feedstock. Since 2008, there has been a legal mandatory obligation in Brazil to mix biodiesel in with the diesel sold. Production of biodiesel is regulated by the government through a public auction system which gives preference to producers with a Brazilian Social Fuel Stamp; which in turn, provides incentives for poor family farmers in disadvantaged areas. The Brazilian National Agency of Petroleum, Natural Gas and Biofuels reported that as of May 2014, Brazil produced around 21.8 million litres daily, and the Brazilian government predicts that this industry will grow in the next few years.

Argentina – overcoming difficulties

Argentina is a world leading exporter of biodiesel which it started producing extensively around 2007. It uses mostly soy as feedstock.

The production of biodiesel in Argentina was encouraged as a solution after China cut-back on its purchase of Argentina’s soy oil. The government saw an opportunity in the biodiesel field, and implemented policies to create a sustainable industry, through encouraging investment, giving incentives and instituting mandatory blending. These policies appeared to have paid off when Argentina became the number one biodiesel producer in 2011 and 2012. However, just when production was at its peak, the European Union amended its regulations and imposed, in Argentina’s view, an unjustified tariff on biodiesel imports, based on anti-dumping practices. This new measure affected Argentina’s sales to Spain, one of its largest importers, and consequently led to a reduction in Argentina’s production.

Approximately 2.5 million tonnes of biodiesel were produced in Argentina in 2014 according to the Argentinian National Institute of Statistics. This was significantly higher than the 1.9 million tonnes that were produced in 2013, and shows a measure of recovery in biodiesel production post 2012. As a result, the government has increased the legal mandatory blending rate to 10 per cent – the highest worldwide – to account for the allocation that would have gone to Spain. Currently, Argentina is the third largest producer of biodiesel worldwide.

Argentina also produces ethanol, mostly from corn (although not in as large quantities as biodiesel). In 2014, approximately 533,978 tonnes of ethanol were produced, significantly more than the 373,890 tonnes produced in 2013. The government has, again as a result of this increase in production, recently raised the legal mandatory blending of ethanol to 10 per cent.

Argentina’s future seems less clear than Brazil’s. However, with well structured policies, clear goals and compliance with sustainable production standards, the country could significantly increase its biofuel production, as it possesses all the necessary elements to do so.

Colombia – up and coming

Colombia has vast experience in the production of sugar cane, and is ranked the seventh largest producer in the world. Colombia also has substantial experience producing palm oil and as the fourth largest producer worldwide, is the largest non-African producer. Therefore, the biofuels industry in Colombia has increased rapidly in the past decade, with ethanol being produced mostly from sugar cane, and biodiesel from palm oil.

Currently, the legal mandatory blending of ethanol in Colombia is at eight per cent and biodiesel at seven to ten per cent, depending on the territory. Mandatory blending was first approved by the government in the last decade and is envisioned to continue increasing.

According to a 2011 study published by ECLAC, Colombia possesses many of the advantages that create the right conditions for continued and increased production of biofuels. It benefits from large arable lands throughout, has solid production experience and has the necessary support of the government to help the industry grow, in the form of; tax exemptions, legal mandatory blending, fixed prices and the introduction of flex-fuel vehicles.

Data issued by the Colombian National Federation of Biofuels Producers states that approximately 35,000 litres of ethanol and 42,000 litres of biodiesel per month were produced in Colombia in 2014, positioning Colombia as the fifth largest biodiesel producer in the world and within the top 15 ethanol producers. Production is expected to grow by 50 per cent for ethanol and 60 per cent for biodiesel over the course of this year.

A report produced by the Swiss Federal Laboratories for Materials Science and Technology, in conjunction with Colombia’s National Centre of Cleaner Production and Environmental Technologies of Medellin and the Bolivarian Pontifical University of Medellin confirms that biofuels produced in Colombia comply with the minimum reduction of 40 per cent of greenhouse gasses.

Mexico – a new kind of proposal

Mexico’s current production of biofuels is low. It produces mostly ethanol from sugar cane, beetroot and sorghum on a small scale, representing only 0.5 per cent of the fuel consumed in Mexico. However, since the country has vast arable lands, the government has taken an interest in the biofuels industry and invested heavily in research and development programs.

Mexico is a world class tequila producer, so its attempt to transform tequila waste into ethanol and become a leading player in the ethanol industry should be taken seriously. According to research studies that were initiated in the country around 2011 lead by the Mexican university Michoacana University of Saint Nicolas Hidalgo, 19.86 kg of tequila waste is needed to produce one litre of ethanol. This means that Mexico has a potential production capacity of approximately 523 million litres of ethanol annually, taking into account that 226.5 million litres of tequila were produced in 2013, which resulted in over 3 billion tonnes of tequila waste. Of course, the more advanced the machines, the cheaper and more environmentally friendly it will be to process the waste and obtain fuel. In any event, as a pilot program this already provides an option with intrinsic environmental benefits, as the raw material used to obtain the fuel is already a waste.

Biofuels and the environment

Ethanol supporters argue in favour of the high reduction in emissions when shifting the production of energy from petroleum sources to biofuels. However, non-supporters explain that the environmental damage still exists when producing ethanol and biodiesel – it just presents at the production level and not when using them, meaning the land, water and air suffer the most. Other arguments by non-supporters are centred around the amount of water and edible raw materials used, which raises questions as to whether there will be enough feedstock, land and water for future populations and highlights the very real potential risk of increased food prices and food shortages.

Not all biofuels are produced in the same way, however. For example, Brazil complies with agro-ecological zoning, a ban on slave labour, uses highly efficient and technological machinery and equipment, and overall, complies with well structured policies and regulations when producing its product. Mexico’s proposal uses waste as the raw material, and although this will require more testing, could be a potentially sustainable way to produce fuel. There is no denying that biofuel production requires constant review along with serious research and development as technologies keep improving. However, biofuels constitute a reliable alternative energy source and there is a firm belief that the industry should continue to grow under the oversight of responsible regulatory systems based on science and which are time and cost-effective.


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