Petrobras and Mitsui to Sign Ethanol Export Pact; Ct. Governor Calls for Removal of US Tariff on Ethanol
09 April 2006
Petrobras—Brazil’s state-controlled oil company—and Mitsui—Japan’s second-largest trading company—will sign an agreement on Monday (10 April) to promote and to sell Brazilian sugar-cane ethanol in world markets.
This agreement follows the May 2005 memorandum signed by Petrobras, Mitsui and Vale do Rio Doce (CVRD) to study how to expand Brazil’s exports of ethanol. (Earlier post.)
The new agreement commits the companies to increasing ethanol exports from Brazil to markets where demand is rising as countries look for alternatives to gasoline to help meet commitments under the Kyoto climate change treaty.
Brazil produces 35% of the world-wide ethanol supply and is also the largest exporter, shipping out more than 2 billion liters in the last year.
Separately, Connecticut Governor M. Jodi Rell is urging Congress to get rid of the current US $0.54 per gallon tariff on foreign ethanol.
On behalf of Connecticut consumers who are tired of constantly rising gas prices, Congress should consider temporarily suspending the tariff on imported ethanol. We must ask whether domestic ethanol truly needs this much protection. The US imposes a 54-cent-per-gallon tariff on ethanol to discourage imports and protect domestic farmers. Simply put: Is this 54 cents justified at a time when prices are skyrocketing?
—Gov. Rell
In 2005, the US produced 3.9 billion gallons of fuel ethanol and imported just 109 million gallons. The Energy Department predicts that the refiners will need an additional 2 billion gallons of ethanol this year.
Ethanol usage is expected to surge as refineries phase out the gasoline additive MTBE. (Earlier post.) Analysts suggest that domestic ethanol inventories will not be able to keep up with demand, thereby further aggravating price increases.
Expanding purchases of cheaper ethanol from producers such as Brazil, Mexico and Jamaica could slow increases in gasoline prices, but due to the tariff, those potential savings cannot be realized according to the Governor.
I wonder, could the tariff be removed after the ethanol from corn subsidy is stopped?
As the Energy Blog and others have observed, it makes sense to stop the ethanol from corn subsidy coincident with availability of cellulosic ethanol, which compares more favorably in terms of energy balance.
Maintaining a tariff does seem foolish given Peak Oil and potential losses from the Middle East and Nigeria, plus greater demand from China and India.
It will be interesting to watch as the major agri-firms takes on the Seven Sisters, eh?
Posted by: jcwinnie | 09 April 2006 at 04:34 PM
Does anyone know what is the difference in fuel economy of a car between using pure gasoline, gasoline with MTBE as an additive and gasoline using ethanol as an additive?
Posted by: James (UK) | 09 April 2006 at 06:35 PM
James, the difference in fuel efficiency between ethanol and MTBE is that your children won't be born deformed.
other than that, there isn't any difference that anyone will ever notice
Posted by: Shaun | 09 April 2006 at 10:06 PM
Ethanol is less energy dense. MPG will be reduced slightly.
Posted by: James | 10 April 2006 at 04:44 AM
as with any other system, we deal with trade-offs. solutions that improve one aspect of a system without making another part worse are desireable, but rare.
in this case, we trade the slightly higher fuel efficiency of MTBE for the lesser environmental problems of ethanol
if we only cared about MPG, we could easily achieve double or triple our current fuel efficiency.
we would drive 1 liter deisels, remove our catalytic converters, mufflers, airbags, structural reinforcement, radios, power steering, back seats, sound insulation, one of the wheels, use low rolling resistance tires (these decrease comfort and increase noise), use unpainted plastic body panels and run the vehicle in lean burn mode all of the time and never go over 80 km/hr
Posted by: Shaun | 10 April 2006 at 08:20 AM
Shaun:
Smart is not that bad.
Posted by: Andrey | 10 April 2006 at 09:00 AM
A 54 cents a gallon duty on imported 'clean burn' ethanol is the USA standard approach to Free World Trade. There is always a USA pressure group around to force that type of twisted unacceptable double protectionism attitude = (local farm subsidies + import duties on competition).
Wouldn't it make more sense to apply the same duty on imported 'dirty oil' to protect the 'poor' local Oil and Gas industries, reduce pollution and part of the high federal budget deficit.
How can a so-called democratic free country apply import duties on clean fuel and let dirty fuel equivalent come in free? Where will such twisted thinking go? Trade wars are often justified for less.
Posted by: Harvey D. | 10 April 2006 at 09:17 AM
Thank goodness for this tariff. Normally I am in favor of free market econommics, but not when the cost is the destruction of CO2 sinks and biodiversity.
Importing ethanol from Brazil is hardly the greenest option. Ethanol is only marginally beneficial for the environment as it stands now, given the mediocre net energy balance. Importing the fuel uses considerably more energy in transport.
More importantly however Brazil is tearing down rainforests to grow soy and sugarcane which hardly reduces atmospheric CO2, but just the opposite, destroys some of the world's most productive CO2 sinks. The destruction of habitat, biodiversity, and productive forests to feed our fuel demand isn't a solution to petroleum, it's madness.
That said, I drive a vehicle that runs on biodiesel and I am a huge proponent of domestic biofuels. Domestically produced fuels are the only sustainable and truly green option for the same reason that locally grown food wins out. Commodity biofuels are rife with problems however, at least from an environmental prospective.
Posted by: Dave | 10 April 2006 at 10:29 AM
Dave: Does it have to come from USA to be green enough? Is corn ethanol (from USA corn) greener than sugar cane ethanol? (from Brazil or somewhere else) Is burning imported middle-East and triple dirty Alberta Oil greener than burning imported sugar cane ethanol?
According to American experts, USA would have to use up to 71% of its farm land to produce enough corn ethanol for the current fleet. Could 300+ million Americans survive on the remaining 29% of the land? Maybe, but .....much leaner.
In the long run, wouldn't it be better to switch to non-liquid fuel, such as plain old clean electricity from Hydro-Wind-Sun-Nuclear-Waves etc for our tansportation, industrial and home needs. Farm land could keep on feeding the world growing population.
Posted by: Harvey D. | 10 April 2006 at 12:08 PM
Harvey,
There is no one solution. To be clear, I'm not a big cheerleader for corn ethanol at all because of the miniscule positive net energy balance. What's the point of using ethanol if you still have to import petroleum to manufacture or import it.
Biodiesel and cellulosic ethanol seem to hold a great deal of promise however. Sure, they're not going to replace fossil fuels overnight and neither are cars that run exclusively on wind energy. Does that make either one a bad solution? No.
The point of my first post is that you have to evaluate potential energy sources as a whole, not just in terms of their CO2 reductions or if they're renewable. You also have to consider what is possible. Domestically produced corn ethanol on a small scale is both renewable and does reduce U.S. reliance on petroleum and redcues CO2, albeit very slightly. Is it a be all end all solution for our transportation fuel needs? Absolutely not. But that doesn't mean that it doesn't hold promise and deseve support. You could think of corn ethanol as paving the way for more efficient biofuels, building out the flex fuel infrastructure, forcing carmakers to build FF vehicles and distributors around the country to start carrying biofuels. Then when more promising solutions like cellulosic ethanol come along, cars will be available and an infrastructure will be in place. From that perspective, corn ethanol is truly paving the way to a sustainable future.
This doesn't exclude research into other viable technological solutions like plugin hybrids, it's not biofuels OR electric cars, these two avenues of research aren't mutually exclusive.
I believe that some biofuels hold promise and others clearly do not -- for one reason or another, be it net energy balance or impact on habitat and biodiversity. The greenest options in my eyes, are those which are sustainable. I realize that folks may have numerous interpretations of what is sustainable, but I think it's pretty cut and dry to me.
Posted by: Dave | 10 April 2006 at 12:41 PM
Dave: Biofuels production, even if it could be very profitable, would sooner or latter be limited by the availaility of feedstocks and the world would soon be looking for other sources of energy to satisfy the growing needs. It would be, at best, a partial short term solution.
Clean Hydro, Wind, Solar and Wave energy is by nature more sustainable and is available in sufficient quantity in North America. It will be around for as long as the millions of us need it without unduly reducing farm production for future generations.
As motive energy, electricity is at least three to four times as efficient as current ICE using gasoline, diesel, ethanol or biofuels and certainly much cleaner.
Another important advantage is that the existing electrical grid/network could be used, with relatively moderate modifications, where and when required. Extended interconnected networks would increase availability of variable energy sources.
Why bother with the production and distribution of a multitude of liquid and gaseous fuels where electricity can do it more efficiently. Bi-directional, two hundred million, 52 KWh on-board batteries, could smooth out electrical grid power consumption and drive us where we want to go without imported polluting oil.
Where is our quest for more efficiency, lower cost, higher profits and cleaner air?
Posted by: Harvey D. | 10 April 2006 at 06:35 PM
New York Times has a nice write up on Brazil and ethanol today.
Posted by: Matt | 10 April 2006 at 07:53 PM
"You could think of corn ethanol as paving the way for more efficient biofuels, building out the flex fuel infrastructure, forcing carmakers to build FF vehicles and distributors around the country to start carrying biofuels. Then when more promising solutions like cellulosic ethanol come along, cars will be available and an infrastructure will be in place."
Finally, someone I can agree with! Sure, Hydro, wind, and solar are likely more sustainable over the long run, but then, we have this little issue of having virtually no pure electric cars to take advantage of it. Yes, it may become a bigger part of the energy picture ten years from now, but we cannot sit on our asses until then....the best way to phase this in is through plug-in hybrids.
If we can someone create an infrastructure that will give people this flexibility (plug-in flex-fuel cars), economics will surely prevail. If solar/hydro-electric is as efficient as it should be, it will win in the end. You'll see batteries get bigger and engines get smaller, until the need for the ICE is obviated altogether.
A couple of other posts have mentioned this, but BUTANOL certainly sounds like it has a ton of potential. I'm sure there are down sides that aren't being advertised though....
Posted by: Angelo | 11 April 2006 at 03:36 AM
Someone asked if MTBE or Ethanol had a different effect on mpg when added to gasoline. I had the displeasure of using them in NY and NJ and every winter my gas mileage would go down by approx. 10%. But at least it reduced polution by 10% according to the news
Posted by: Mark | 11 December 2006 at 06:18 PM