US-Brazil Cooperation in the Development of Biofuels
In 2007, the governments of Brazil and the United States embarked together on a path that will have a profound impact on energy security and the environment, not only for each country, but also for their neighbors, indeed the entire world. During President George Bush’s visit to Brazil in March, Secretary of State Condoleezza Rice and Brazilian Foreign Minister Celso Amorim signed a historic Memorandum of Understanding (MOU), which created a partnership to collaborate on biofuels. Its goals are to catalyze biofuels use in the Western Hemisphere, starting in four Central American and Caribbean nations, and then globally via greater compatibility of biofuels standards and codes. The MOU outlined the two countries’ commitment to cooperate through a threepronged approach: bilaterally – regionally – globally.
In his State of the Union address, the President pledged to reduce US consumption
of gasoline by 20 percent by 2017 through alternative fuels and energy efficiency, which followed two previous goals of making cellulosic fuel competitive by 2012 and reducing the import of oil by 30 percent by 2030 (otherwise referred to as the 30/30 goal). Not only will achieving these targets reduce the country’s dependence on expensive imported oil and make it less dependent on the decisions made in other parts of the world, it will be a positive step in addressing shared environmental goals.
When President Bush visited an ethanol depot in São Paulo with President Lula, he
said it is in the national security interest of the United States to increase the global production of biofuels. Brazil’s commitment to ethanol is well known and long-standing. It began development of ethanol through sugarcane in the 1920s. Brazil’s determined effort to establish a significant biofuel infrastructure, riding the ups and downs of the price of sugar, and of oil, is the base for its present success. Today, Brazil is the world’s leading producer of sugarcane ethanol. Forty-five percent of its energy matrix comes from renewable sources and 50 percent of its fuel for automobiles comes from biofuels. Over 80 percent of light vehicles sold in Brazil are flex fuel cars.
President Lula, for his part, shared the optimism that partnership between the United States and Brazil would bring, by saying that the two countries were at a new
moment for world energy and “possibly a new moment for humanity.”
This transformational partnership between Brazil and the United States will go a long way toward:
♦ Helping reduce greenhouse gas emissions and protecting the environment, especially with the potential of cellulosic ethanol;
♦ Creating jobs and raising incomes, especially in rural sectors;
♦ Stimulating research into new methods of providing energy to consumers;
♦ Reducing the distortions that high-priced petroleum has wreaked upon national economies; and,
♦ Allowing the world’s resource-poor countries to become energy producers.
On the final point, the global marketplace will be facilitated by the transfer of new technology to third countries, especially those in the developing world. This new transformational partnership to develop biofuels will democratize energy production, making it a process in which almost any country in the world can participate. This venture will address not only energy but the economics and development of Latin America and other regions.
The future of biofuels will include not only sugarcane and corn, but such diverse agricultural products as soybeans, cottonseed, African palm and sunflowers. Meanwhile, the next generation of cellulosic ethanol, a type of fuel that can be produced from non-food products such as the woody materials of biomass, is even more promising. The introduction of cellulosic ethanol could result in an 80 percent reduction in the emission of greenhouse gases, compared to the current crop of biofuels. Imagine: the waste of today can become the energy of tomorrow. This new, clean technology can revolutionize the way we live.
After the signing of the MOU, many other countries and the private sector were able to make long-term financial investments in biofuels because they were secure that both countries were committed to biofuels, irrespective of the price of oil. Governments and energy companies from Japan and Italy announced plans to invest in this transformative, new energy. While governments can provide the necessary ground work, ultimately the growth in biofuel manufacturing must come from the private sector. A number of American investors also have taken up the challenge and have made significant investments in the development of biofuels in Brazil, just as investors continue to invest in large-scale ethanol projects in the United States.
The actions already taken by the American and Brazilian governments have allowed the private sector to make the necessary investments to grow, harvest, refine and distribute alcohol from renewable crops. Safe in the knowledge that this commitment to developing a new technology is here to stay, investors are providing the necessary capital to further develop the industry. At the Brazilian Mercantile and Futures (BM&F) exchange in São Paulo, biofuels futures contracts are already being traded.
Bilateral Cooperation. The first meeting of the US-Brazil Steering Group met in August following earlier high-level visits which bolstered bilateral cooperation on biofuels research. That meeting was soon followed by a team of Brazilian scientists who visited laboratories of the Departments of Energy and Agriculture to further advance cooperation in biofuels research, and expand exchanges between leading US and Brazilian universities.
Regional Cooperation. The United States and Brazil, in cooperation with the Inter-American Development Bank, Organization of American States and the UN Foundation, have begun feasibility studies in Haiti, the Dominican Republic and El Salvador, and have completed feasibility work in St. Kitts and Nevis. These studies will be used to assist those governments and provide funding for public-private sector activities to develop local capacity for biofuels production.
Multilateral Cooperation. Standards bodies from the United States, Brazil and Europe have agreed on a roadmap to achieve biofuels standards and codes compatibility by the end of 2007. This work is being carried out under the International Biofuels Forum (IBF) which met in Brussels in July and will meet again in India this fall. IBF members include Brazil, the United States, the European Commission, China, India and South Africa.
Inclusion of all concerned institutions provide further assurance to the private sector that all progress and changes will remain transparent and stable.
As a result, many energy companies have begun the process of re-inventing themselves. A prime example is Brazil’s Petrobras, which is transforming itself from an oil and gas company to a full-fledged energy company. Petrobras is moving forward in all phases of the biofuels production process: from cultivation to refining and distribution. The company is funding $700 million in new factories and facilities of various types of energy. It is also reaching out to universities and the academic sector, to expand research and development. To ensure that there are adequate supplies for both the domestic and the export markets, Petrobras has taken a minority stake in over 40 domestic ethanol production ventures.
Private and public sector investors are well aware of the criticism over the future development of biofuels. In response to some of those concerns, the Brazilian government has proposed a ban on the production of sugarcane in the Amazon and Pantanal regions. This and other legitimate concerns should be addressed, and as the development and debate over the future of biofuels advances, the remaining questions will be answered.
How Does the Future Look?
Obviously, there are any number of obstacles to overcome in shifting from a global petroleum-based economy toward a more balanced one that would include biofuels and other renewable energy sources. Such a shift would be every bit as dramatic as that seen when the newly industrializing world moved from wind, water and horse power to coal, or the shift in the late 19th and 20th centuries from coal to oil.
Any new source of energy will raise new questions, new concerns, resulting in different impact and consequences. However, biofuels represent an advance that cannot be denied. Rising crop yields are mitigating the food versus fuel concern. Technological breakthroughs will be important in addressing this issue, particularly if agricultural waste and switchgrass can be efficiently and competitively converted to cellulosic ethanol. That day is coming closer to reality as six new commercial scale cellulosic ethanol plants have been contracted recently in the United States, each capable of producing 80 million liters per year. In May, Secretary of Energy Samuel Bodman announced five smaller-scale experimental facilities that are focused on new process technologies. The hope is that these will reduce technological and funding hurdles for larger projects in the future. All of these projects will be public-private partnerships.
Other questions could be addressed as technology further increases yield per acre or increases the efficiency of converting corn, sugar beets or other plants to biofuels.
This commitment by the United States and Brazil will move both countries forward. New seeds will be developed for more arid areas. New crops will be harvested and new enzymes will be developed. Automobiles, turbines and generators will all be adapted. As in the case of other transformative processes, the economic opportunities are abundant.
The United States and Brazil, as the two largest producers of biofuels, have shown the depth of their commitment to work together as partners, for the benefit of their citizens, for the environment and for global security. The foresight of the two Presidents will influence both nations’ parallel course for years to come.
While many questions and hurdles remain, I share the excitement of President Bush and President Lula as the United States and Brazil lead the way forward.
United States Ambassador to Brazil