Brazil Announces Incentives and New Investments in Ethanol Fuel

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – A new regulation, signed this week by the Ministry of Mines and Energy, is expected to help Brazil’s ethanol sector receive investments close to R$13 billion per year. The measure, part of the RenovaBio (National Biofuel Policy), will regulate conditions for issuing infrastructure debentures for petroleum, natural gas and biofuel projects.

“RenovaBio, which will come into full force in January 2020, will create in the ethanol sector alone estimated investments of around R$9 billion per year, with the renewal of sugarcane plantations, and another R$4 billion with the increase in sugarcane production,” said Mines and Energy Minister, Bento Albuquerque.

The decree, signed during the opening of Ethanol Summit, the largest event in Latin America in the sugar-based energy sector, will allow companies to receive investments with tax exemptions, encouraging investors to expand their operations, open new plants or modernize existing ones. It will regulate the issuance of incentive debentures in the biofuels sector.

According to the Minister, with the new decree, RenovaBio becomes the largest financing program for the country’s sugar-based energy sector.

Although existing since the 1930s, Brazil’s ethanol fuel program took off in the 1970s, during the global energy crisis. The large incentives given by the Brazilian government over the years allowed the country to become the world’s second largest producer of ethanol and the world’s largest exporter of the product.

Today, 90 percent of new cars sold in Brazil are flex fuel, able to run on both gasoline and ethanol fuel. These vehicles now make up about 70 percent of the country’s entire passenger vehicle fleet.

The Global Energy Transformation Study, published this year by the International Renewable Energy Agency (IRENA) showed that biofuels have the potential to reduce global CO2 emissions by 70 percent by 2050.

The study, presented on Tuesday at the Summit, identifies options for the decarbonization of the global energy matrix until 2050 and shows that the use of biofuels is one of the top contenders for clean energy.

“RenovaBio will be the largest decarbonization program in the world in the future,” said Agriculture Minister Tereza Cristina Correa da Costa Dias during the opening of the Summit.

According to Minister Dias, the government’s new policy will strengthen the role of the ethanol, sugar and bioenergy production industry, the second largest supplier of energy in the country.

Dias says that after the “discouragement” faced by the sugar-ethanol industry in the past decade, “everyone is getting back to being excited about the sector again”.

According to experts, the enthusiasm is not only for an increase in domestic consumption but for an expansion of Brazilian-produced ethanol abroad.

According to the Sugar Cane Industry Association (UNICA), although there are ethanol programs in more than 60 countries in all continents, 89 percent of global ethanol consumption is concentrated in three regions: Brazil, the United States and the European Union.

“Our major challenge is to expand and strengthen ethanol programs outside these three regions,” explains UNICA’s executive director, Eduardo Leão.

According to estimates by the International Energy Agency, an entity linked to the Organization for Economic Cooperation and Development (OECD), biofuels should increase by 19 percent their participation in the worldwide transport sector by 2023. The IEA says developing countries, such as China and India, represent the greatest potential for expansion in the consumption of renewable energy.

Plinio Nastari, an advisor to Brazil’s National Energy Policy Board, says that expanding gasoline consumption in China, growing currently at a rate of 6 percent a year, should lead to increased demand for ethanol.

“The country (China) produces little ethanol and should need to import more to balance the composition in the fuel pumps at the stations,” he told participants at the Ethanol Summit.

That is where Brazilian ethanol producers say they can help.

“Today, if we consider all the ethanol used in the world and compare it with gasoline consumption, ethanol represents just over six percent. We could, without any kind of environmental cost, duplicate this production,” adds UNICA’s Leão.

According to the executive, if the world increases its ethanol-fuel consumption to fifteen percent the additional area needed to plant extra sugarcane or corn would ‘represent less than 0.5 percent of the total area of arable land in the world,’.

For sugar-ethanol experts, the current global drive for alternative, renewable, sources of energy could greatly benefit Brazil and other biofuel producers.

“New policies for the use of renewable energy should increase the demand for biofuels,” concluded Marcio Carvalho Bezer, secretary of oil, natural gas and renewable fuels at Brazil’s Ministry of Mines and Energy.