Market Access Key to Building Demand

FROM THE JUNE ISSUE: Driving global ethanol demand by strengthening nations' fuel policies critical in reducing greenhouse gas emissions.
By Brian Healy | May 16, 2019

Changing biofuels policies around the world boosted global ethanol trade to a record high last year—10.7 billion liters or 2.8 billion gallons—and policy trends point toward continued growth as countries look for new ways to reduce overall emissions. Lowering market access barriers so trade acts as a supply stabilizer is a critical link between the success of many of these policies and increasing global ethanol trade, which has trended higher for the past five years. While more than 65 countries have biofuels policies in place, they vary widely in terms of enforcement and overall renewable content in the fuel supply.

Brazil has the highest share of ethanol in its fuel pool in the world at nearly 48 percent, which is expected to expand as RenovaBio, the country’s new national biofuels policy, incentivizes greater use of E100 in flex-fuel vehicles or hydrous ethanol. Japan, the fifth-largest gasoline market today, uses ethyl tert-butyl ether (ETBE) as an oxygenate, which means there is less than 2 percent penetration of renewable content in its fuel supply. Both countries’ policies are enforced by and benefit from trade but leave room for growth in overall renewable content.

Another approach to biofuels policy is exemplified by the Philippines, which imported ethanol early in its experience with biofuels to create a guaranteed supply as domestic infrastructure and production capacity was developed. While many countries currently follow this model, others could benefit from it, including India, which has a goal to achieve E20 by 2030.

A third tranche of countries with biofuels policies are those that allow for renewable content in fuel specifications but don’t have a specific mandate for ethanol use, making blending—or even education about the benefits of blending—inconsistent. For example, Nigeria allows up to 10 percent ethanol content in its fuel specification, and imports nearly all its finished gasoline from countries in the European Union. Chile allows up to 5 percent ethanol in its fuel specification but is not yet blending.

Lowering market access barriers to allow for more robust ethanol trade is the critical link for many of these polices. Many tariff schedules do not reflect the true use of ethanol as a stand-alone fuel or a renewable energy component of gasoline. The tariff schedule in Indonesia, for example, remains high for both undenatured and denatured ethanol at 30 percent compared to 5 percent tariffs on aromatics and duty-free access for gasoline. This higher tariff on renewables than on fossil fuels is a widespread problem globally that penalizes the competitiveness of renewables.

Righting these discrepancies in market access is a critical step forward as countries continue to look for ways to reduce overall greenhouse gas emissions and improve air quality and human health. Providing information and examples of policies that work is a key component of the market development work the U.S. Grains Council and its partners in the U.S. ethanol and corn industries are undertaking.

Author: Brian Healy
Manager of Ethanol Export Market Development
U.S. Grains Council