Around the World

FROM THE JULY ISSUE: Several countries are making legislative changes that bode well for U.S. ethanol.
By Brian Healy | June 14, 2019

There is new-found global momentum toward implementing or expanding current ethanol policies, while global ethanol production has reached a record 29 billion gallons. In just the past two years, more than a dozen countries have announced significant expansions of their ethanol policies. The timely expansion of policies reflects heightened global awareness of environmental issues, as countries set goals to reduce greenhouse gas (GHG) emissions.

The U.S. Grains Council and U.S. industry partners are working globally to expand the use of ethanol, normalize its use as a clean energy component of the transport sector, and build partnerships with countries and industries looking to expand ethanol use. As more countries look to ethanol as a possible solution, the U.S. industry continues to provide technical assistance around policy development and implementation, as well as handling and logistics information, while supporting the role for trade in ensuring policy success.

The new and expanded policies fall into two key categories: environmental benefits and agricultural producer benefits. GHG reduction is a principal component of many of the policy changes for the following countries, meaning that if U.S. producers want to have market access, they must continue to invest in technologies and improvements that lower ethanol’s carbon intensity.  

RenovaBio, Brazil’s new ethanol policy that goes into effect at the beginning of 2020, has the potential to nearly double the Brazilian ethanol market, currently the second-largest ethanol market after the U.S. Ethanol expansion under the new policy is expected to be centered almost exclusively in the hydrous ethanol market, or E100.

Canada is developing a Clean Fuel Standard that includes liquid, gaseous and solid stream fuels with an overall goal to reduce GHG emissions by 30 megatons by 2030 to meet its Paris agreement commitments. The current Canadian renewable fuels regulations require an average renewable fuel content of at least 5 percent based on the volume of gasoline the country produces or imports, but the nationwide average is higher because provinces like Ontario blend at higher levels. Under the current timeline, the federal policy is expected to go into effect in 2021. Concurrently, individual provinces have begun to announce their own expanded ethanol policies, led by Ontario moving to E10 by 2020 and further expanding to 15 percent renewable content in 2025.

As of April 2018, U.S. ethanol qualifies under the updated Japanese biofuel policy. Ethyl tert-butyl ether (ETBE) is a component of gasoline used in Japan as an oxygenate to more completely combust fuel partially composed of ethanol. Until the April 2018 decision, only Brazilian ethanol could be used in ETBE destined for the Japanese market. In the coming years, Japan is expected to consider expanding the total use of ETBE or direct blending.

European Union
Under its new renewable policy, Renewable Energy Directive II, the EU is maintaining the current cap on crop-based biofuels at 7 percent, rather than decline to 3.8 percent by 2030 as had been initially proposed. This policy calls for ethanol suppliers to meet certification requirements demonstrating GHG reductions of at least 50 percent for both the production facility and feedstock.

Ireland has a plan to move to E10 starting in 2019. Though its demand is relatively small, Ireland can be a leader in ethanol use within the EU community.

United Kingdom
Like Ireland, the U.K. is considering the opportunity for expanding its ethanol use to E10 by 2020. 

Supporting domestic agricultural production is another major consideration for the recent policy announcements. In spring 2018, Bolivia announced that by 2019 its gasoline will require E10, and by 2025, the country plans to move to E25. The goal of the program is to reduce fuel subsidies on imported gasoline and to support sugarcane and sorghum producers.

While the U.S. currently faces prohibitively high tariffs in the second-largest gasoline market in the world, China’s decision to implement an E10 nationwide ethanol policy has major implications for global ethanol demand. It would require significant expansion in domestic production to meet the more than 4 billion-gallon market at E10. China is in the process of implementing policies at the provincial level and is building out its own domestic infrastructure.

While imports of ethanol for fuel use are banned under current policy in India, the addition of new feedstocks is a significant development by the Indian government that has the potential to expand domestic production. Molasses, a byproduct of sugar processing, was the previous source of feedstock in Indian ethanol production, but spent grain and sugarcane juice now are allowed. The new biofuels policy goal in India is to achieve E20 by 2030.

Mexico expanded the allowance of ethanol from E5.8 to E10, up from E0 in 2016. While this does not include the cities of Mexico City, Guadalajara and Monterrey, the Mexican market is significant in terms of demand at nearly 720 million gallons. Major fuel infrastructure linkages with the U.S. are already in place, and imports to supplement domestic production would provide foreign exchange savings relative to other components of gasoline.

In early 2018, Vietnam started offering E5 at gas stations, achieving a national blend average of about E2.5. Vietnam’s goal is to replace the E5 option with E10 in 2020. Cassava is the primary feedstock in Vietnam, like Thailand and Nigeria, yet yields are currently quite low.

Other countries are making moves to change or update their ethanol policies, which could impact the global market in years to come. Russia clarified its policy to define fuel-grade ethanol as distinct and separate from industrial use and potable ethanol.

Poland, Slovakia, Czech Republic
Poland, Slovakia and the Czech Republic, also members of the EU, have announced their intent to move to E10, which would require legislation amendments and would likely not take place before 2022.

As the global demand for ethanol increases and its use is normalized as an energy product, global trade will expand. Global engagement will be required to expand multilateral institution support and endorsement of ethanol across the transport sector.

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