It's A Global Thing

Opportunities abound for ethanol on a global scale. What they are, and how they can benefit local economies to ensure sustainability, are questions an international panel effectively addressed at the 2006 FEW.
By Anduin Kirkbride McElroy | August 01, 2006
Considering the wild ride the U.S. ethanol industry has been on over the past 18 months, it's easy to forget that the proliferation of fuel ethanol production and use is a worldwide phenomenon. Although the excitement and advances in the United States are certainly garnering the proverbial spotlight of the American media and political stage, the world's leading biofuel is rapidly gaining acceptance and strength in other nations—and not just Brazil.

"International Update: Ethanol, Growing Globally," a June 21 session at the 2006 FEW, hammered home that point with insightful presentations from representatives of nations abroad.

Though still smaller than biodiesel, ethanol is beginning to gain a stronger foothold in nations such as Germany, where the government sponsored a global study on biofuels; France, where economic developers are seeking ethanol plants; and Italy, where young farmers see new agricultural markets in ethanol.

In June, the Worldwatch Institute released a report titled Biofuels For Transportation: Global Potential and Implications for Sustainable Agriculture and Energy in the 21st Century. In need of a single resource for decision-makers to help set policy, the German Secretary of Agriculture requested the report, noted Suzanne Hunt, Worldwatch Institute biofuels project manager. The report is a comprehensive assessment of the opportunities and risks associated with the large-scale international development of biofuels.

The top five ethanol producers in 2005 were Brazil (4.35 billion gallons per year), the United States (4.3 billion gallons per year), China (530 MMgy), the European Union (250 MMgy) and India (80 MMgy). Brazil and the United States account for 90 percent of all ethanol production. Also, it should be noted that the United States—now producing at a rate of about 4.6 billion gallons per year—is widely considered the world's largest ethanol producer. Hunt noted that strong incentives, coupled with other industry development initiatives, are giving rise to fledgling ethanol industries in countries such as Thailand, the Philippines, Columbia, the Dominican Republic and Malawi. Still, the Worldwatch representative said, ethanol isn't yet making much of a dent in world oil consumption. "Already, with this rapid growth, the industry has only reached 1 percent of [the world's] global transport fuel," Hunt said, warning that she believes food crop requirements will not enable a large ramp-up in biofuels production. She explained that within that 1 percent, fuel takes up significant percentages of crops, yet results in minimal petroleum displacement.

However, cellulosic and waste streams could significantly contribute to the global production potential. For example, Hunt described how production in Brazil could double from cellulosic conversion of bagasse. Additionally, if the leaves and tips of the sugarcane feedstock are also harvested—currently they are burned before harvest—ethanol yields could triple.

Because ethanol is touted as an environmentally friendly fuel, the institute decided to look into the facts behind the assertion. An example of one of their probes is examining ethanol production's impact on land use. "Many studies say if virgin rainforest or a grassland ecosystem is burned or cut down, and converted into an annual crop for biofuel production, all of the climate benefits are negated," Hunt said. She added that the sprawl of cropland onto sensitive areas is a major concern, but there are also concerns about aquifer depletion and soil degradation. "We can't continue to produce fuels if we don't have soil to support them."

These and other constraints offer challenges for the global ethanol market. Nevertheless, the fuel offers significant opportunities for rural development, energy security and job creation. Hunt referenced a World Bank report, which found approximately 100 times as many jobs are created by biofuels industries per unit of fuel compared to the petroleum industry. She noted that these benefits are especially significant in tropical, developing countries.

Opportunities for Agriculture
The benefits are great for the agricultural community when ethanol is developed within a chain, reported Anna Trettenero, vice president of the Young Farmers Association of Italy. This is why her organization has initiated a grassroots effort to promote the local production and agricultural ownership of biofuels in the Mediterranean nation.
Like the United States, demand for ethanol in Italy is being driven in part by the replacement of MTBE—to the tune of 250,000 metric tons per year. Italy's biofuels legislation, published this March, has also been a shot in the arm for ethanol. The law established a mandatory 1 percent incorporation of ethanol, on an escalating scale, into the gasoline supply every year until 2010, Trettenero told the audience. Currently, Italy uses 14.5 million metric tons of petroleum fuels per year, which would put the demand for ethanol at more than 1 million metric tons per year by 2010. That production would require 350,000 hectares of corn, much less than the 1.2 million hectares of corn the nation currently grows.

The Young Farmers Association launched a study to evaluate how biofuels production could benefit farms and the Italian society. "We're looking for a chain that starts at the farm and goes all the way to the filling station," Trettenero said, explaining that the envisioned program is fiscally similar to farmer-owned cooperative plants seen in the United States. The group is looking for national self-sufficiency of feedstock in order to maintain and promote local employment in the rural communities. It would be achieved through the direct financial involvement of farmers, coupled with an effective marketing and fiscal strategy.

Italy offers green certificates for electricity produced from renewable sources. To utilize the credits, the Young Farmers Association is proposing to use distillers grains as an energy source. Politically, the group has proposed a similar credit, called blue certificates. The credits should promote the value of the feedstock, be marketable, and be linked to the territory and rural community. "We believe that promoting the local production of biofuels, from farm to car, is the only policy option for the independency upon oil imports and for the benefits of the community in terms of employment and carbon dioxide balance," Trettenero said.

International Expansion and Economic Development
Another presenter identified France as a location for ethanol expansion. "This isn't just about environmental protection or the environment," said Rodrigo Madiedo, an economic developer with Capemm, based in northeastern France. "It's not just about farmers and economic development. This is about business."
The main driver for ethanol production in France is the market, Madiedo said. By the end of 2010, the EU biofuel inclusion target will be 5.75 percent, which France expects to achieve by the end of next year. In France, gasoline makes up 24.5 percent of the fuel market—and its market share is reportedly decreasing—but it "remains a significant part of the market, and that is not going to disappear," Madiedo noted.

Madiedo said France has abundant cropland; there are 25,000 hectares currently used for ethanol. "To achieve [European Union] targets, there will need to be 1.1 million hectares for both ethanol and biodiesel," he said. "It's estimated that an additional 5 million to 7 million hectares could be used in France for biofuel production." Lorraine, in northeast France, has 21.7 percent of the country's cultivated agricultural land, which is equivalent to 9.4 million metric tons of wheat harvested annually.
Three sites have been made available for an ethanol plant in Meurthe-Moselle County in Lorraine, near the borders of Luxemburg, Belgium and Germany. Madiedo said all three sites are along an inland waterway, which boasts France's largest port silos leading directly to the North Sea.

Government policy in France is becoming more biofuel-friendly, Madiedo explained. He described how the government has implemented policy changes in relation to taxes and has also worked to deregulate the industry. "Deregulation is in the form of reduced pump tax and incentives for farmers to use biofuels themselves," he said.
However, Madiedo acknowledged that administrative obstacles and red tape—taxes and quotas, in particular—still pose challenges. Therefore, he offered the services of his organization, which include helping businesses through such obstacles. It also connects a plant with various politicians, suppliers, customers, distributors and investors. "By 2010, an estimated 3 billion Euro will be invested in this new business," Madiedo noted.

Policy Recommendations
Supporting opportunities such as those in Italy and France, the Worldwatch Institute has taken a positive position on the policies being implemented in several countries. Several "creative" policies include investment risk reduction for next-generation technologies, putting a price floor on oil, and tying subsidies to the price on oil, Hunt said. In addition, "there's a push to set basic [social and environmental] standards while the industry is growing so fast, and then work on refining them in the future," she said.
The report also makes several policy recommendations, including those that strengthen the market, speed the transition to next-generation technologies, protect the resource base and facilitate sustainable international biofuels trade. Trade is complicated because "biofuels in some instances are considered an agricultural product, while in other instances are considered an industrial good, so it is subject to completely different trade rules," Hunt noted. Another recommendation is to distribute the benefits equitably. Brazil has seen an increased concentration of ownership, and "policy intervention is necessary at this point to ensure that little guys get their fair share," she said.

Hunt concluded with the report's final recommendation: develop in concert with demand reduction and efficiency gains. "Efficiency has an incredibly important role to play in terms of supply," Hunt said. To demonstrate, she said that a typical American city of 1 million people generates enough municipal solid waste to produce ethanol to fuel the needs of more than 58,000 people in the United States. The same amount of ethanol would supply the needs of 360,000 people in France, which has a similar standard of living. At current rates of per-capita fuel use, that ethanol would supply nearly 2.6 million people in China. "Dealing with the demand side and getting highly efficient vehicles on the road is very important to this industry," Hunt said. EP

Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at amcelroy@bbibiofuels.com or (701) 746-8385.