4 Factors for Global Ethanol Growth

Ethanol-producing countries should not be those with the most restrictive barriers to market entry. They should be our partners in opening global markets, instead of shutting their own markets down. Equitable tariff treatment is critical.
By Brian Healy | January 14, 2021

The pandemic has weighed heavily on global ethanol trade, especially fuel ethanol, which is expected to be down in 2020 below the nearly 2.5 billion gallons of total trade in 2019. Stay-at-home orders have weighed on overall fuel demand, impacting U.S. ethanol exports by 12% this past marketing year where three of the top four markets are fuel ethanol use markets. Purely octane market demands have also eased in the Persian Gulf but are expected to resume as economics return in 2021.

That short-term market loss serves as a critical reminder of the importance of policy driving demand use for ethanol.

Looking to 2021, there are four factors the global industry needs to address to foster growth.

First, the industry must ensure the incoming administration understands the environmental value of ethanol as it launches both a domestic and global climate focus. Our global partners in ethanol production and use need to work together to market product as an environmental solution and component of transport policies focused on reducing overall emissions and tie those reductions into global initiatives like the Paris Agreement, among others.

The International Energy Agency has recognized the important role of policies as a demand driver and the ability for countries to achieve their environmental and climate goals.

The incoming Biden Administration in the U.S. has made it clear it wants to rejoin the Paris Agreement, furthering the opportunity for ethanol to be recognized as one of many solutions to greenhouse gas emission reductions. Five years after first signing the agreement, countries are reporting out their progress to meet their nationally determined contributions to overall emissions reductions with several countries implementing policies specifically to meet their commitments.

The ethanol industry has a mandate to make clear to the administration that ethanol trade will remain a critical aspect in global energy markets and a homegrown and readily available exportable solution exists. 

Second, from the trade side, the industry must ensure ethanol is treated equitably from a tariff standpoint to ensure it is recognized as a transportation energy product. The tariff disparities between ethanol, aromatics, MTBE and gasoline itself need to be resolved. With mismatched tariffs, ethanol will face challenges getting into markets.

Next, technical barriers to trade that impede market access and expanded uses for ethanol must not be erected. These technical restrictions take many forms and it is incumbent upon the industry to aggressively address them globally to ensure fair access.

Finally, building global partnerships goes without saying. It is the bedrock from which all market development efforts are built. Ethanol-producing countries should not be those with the most restrictive barriers to market entry. They should be our partners in opening global markets, instead of shutting their own markets down.

Looking forward, policies remain critical for driving overall demand for ethanol and biofuels more generally. Addressing these factors concurrently will be key to global ethanol growth in 2021 and beyond.

 

Author: Brian Healy
Director of Global Ethanol
Market Development
U.S. Grains Council
202.789.0789
bhealy@grains.org