Regional Round Table Meeting on Commodity Development in Latin America and the Caribbean

1
Regional Round Table Meeting onCommodity
Development inLatin America and the Caribbean

• Biofuels A new Agenda for Sustainable Commodity
  Development
• José Roberto Moreira
• 10-13 September 2007Lima, Peruorganized by the
  CFCin cooperation with the Government of Peru

2
Biofuels Commodity?

• Patterns in a context of international trade

Compatible Specifications

• Possibility of delivery on due dates settled
  between buyers and sellers

Negotiation with traders

• Possibility of storage or sale in standard units
  of trade

litter, barrel, m3 ...

• Many producers and many consumers

Market to be established
Commodity - it requires a common product
negotiated in an international environment

3
Biofuels Commodity?

• Patterns in a context of international trade

Compatible Specifications
Commodity - it requires a common product
negotiated in an international environment

4
(No Transcript)
5
(No Transcript)
6
(No Transcript)
7
(No Transcript)
8
Most Relevant Areas of Palm oil Plantation and
Biomass Production
9
Biofuels Commodity?

• Possibility of delivery on due dates settled
  between buyers and sellers

Negotiation with traders
Commodity - it requires a common product
negotiated in an international environment

10
Biofuels Commodity?

• Possibility of storage or sale in standard units
  of trade

litter, barrel, m3 ...
Commodity - it requires a common product
negotiated in an international environment

11
Logistical barriers
12
(No Transcript)
13
Use of Terminals

• Energy plants require a continuous supply of
  forest chips and they favour consistent biomass
  quality.
• Yet their experience is to have uneven
  deliveries, causing backlogs in receiving and
  congestion in the storage area.
• Variations in the quality of forest chips have
  caused difficulties in optimal operation of power
  plants.
• The amount of biomass used by energy plant
  fluctuates during the year with emphasis on
  winter, and often energy plants will not receive
  chips if the plant is down or the receiving area
  is full.
• In the field too many trucks on the road often
  cause queuing for either chippers or chip trucks.
  Chipper breakdowns impeded delivery of chips.

14
(No Transcript)
15
Wooden energy products prices in Italy for the
year 2005 for Industrial sector
16
Biofuels Commodity?

• Many producers and many consumers

Market to be established
Commodity - it requires a common product
negotiated in an international environment

17
Sugarcane/biofuels potential
Source FAO,2006
SI suitability index
18
The tropics are the most suitable area for
biofuels The greater consumption per capita is
outside the tropics!
Source BP Statistical Review (June/2006)
Cancer Tropic
Equator
Capricorn Tropic
19
(No Transcript)
20
FOOD VERSUS FUEL
21
(No Transcript)
22
Inventory of Barriers

• Economic barriers
• One of the principal barriers for the use of
  biomass energy in general is the competition with
  fossil fuel on a direct production cost basis
  (i.e. excluding externalities)
• Technical barriers
• A general problem of some biomass types is its
  variety in physical properties (e.g. low density
  and bulky nature) and chemical properties, such
  as high ash and moisture content, nitrogen,
  sulphur or chlorine content.
• Logistical barriers (already discussed)
• Related to technical barriers are logistical
  barriers. One of the problems of logistical
  barriers is a general lack of technically mature
  pre-treatment technologies in compacting biomass
  at low cost to facilitate transportation,
  although this is fortunately improving

Junginger et al., 2006. Opportunities and
barriers for sustainable international bioenergy
trade and strategies to overcome them, IEA Task
Force 40,
23
Economic barriers
Parity prices PetrolCrude oil Ethanol Various
feedstocks and farming/production systems
120
100
80
Crude, US/bbl
60
40
20
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Petrol, US/l
Gasoline-Crude US
Cane Brazil, top producers
Cane, Brazil, average
Cassava, Thaioil, 2 mio l/d
Maize, US
Cassava, Thailand, OTC joint venture
Palmoil, MPOB project
Mixed feedstock Europe
BTL Synfuel/Sunfuel
Josef Schmidhuber (2005)
24
Combined Forest Fuel Production- Sweden and
Finland
25
Commercial Feasibility - Ethanol
Goldemberg et al., 2005
26
Technical barriers Setting up technical biomass
standards on bioenergy trade

• For biomass to become a large-scale commodity,
  which can be traded on an exchange, technical
  standards are needed. It is recommended that the
  various standards that are applied today are
  developed into internationally accepted quality
  standards for specific biomass streams (e.g. CEN
  biofuel standards).

27
Biodiesel Specifications
28
Inventory of Barriers (2)

• International trade barriers
• As with other traded goods, several forms of
  biomass can face technical trade barriers. As
  some biomass streams have only recently been
  traded, so far no technical specifications for
  biomass and no specific biomass import
  regulations exist.
• Ecological barriers
• Large-scale biomass dedicated energy plantations
  may in principle pose various ecological and
  environmental issues that cannot be ignored, e.g.
  monocultures and associated (potential) loss of
  biodiversity, soil erosion, fresh water use,
  nutrient leaching and pollution from chemicals
• Social barriers
• Also linked to the potential large scale energy
  plantations are the social implications, e.g. the
  effect on the quality of employment (which may
  increase, or decrease, depending on the level on
  mechanization, local conditions, etc.), potential
  use of child labour, education and access to
  health care

Junginger et al., 2006. Opportunities and
barriers for sustainable international bioenergy
trade and strategies to overcome them, IEA Task
Force 40,
29
International trade barriers Solving
sustainability issues International
classification and certification of biomass

• Certification of biomass may be one way to
  prevent negative environmental and social
  side-effects. Setting up minimum social and
  ecological standards, and tracing biomass from
  production to end-use can ensure the
  sustainability of biomass. In an exploratory
  study has been shown that certification schemes
  for social and environmental standards do not
  necessarily result in high additional costs

30
Ecological barriers
1) Life cycle analysis, labelling and
certification of origin of biofuels should be
applied in the global energy market to ensure
that sustainable bioenergy production is not
affecting biodiversity and food security.
2) Classification of sustainable bioenergy
should be introduced in the WTO rules in order
to reduce or, as appropriate, eliminate tariff
and non tariff barriers according to the Doha
Development Agenda, paragraph 31 (iii)
3) Research and development of innovative
technologies to produce biofuels from cellulose
should be supported by the International
Financial Institutions in the developing world.
31
FOSSIL ENERGY AND GHGs BALANCE
Data represent the amount of energy contained in
the listed fuel per unit of fossil fuel input
ETHANOL
BIODIESEL
Source Various, compiled by World Watch
Institute.
Emissions avoided with ethanol replacing gasoline
Note Reductions in well-to-wheel CO2-equivalent
GHG emissions per km, from bioethanol comparared
to gasoline, calculated on a life-cycle basis.
Source IEA International Energy Agency (May,
2004), based on a review of recent articles.
32
Social barriers
de Moraes, M. A. F., 2007. Labor market
indicators of the Sugar Cane-AgroSystem in
Brazil, Ethanol Summit, Sao Paulo Jun 2007
33
(No Transcript)
34
Many producers and many consumers
World Biodiesel Production, 2005
World Ethanol Production, 2005
Source GLOBAL POTENTIAL AND IMPLICATIONS FOR
SUSTAINABLE AGRICULTURE AND ENERGY IN THE 21st
CENTURY FINAL REPORT Prepared by the Worldwatch
Institute for the German Federal Ministry of
Food, Agriculture and Consumer Protection (BMELV),
35
VERY SUITABLE AND SUITABLE POTENTIAL LAND AREA
FOR SUGARCANE CROPS IN MAJOR 26 COUNTRIES
PRODUCERS- HIGH, MEDIUM AND LOW INPUT EFFORT -
FOREST AREA EXCLUDED - Thousand Ha
Source FAO (2005) http//www.fao.org/ag/AGL/agll/
gaez/ds/ds.htm
36
(No Transcript)
37
(No Transcript)
38
CONCLUSION

• Biofuels do contribute to
• Energy security
• Improvement of environment conditions in urban
  areas
• Creation of jobs and income in rural areas
• Economic development.
• However, in order to achieve this reality, it is
  required
• Governmental decision with adequate public
  policies
• Global efforts towards creation of biofuels
  international market

Governmental policies do exert strong influence
on climate for investment because they can
produce immediate impacts over costs, risks and
barriers to competition.
39
CONCLUSION - Create a stable demand-side

• On the longer-term, market support policies in
  the various countries, etc. should be designed to
  promote and stimulate international trade when
  and where trade would be the logical option. Some
  task member advocate a harmonization of e.g. EU
  policies but recognize that this will be hard to
  achieve in practice and would require a gradual
  process of adjusting the various national support
  systems.
• Policy incentives could also include requirements
  for energy and/or CO2 balances.
• In order to create long-term incentives, policy
  makers in countries with biomass targets (or
  renewable energy targets in general) are advised
  to formulate sound long-term biomass policies,
  including new targets with a time horizon of at
  least 10 years or longer, e.g. 2020, in order to
  create clarity and security for the industry for
  long-term investments.

Source Opportunities and barriers for
sustainable international bioenergy trade and
strategies to overcome them, IEA Task 40
40
CONCLUSION - stimulate a stable supply side

• Improved logistical infrastructure on the
  supply-side is needed, such as low-cost
  long-range shipping.
• Further technology development of pretreatment
  technologies should be stimulated
• Projects by e.g. the World Bank or FAO should
  recognize and increasingly stimulate the use of
  residues as important (by-) products and actively
  promote energy crops as bioenergy source.
• Stimulate and support capacity building on
  bioenergy trade related issues.

Source Opportunities and barriers for
sustainable international bioenergy trade and
strategies to overcome them, IEA Task 40