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US and Brazil Sign MoU to Advance Cooperation on Biofuels

9 March 2007

US Secretary of State Condoleezza Rice and Brazilian Foreign Minister Celso Amorim today signed a memorandum of understanding to advance cooperation between the two countries on biofuels. As the world’s two largest producers of ethanol, the United States and Brazil intend to advance the research and development of new technologies to promote biofuels use.

Regionally, the two nations intend to help third countries, beginning in Central America and the Caribbean, to stimulate private investment for local production and consumption of biofuels. The United States and Brazil expect to support feasibility studies and technical assistance in partnership with the Inter-American Development Bank, the United Nations Foundation, and the Organization of the American States.

Multilaterally, the United States and Brazil intend to work through the recently-launched International Biofuels Forum to examine development of common biofuels standards and codes to facilitate commoditization of biofuels. Greater cooperation with Brazil is complementary to existing United States efforts in the Global Bio-Energy Partnership endorsed by the Group of Eight and the Asia-Pacific Economic Cooperation forum’s Biofuels Task Force.

The International Biofuels Forum, announced on 2 March 2007, is a joint project of Brazil, China, India, South Africa, the United States and the European Commission, and will initially be established for one year. It will meet regularly to discuss ways to promote the sustained use and production of biofuels around the globe. Brazil President Luiz Inácio Lula da Silva was the driver behind its formation.

The Forum is not a new international standards organization, but rather a mechanism for closer coordination among the field’s major players to establish common standards and work towards the commoditization of biofuels, so that they might eventually be traded like oil.

The United States and Brazil already are working through existing mechanisms such as the US-Brazil Commercial Dialogue launched in 2006, the US-Brazil Consultative Committee on Agriculture established in 2003, the 1999 US-Brazil Memorandum of Understanding on Energy, the US-Brazil Common Agenda for the Environment established in 1995, and a 1984 Framework Agreement on Science and Technology.

The new US-Brazil cooperation does not include discussions of United States trade, tariffs or quotas.

The signing came during a visit by US President George Bush and President Lula to a Petrobras facility in Guarulhos, State of São Paulo.

March 9, 2007 in Biodiesel, Brazil, Ethanol | Permalink | Comments (23) | TrackBack (0)

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The fact that tariff reductions or eliminations weren't even on the table, and that standards for sustainability (food vs. fuel, GHGs, rainforest and soils protection, among other things) weren't included reduces the potential of this agreement.

BlackSun,

What is up with those fancy words, like sustainability, and GHG?

I better ask Condilizza what dem words mean!

You know, it's needlessly inflammatory stuff like the second poster that makes it hard to have a serious discussion on these issues.

Goodbye, rain forest.

How can anyone not be cynical about anything the State Dept.does? Have they done anything right in the last six years?

Cynicism is one thing, provoking a flame war is quite another.

What will happen to the (very friendly?) $0.54/gal import tax on Brazilian Ethanol?

Harvey:

Tariff stays. Last summer Pres. Bush tried to get rid of it, but his proposition was unanimously rejected on Capitol Hill.

“The U.S. ethanol industry benefits from a 51-cent-a-gallon tax credit as well as a 54-cent-a-gallon tariff levied on most imports.

While a certain amount of foreign supplies can avoid the tariff if the ethanol is dehydrated in a Caribbean country before it enters the U.S., the amount of duty-free ethanol is capped at 7% of annual U.S. ethanol consumption.”

Expansion of NAFTA to more countries of Central and South Americas and Caribbean potentially could increase US import of duty-free sugar cane ethanol. But, as you know, NAFTA does not have uniform agricultural policy, but rather bi-lateral agreements between members.

Andrey -

do you know if the $0.54/gal tariff applies only to finished ethanol or to the equivalent feedstock mass as well? US farmers will be upset if sugar cane were imported but the ethanol refineries presumably don't care all that much where the sugar comes from. After all, they have been buying so much corn from Mexico lately that peasants there can now ill afford their staple tortillas.

In Brazil, you can make fuel ethanol by fermenting cane juice straight from the crusher.  Shipping sugar to the USA for fermentation would require dehydrating the juice just to preserve it.  I expect that the energetics of that course would, to put it bluntly, suck.

And aren't the US and EU tariffs on sugar imports just about as high as the US tariff on ethanol imports?

One may find it inequitable and even underhanded that a leading 'democratic' country imposes such a high import duty on 'greener' fuel but not on dirty liquid fossil fuels such as conventional crude oil and even more so on tar sands by-products.

The $0.51/gal tax credit for locally produced ethanol is not very equitable either but is a common world practice.

The import duty doesn't look like a very democratic measure. That type of 'special' democracy is getting very hard to sell abroad, specially in South America.

Why is this tolerated by WTO ... and the American public?

Great points, Harvey! I think the answer to your last question is that agriculture is treated differently than manufacturing or services by the WTO. It's the classic problem -- the benefits of protectionism are concentrated and the negatives are diffuse and underappreciated by the public.

If we really want to help Latin America get rid of the tariffs on all agricultural products.

While the circumstances could be better, Viva Bush for trying to do something about energy security....next, let's get rid of all Citgo gas stations!

Rafael:

Indeed, last autumn, as corn prices doubled and did not show sign of leveling off, US ethanol producers seriously considered the idea of importing sugar as a feedstock to their operations. However, corn prices stabilize since, and half a dozen of major fuel ethanol producers demonstrated that they could produce a profit even at that record high corn prices, for last quarter of 2006. The reason for this is quite simple: fuel ethanol market is mostly politically driven. Gasoline retailers are just legislated to blend some amount of bioethanol into gasoline, no matter the cost (as far as it is not prohibitory expensive).

US sugar import, from the other side, is subject to strict quotas with progressively increasing import tariffs. With all lobbying power, ethanol producers are not powerful enough to fight mighty US agricultural protectionist lobby. As you know, agriculture trade is incredible protectionist in all countries in the world, and US is not exception.

So far, aggressive fuel ethanol expansion proved to be beneficial to Brazilian, American, and Argentinean farmers, rural communities, and strategically (and politically) important domestic agribusinesses as a whole. Mexico, as major corn producer with huge growth potential already begins to benefit from it too. Current initiative invites more countries to join the club.

As for some negative social impact of higher corn prices, Mexico is quite different country now, and can (and will) take care of this minor problem.

Andrey:

I'm not so sure that the pressure on world food price, due to the heavy use of food as feed stock to produce ethanol, will be a minor problem.

Farmers will quickly switch from wheat, barley, beans, oats, potatoes etc to corn if the price is better. This will put pressure on the price of most farm produces by 2008 or 2009 if not before.

This may not happen in the first year or so due to current surpluses. The effect will certainly be there unless we reduce fuel consumption with PHEVs + BEVs or use non-food stocks to produce bio-fuels.

China will have a corn deficit in 2007 and so will many other countries producing ethanol.

Corn Ethanol is a bridge technology.

Search this site for Range Fuels and ALICO. They are gasifying all types of waste including Municipal Solid Waste, and were just funded two weeks ago by DOE to produce ethanol from garbage and waste products. See TechnologyReview.com and search for "Ethanol from Trash"

This is beautiful technology and will eliminate landfills and displace 25% of gasoline consumed in this country.

Harvey:

Higher corn and other agricultural products prices are beneficial for producers, suffering from periodic price collapses due to chronic overproduction. When corn growers are sure that all their surplus will be distilled to ethanol and prices will be stable, they grow more and by more efficient ways.

For poor countries, especially depending on food import, it is indeed grave danger.
Mexico is neither poor, neither food importer.

Harvey D, I think you are confusing democracy with capitalism. You could certainly make the argument that these tariffs and farm subsidies are don't fit the model of free trade and globalist capitalism, but I certainly don't think that the US is a purely capitalist country, and I for one wouldn't want it to be. If the people want subsidies and tariffs to protect their farmers, then it is the duty of a democratic government to enact them. Anti-globalists have been raising hell about manufacturing jobs being moved to Mexico and China, and I would imagine that if these farm subsidies and tariffs were immediately removed, I think you could expect to see the Ag-heavy red states scream bloody murder. Also, I think this would result in the Amazon immediately being slashed and burned at an unprecedented rate to grow sugarcane. I doubt that the agricultural subsidies and tariffs that are so prevalent in North America and Europe are going to disappear anytime soon, but hopefully they can be reduced in a way that that is inline with the goal of reduced dependence on petroleum, but without causing an economic crisis for US farmers, or an environmental crisis in the rain forest.

Switching feedstock from Corn to say sugar, in any form is not quite as simple as it sounds. british Sugar have just commenced production at their new plant in the UK processing beet sugar /molasses which when introduced to gasoline fuel eneded up with siicon based anti foaming agents clogging up exhaust catalytic sensors with oxidised silicon which made the engine management system adjust air / fuel which didn't work because the sensor was malfunctioning. Result. Engine stops. result. Huge clams on petrol pumpers.

The UK fuel mixers had previously been using Brazilian ethanol imports who no doubt had got round these problems.

Brazil probably doesn't bother with anti-foaming agents.  And WTF would they be doing in the ethanol, which is distilled?

In 1986, as U.S. Commercial Attache stationed in Brasilia, I crafted an agreement between the Brazilian Ministry of Transportation and the U.S. Dept. of Transportation specifically mentioning technical cooperation on ethanol biofuel production, engine development and fuel production and storage. Lionel Olmer signed on behalf of Sec. Elizabeth Dole and the Minister of Transport,Cloraldinho Severo signed for Brazil. Elizabeth Dole's message to Brazil said: "I am pleased that our countries have concluded this formal basis for cooperative effort. There is much we can learn from each other..."

An article can be found on this at: http://www.findarticles.com/p/articles/mi_m1052/is_v7/ai_3225993

Here's a better link to the Business America article I wrote in 1986 on the biofuel (ethanol) technology cooperation between the Ministry of Transportation and the Dept. of Transportation (Elizabeth Dole)

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