BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION

Joel Velascojoel@unica.com.br+1 (202) 506-5299

Brazil’s Sugarcane Ethanol Industry

2

OUTLINE

• Sustainable Solutions Today – Gasoline is the “alternative”

– Ethanol uses 1% of arable land

– +80% GHG emissions reduction

• Advanced Biomass Feedstock– Carbon absorbing machine

– High and growing yields

– Continuously improving technologies

• Food vs. Fuel debate?

– Unsustainable oil

– Abundant land

– “Productivity stupid”

3

Introduction: Who, What, Where

4

UNICA

• The leading sugarcane industry association, representing 110 producers and mills in Brazil

• Responsible for 60% of all ethanol and sugar production in Brazil

• Emerging as a leader in the generation of bioelectricity

• International presence, now in Washington & Brussels, to engage in constructive dialogue

5

LOCATION

South-Central region represents 87% of sugarcane

harvest

South-Central region represents 87% of sugarcane

harvest

Sources: NIPE-Unicamp, IBGE and CTC

6

SUGARCANE HARVEST (2008/09)

Source: CanaSat, INPE, CTC & UNICA

7

PRODUCTS

8

our sustainable solutions today

9

Sugarcane is #1 source of renewable energy

with 16% of total energy consumed

Sugarcane is #1 source of renewable energy

with 16% of total energy consumed

RENEWABLE ENERGY RATIO

9

Source: Ministry of Mines and Energy’ BEN (2008 preliminary estimate)

Gasoline

GASOLINE IS NOW THE ALTERNATIVE FUEL

Ethanol

10

Source: ANP & UNICA

Accumulated Sales of Flex-Fuel Vehicles

Domestic Ethanol Sales (E-100)

DEMAND IS DRIVEN BY CONSUMER CHOICE

11

90% of new cars sold are FlexFuel,

representing about 25% of fleet

90% of new cars sold are FlexFuel,

representing about 25% of fleet

Source: ANP & ANFAVEA

12

Note: Brazilian Gasoline has 25% ethanol content. There is no "pure" gasoline available in Brazil.

ETHANOL VS. GASOLINE PRICES (2007)

Sources: ANP, UNICA, Reuters

Pri

ce

at

the

Pu

mp

(R

$/L

ite

r)

Petroleum

Gasoline (E-25)

Ethanol (E-100)Producer’s Price

GASOLINE NOT FOLLOWING OIL’S RISE

13Sources: IMF, IPEA, CEPEA/ESALQ, ANP

14

Millions of Hectares (2007)

%

total land

%

arable land

BRAZIL 851

TOTAL ARABLE LAND 354.8

1. Total Crop Land 76.7 9.0% 21.6%

Soybean 20.6 2.4% 5.8%

Corn 14.0 1.6% 3.9%

Sugarcane 7.8 0.9% 2.2%

Sugarcane for ethanol 3.4 0.4% 1.0%

Orange 0.9 0.1% 0.3%

2. Pastures 172.3 20% 49%

3. Available area Total arable land – (crop land + pastures)

105.8 12% 30%

1% OF ARABLE LAND DISPLACES 50% GASOLINE

Sources: IBGE, UNICA

15

an advanced biomass feedstock

Note: Reductions represent well-to-wheel CO2-equivalent GHG emissions avoided from unit of ethanol compared to gasoline, calculated on a life-cycle basis.

AVOIDED GREENHOUSE GAS EMISSIONS

16Source: IEA – International Energy Agency (May, 2004), based on a review of recent articles.

RFS ADVANCED

BIOFUEL

U.S. RENEWABLE FUEL STANDARD

17Source:

SUGARCANEETHANOL

ENERGY BALANCE

18Source: World Watch Institute, compilation of various sources.

Liters per hectare

AVERAGE PRODUCTION YIELDS

19Source: IEA – International Energy Agency (2005), USDA (2008), MTEC, MAPA, ICONE, UNICA

20

A CARBON ABSORBING MACHINE?

2 METERS

3 METERS

2 METERS

3 METERS

1 METER

1 METER

4 METERS

22-36 tons C/ha

3-5 tons C/ha

5-7 years

Source: Polo de Biocombustivel (Weber Amaral) from various sources.

21

Annual tons carbon per hectare

3-8 t C/ha3-8 t C/ha 22-36 t C/ha22-36 t C/ha

CANE VS. PASTURES: CARBON UPTAKE

Source: Polo de Biocombustivel (Weber Amaral) from various sources.

22

BREAKDOWN OF SUGARCANE’S ENERGY

Source: UNICA, CTC.

Assumptions based on the following values: 1 ton of sugar cane produces 250 kg of bagasse e 204 kg de straw, 1 ton of cane (only bagasse) generates 85,6 KWh for exporting, 1 ton of cane (bagasse + straw) generates 199,9 KWh for exporting, the straw inferior calorific value = 1,7 bagasse inferior calorific value, capacity factor = 0,5. Note: ave.MW = MW firm capacity.

GROWING ROLE OF BIOELECTRICITY

23Source: UNICA, COGEN.

10,000 MW

INSURANCE AGAINST SUBSIDIES…

Exports

Domestic

SU

GA

RE

TH

AN

OL

32%

51%

$20 Billion $45 Billion

24

Domestic

SU

GA

RE

TH

AN

OL

MW 16%

Source: UNICA

25

the food vs. fuel debate…

Petroleum

Agricultural non-food raw materials

Food

Notes: Deflated values for March 2008 with CPI base 100 in January 1995; “Agricultural non-food raw materials” include cotton, wood.,wool, timber and leather.

FOOD VS. OIL PRICES

26

Oil prices jumped +500% while food prices

increased 36%

Oil prices jumped +500% while food prices

increased 36%

Source: IMF, US Bureau of Labor Statistics, UNICA

Per

cen

tag

e In

crea

se

Note: “Others” include the harvested area for the remaining crops like fruits, fibers, nuts, pulses, roots and tubers, spices and other vegetables .

WORLD LAND USE

27

The world’s total harvested agricultural area is 1.4 billion hectares.The world’s total harvested agricultural area is 1.4 billion hectares.Only 15 million hectares are devoted to ethanol production. Only 15 million hectares are devoted to ethanol production.

Source: FAO, F.O. Licht, Datagro, USDA, EC, UNICA

28

Millions of Hectares (2007)

%

total land

%

arable land

BRAZIL 851

TOTAL ARABLE LAND 354.8

1. Total Crop Land 76.7 9.0% 21.6%

Soybean 20.6 2.4% 5.8%

Corn 14.0 1.6% 3.9%

Sugarcane 7.8 0.9% 2.2%

Sugarcane for ethanol 3.4 0.4% 1.0%

Orange 0.9 0.1% 0.3%

2. Pastures 172.3 20% 49%

3. Available area Total arable land – (crop land + pastures)

105.8 12% 30%

1% OF ARABLE LAND DISPLACES 50% GASOLINE

Sources: IBGE, UNICA

29

FOOD PRODUCTION INCREASING

Area

Sources: IBGE, UNICA

Note: 1) 2008 is estimated data; 2) Grains include rice, corn, wheat, soybeans, etc.

Brazil’s food production volumes doubled in the

last decade mainly due to yield gains

Brazil’s food production volumes doubled in the

last decade mainly due to yield gains

Note: 1) 2007 * - estimated data ; 2) Sugarcane include cane destined for ethanol production, sugar production and other uses (animal feed, spirits, etc)

PRODUCTIVITY FOR BRAZIL’S TOP THREE CROPS

30

Sources: IBGE, UNICA

Ethanol

Sugar

Area

SUGAR & ETHANOL PRODUCTION INCREASING

31

Sources: IBGE, UNICA

Brazil’s sugarcane ethanol volumes have

increased 130% and sugar more than 350%

Brazil’s sugarcane ethanol volumes have

increased 130% and sugar more than 350%

100 countries could supply biofuels to 200 nations, while currently 20 oil producers provide fossil fuels today.

WORLD SUGARCANE MAP

32

Sources: British Sugar

BRAZILIAN SUGARCANE INDUSTRY ASSOCIATION