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Can the Complexities of Sugarcane Ethanol Imports Lead to Increased Carbon Emissions?

John Miller's picture
Owner-Consultant Energy Consulting

During my Corporate career I provided manufacturing with power generation facilities’ technical-operations services and held different technical and administrative management positions.  In order...

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energy and policy developments

The U.S. created the latest ‘Renewable Fuel Standard’ (RFS2) in 2007, which requires blending increased-minimum biofuel volumes into petroleum motor fuels annually.  The EPA is responsible to administrate and establish annual RFS2 biofuel blending targets for conventional biofuel (corn ethanol) and advanced biofuels.  Advanced biofuels include biodiesel, cellulosic ethanol and ‘other’ biofuels, such as sugarcane ethanol.  Sugarcane ethanol is not normally produced within the U.S. and must be imported primarily from Brazil.

To be certified as an advanced biofuel the ‘full-lifecycle’ carbon emissions must be 50% less than the displaced petroleum’s emissions.  ‘Full-lifecycle’ carbon emissions normally include the fossil fuels consumed during the biomass cultivation-through-biofuel production-transportation-and-consumption in motor vehicles.  Biofuel ‘full-lifecycle’ energy & carbon balances are commonly called ‘cultivation-to-wheel’ (CTW) balances.  The ‘full-lifecycle’ carbon emissions of Brazil sugarcane ethanol, however, can be more complex than basic CTW fossil fuels consumption balances.  Added ‘full-lifecycle’ complexities include ethanol export’s (Brazil to U.S.) transportation fuels consumption, Brazil’s recent year’s domestic ethanol supply shortages and their need for ethanol and petroleum imports to meet domestic fuels demand.  These factors can make determining sugarcane ethanol’s (direct & indirect) ‘full-lifecycle’ carbon emissions significantly more complex.  Based on these more comprehensive and increased complexities of supplying and exporting sugarcane ethanol to the U.S., what are the possible impacts on overall ‘net’ sugarcane ethanol carbon emissions?

Brazil’s Recent Ethanol Supply-Demand History – Brazil is the World’s second largest ethanol producer following the U.S. and the primary supplier of ethanol imports to the U.S. and Europe.   Since the EPA certified Brazil sugarcane ethanol as an advanced biofuel in 2010 the U.S. has imported about 800 million gallons (Mgal.).  While this 800 Mgal. volume only represents a small fraction of total Brazil ethanol production it does represent a very significant volume compared to declines in total Brazil domestic ethanol consumption in recent years.

In 2013 Brazil began experiencing the worst drought in 50 years.  The drought has continued into 2014, and is projected to cause major hydropower electricity generation shortages and reduced agriculture production.  Sugarcane production is also projected to decline due to the drought.  Fortunately an excess of sugarcane from last year has apparently minimized the impact on Brazil ethanol production, which is projected to decrease only slightly 2013-14.

Similar to the U.S., Brazil implemented gasoline ethanol blending standards beginning in the 1970’s in order to reduce their domestic demand for petroleum.  Required blend standards increased from E-10 (10% ethanol + 90% petroleum gasoline) up to E-25 in 2007.  Unfortunately the combination of the recent World-Brazil economic recessions and severe droughts resulted in Brazil not achieving their E-25 target due to chronic domestic ethanol supply shortages.  These factors made it necessary for Brazil to reduce their blend targets down to E-18 in 2011.  Even though Brazil recently announced reestablishing the E-25 target their ongoing drought and recent increases of domestic demand for gasoline motor fuels continue to be major barriers to actually achieving E-25 domestic blend levels.

Despite Brazil’s chronic domestic ethanol shortages they still exported 242 Mgal. of sugarcane ethanol to the U.S. in 2013.  To help meet their domestic demand-supply shortages Brazil has also imported ethanol from several North and South America Countries.  During 2013 Brazil imported 47 Mgal. of ethanol from the U.S.  Despite these and other countries’ ethanol imports, Brazil has yet to meet its E-25 gasoline standards for most domestic consumption in recent years.  This being the case, why would Brazil continue exporting ethanol to the U.S. during a period of ongoing drought and known shortages of domestic ethanol supply?

Economic Incentives for Brazil Ethanol Exports to the U.S. – The EPA developed the latest RFS2 annual biofuel blend standards last year.  Refer to Table 1 of a recent TEC post.  Due to the E-10 ‘blend wall’ the EPA reduced the conventional corn ethanol blend target from 13.8 to 13.0 billion gallons (Bgal.). The ‘other’ advanced biofuel, which includes primarily sugarcane ethanol imports, was also reduced to 0.9 Bgal.

To comply with annual RFS2 biofuel blending standards, petroleum motor fuels Producers or Refiners and Blenders must purchase the biofuels and/or associated ‘Renewable Identification Numbers’ (RIN) certificates.  The RINS’s must be submitted to the EPA as proof of annual RFS2 compliance.  The advanced ethanol biofuel RIN’s market values recently averaged about $0.70 per gallon during 2013.  The obvious economic incentive for Brazil to export 242 Mgal. of sugarcane ethanol to the U.S. in 2013 was to collect-sell RIN’s valued up to about $170 million.  This total 2013 Brazil import RIN bill was paid for directly by U.S. gasoline Producers/Blenders and indirectly by U.S. gasoline Consumers.

U.S. Impacts from Brazil Sugarcane Ethanol Imports – The primary justification for the EPA certifying Brazil sugarcane ethanol as an advance biofuel is to reduce U.S. carbon emissions by at least 50% of the petroleum gasoline displaced.  Refer to the past TEC post for further details.  The estimated carbon emission reduction is supposed to be based on the ‘full-lifecycle’ energy/carbon balance.  As previously described, the ‘full-lifecycle’ sugarcane ethanol CTW balance should include the added transportation to the U.S.  In addition the CTW balance should include changes to Brazil’s domestic ethanol/gasoline motor fuels consumption and mix affected by their exports to the U.S.  The problem statement for exports to the U.S. becomes: with the obvious shortage of Brazil ethanol supply availability to meet domestic demand in recent years and need for ethanol imports from the U.S. to help meet their domestic ethanol demand, are the U.S./World total or ‘net’ carbon emissions actually being reduced by the 50% minimum level required by the EISA advanced biofuel certification?

As previously discussed, the U.S. imported 242 Mgal. and exported 47 Mgal., for ‘net’ ethanol imports of 195 Mgal. in 2013.  Based on the average ‘full-lifecycle’ CTW carbon emission reductions for advanced biofuel imports (50%) minus conventional biofuel exports (20%), the U.S. ‘net’ (imports-exports) carbon emissions should have been reduced by about 645,000 metric tons (MT) in 2013.  The estimated $170 million RIN’s cost for 2013 is equivalent to about $260/MT of carbon; a carbon credit cost extremely expensive compared to average EU and California carbon credit market prices of about $10-12/MT during 2013.

However, the actual carbon emission reduction benefits may be significantly less than EPA certification estimates.  The Brazil economy has been growing at fairly positive rates (on average) in recent years.  As a result their consumption of liquid fuels has also increased by over 1.8 Bgal. during 2012-13.  A very large percentage of 2012-13 increased liquid fuels consumption was due to petroleum gasoline demand.  During recent years Brazil ethanol consumption and production (refer to EIA data: Ethanol” section, ‘Brazil Ethanol Production – 2002-2012’ graph) have both actually declined.  Based on these factors Brazil has apparently been required to increase their imports of petroleum liquid fuels in order to meet their growing domestic demand.

To help meet Brazil’s shortages in domestic gasoline motor fuels supply, they have significantly increased petroleum imports from countries such as the U.S. in recent years.  U.S. petroleum imports to Brazil included 133 Mgal. of unfinished gasoline blend stocks plus 80 Mgal. of finished gasoline, for a total gasoline imports of 213 Mgal. in 2013.  This is equivalent to over 300 Mgal. of sugarcane ethanol consumption that could be displaced by increased petroleum gasoline imports (constant heat content basis).  Needless to say, these U.S. petroleum gasoline exports to Brazil would more than offset all the total carbon emission reductions of the 242 Mgal. U.S. sugarcane ethanol imports in 2013.  In other words, Brazil has essentially replaced all their ethanol exports to the U.S. with imports of U.S. petroleum gasoline in order to supply their domestic demand for total ethanol-gasoline motor fuels during 2013.

The substituting Brazil domestic ethanol demand with U.S. petroleum gasoline imports should require adjusting Brazil’s sugarcane ethanol ‘full lifecycle’ CTW carbon emissions accordingly.  The bottom line result is the U.S. has paid Brazil up to $170 million in 2013 for ethanol advanced biofuels and RIN’s with overall ‘net’ full lifecycle energy/carbon balances that resulted in actually increasing World net-total carbon emissions!

In Conclusion – When Congress created the RFS2, under the ‘Energy Independence and Security Act’ (EISA) of 2007, they envisioned advanced biofuels production would significantly reduce U.S. energy imports and carbon emissions.  Nowhere in the EISA 2007 legislation did Congress include certifying advanced biofuels that had ‘full-lifecycle’ or ‘net’ carbon emissions greater than 50% of the petroleum fuel displaced.  This includes Brazil’s replacing sugarcane ethanol exports to the U.S. and their domestic ethanol shortages with increased petroleum gasoline consumption.  Certifying advanced biofuel imports should include the direct and indirect CTW ‘full-lifecycle’ carbon emissions to ensure U.S. and World ‘net’ carbon emissions are actually reduced by the EISA required minimum 50% level.  U.S. gasoline Producers/Blenders and ultimately Consumers should not be forced to pay $100’s million per year for RIN’s that do not reduce actual World ‘net’ carbon emissions by required levels.  Recent sugarcane ethanol imports appear to be another classic example of ‘carbon leakage’, where a Developed Country (U.S.) pays a Developing Country (Brazil) for taking actions to reduce World carbon emissions and actually realize little or no benefit.  What do you think?

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Bob Meinetz's picture
Bob Meinetz on Apr 7, 2014

John, I think (since you asked) your skepticism is well-founded. The complexities of energy paths are mind-boggling – an examination of Argonne National Labs’ extensive GREET model will show that even it relies on significant assumptions.

Notwithstanding, fundamental energy balance analyses make it difficult to justify the idea that converting plants to motor fuels ultimately decreases petroleum consumption. Under laboratory conditions, or with extreme conscientiousness in growing and processing we might be able to create a chain which results in carbon emissions which are net-negative. Would they be significantly less? Unlikely. Would they be cheaper? No. And whether future climate concerns will trump immediate economics in the poorest countries of the world is a question which fairly answers itself.

Most importantly, biofuels and most so-called “renewable” paths amount to rearranging deck chairs on the climate-change Titanic. The idea that they represent potential solutions to our problems crosses the border from optimism to denial.

John Miller's picture
John Miller on Apr 7, 2014

Bob, the skepticism is even shared by the Renewable Fuels Association (RFA), who also questions the EPA’s estimated carbon reductions of sugarcane ethanol vs. corn ethanol.  The RFA believes that the full-lifecycle carbon emissions of corn ethanol has been over estimated by the EPA and that the EPA has failed to reasonable address ‘land-use change’ (LUC) that has occurred in Brazil; and increases the carbon emissions of sugarcane production-cultivation.  If the RFA estimates for corn ethanol are reasonably accurate they appear to be building a case that corn ethanol can almost achieve the advanced biofuel carbon reduction levels.  If this proves to be accurate, meeting the RFS2 E-10 maximum ethanol blend level should probably be met by domestic corn ethanol production only and not highly questionable sugarcane ethanol imports.  This action could also save Consumers at least a couple $100 million/yr, for those costly advanced biofuel RIN’s.

John Miller's picture
John Miller on Apr 9, 2014

N Nadir, ‘land-use changes’ are a significant and very important issue for essentially all biofuels.  When natural environments must be disturbed or destroyed to produce biomass feedstocks for various biofuels production, this is often one of the necessary trade-offs required to produce increased levels of biofuels around the world.  This includes clearing of rain forests in Asia to produce palm oil for EU biodiesel markets, to the huge chemical fertilizer run-offs in the U.S. from increased corn production that results in Gulf of Mexico algae blooms-dead zones, to the impacts of increased sugarcane production in Brazil (as you have done a very good job in referencing).  When it comes to ‘full-lifecycle’ or ‘overall global impacts’ of biofuels the complexities can often hide or confuse the sum-total of all environmental impacts that can often off-set most or all the estimated or claimed benefits.  That’s why responsible Government Agencies must do a much more thorough job of evaluating biofuels and other schemes that are supposed to reduce World carbon emissions and require Consumers to pay for the associated carbon credits that may not be beneficial in the bigger picture; i.e. World ‘net’ carbon emissions and current-future environmental impacts.

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John Miller on Apr 10, 2014

The only biofuel that comes to mind that meets all of the constraints you have listed is ‘wood’.  Wood biofuels have historically exceeded all other renewables except hydropower.  Even today, despite the large growth in solar+wind renewable energy, wood still exceeds these non-bio renewables energy supplies within the U.S. (and many other nations around the world).

Lewis Perelman's picture
Lewis Perelman on Apr 12, 2014

Excellent analysis and discussion here. It raises the larger question: Does the RFS make any sense, and should it be abandoned altogether?

Biofuels just seem like a bad bargain, no matter what the source.

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John Miller on Apr 12, 2014

Lewis, a brief history of the RFS development: back in the 1990’s ‘oxygenates’ were required-blended into reformulated gasoline (RFG) in order to reduce LDV’s tailpipe CO emissions.  The most economic oxygenate was initially MTBE, followed by EtOH.  Leaking buried gasoline station tanks lead to MTBE water contamination problems, which resulted in EtOH becoming the primary and only oxygenate by the early 2000’s.

As you probably remember, Congress passed the EPAct of 2005, which created the first RFS(1) regulation and blending up to 7.5 billion gallons per year of EtOH.  This regulation was fairly consistent with the original RFG oxygenate requirement of about E-7.5.  The popularity of EtOH (with help from the Corn Farming/Ethanol Lobby) resulted in Congress passing EISAct of 2007, which raised total biofuel blending RFS(2) up to 36 billion gallons/year.  This is when the RFS regulation became less than constructive towards either LDV tailpipe CO emissions or energy security (displacing petroleum gasoline).  The EISA RFS2 regulation assumed that advanced cellulosic and/or algae biofuels technologies could be developed to efficiently and cost effectively produce ethanol & biodiesel.  Unfortunately, both these non-conventional/non-corn ethanol advanced biofuels struggle to compete (cost, efficiency and carbon emission reductions) with conventional corn ethanol and soybean biodiesel.

Yes, I agree, above E-7.5 (assuming RFG oxygenates are still required in modern LDV’s to control tailpipe CO emissions) continue to be a bad bargain in nearly all cases based on currently available advanced biofuels technologies.

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John Miller on Apr 13, 2014

Bill Brandon, as far as ‘Figures vs. Facts’ let’s review some additional facts.  I did a detailed analysis of the GREET model a couple years ago and found the full lifecycle carbon emissions of petroleum gasoline was over estimated by about 75%.  Granted, petroleum production from growing U.S. domestic ‘tight-oil’ crude production directionally increases its carbon emissions, but this factor also directionally applies to the petroleum consumed during the corn ethanol full lifecycle ‘cultivation-to-wheel’ carbon emissions.  These factors also directionally inflate the carbon reduction benefit of all biofuels (including conventional corn ethanol) very significantly.

Agreed, the energy efficiencies of average corn ethanol bio-refineries in operation today have very likely increased over the years (in part due to the shutdown of the least efficient/unprofitable plants in recent years).  If the RFA analysis that corn ethanol carbon reduction has increased from 22% (past GREET model analysis) up to 38% that would definitely be a good outcome (assuming the EPA validates/approves the increased benefit analysis).

As far as sugarcane vs. corn ethanol, the chemical/bio conversion fact is that fermenting pure sugar(cane) into ethanol is far more efficient than having to first convert corn starch into sugar prior to fermentation.  This TEC Post, however, focuses primarily on the probable fact that Brazil has recently and currently replaced its exported sugarcane ethanol (and associated domestic motor fuels consumption) with higher carbon U.S. corn ethanol and petroleum imports.  These factors make Brazil sugarcane imports’ ability to comply with U.S. advanced biofuel requirement of a 50% full lifecycle carbon reduction vs. petroleum gasoline, highly infeasible (and likely in violation with U.S. RFS requirements).

It will be interesting to witness how successful Ford’s Ecoboost engines operating on E-30 will be in reducing actual fuel consumption (increased efficiency) outside the lab.  These state-of-art turbocharged, direct fuel injection and higher compression engines are definitely more efficient than simpler technologies.  Do you know why Ford has chosen to test E-30 (not Commercially available within the U.S.) vs. E-85 which is widely sold to FFV owners today?

As far as DDGS (corn protein/oil/fiber co-product from ethanol production), the carbon credit value of this co-product made up the majority of the past GREET model analysis carbon reduction (vs. petroleum gasoline).  I suspect the DDGS co-product carbon credit makes up about half the carbon reduction value of corn ethanol based on the more recent RFA full lifecycle analysis (including ILUC).  Is DDGS more healthy for animals vs. raw corn?  I’ll leave this factor/comment up to those more familiar with this specific subject.

John Miller's picture
John Miller on Apr 13, 2014

Bill, I understand very well how the RFS and associated RIN’s are designed to function.  The RFS was created under Energy Policy Act of 2005 and updated under Energy Independence and Security Act of 2007.  Both these regulations were primarily intended to displace petroleum consumption (and imports) with alternative fuels, including biofuels.  The primary priority was ‘energy security’ and had nothing to do with some assumed ‘monopoly’ theory.  The RIN’s, of course, are just an accounting process, with the possible application to ‘free market’ (trading) investors.

Biojet can directionally burn cleaner than 100% petroleum jet.  However, biojet does have a major physical property shortcoming: pour/freeze point.  In order to meet Commercial/Military jet specifications biojet must be blended with large percentages of petroleum jet.  Also, biojet is not the perfectly clean fuel either.  Jet engine exhaust pollutants such as formaldehyde are increasingly generated from biojet.

Ethanol was the original octane booster since the dawn of the automobile.  Due primarily to economics it was (unfortunately) replaced by TEL, and more recently by higher octane hydrocarbons.  As I assume you are aware, modern ICE’s with exhaust-environmental controls have more than adequately eliminated the past VOC emissions that contained aromatic combustion products; in the fairly distant past.

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John Miller on Apr 14, 2014

Bill, a couple more facts to consider:

Some ‘tight (crude) oil’ production, compared to conventional crude oil production, could have increased energy consumption directionally up towards 50%.  This, however, is the extreme of economically feasible operations and only represents a very small fraction of total production.  On average, U.S. crude oil production energy intensity overall has only increased by a couple percent in recent years (based on $100 per barrel average market prices).

The original ethanol lifecycle energy and fossil fuels/carbon balances used by most Federal Agencies (including the EPA) were develop by the Argonne National Laboratory (ANL); hired by the DOE.  My past analysis shows that based on ANL GREET data the petroleum consumption for the ‘well-to-wheel’ (cultivation-thru-consumption) was 15% of total fossil fuels consumption.  Natural gas made up about 60% (power+heat) and the balance of fossil fuels consumption (25%) comes from coal (power+heat).

The Brazil sugarcane ethanol producers are very likely currently claiming carbon reduction benefits for possible future efficiency/improvements.  While this practice may be acceptable to the IPCC and EU, I do not believe U.S. Consumers should be paying for RIN’s that have little or no current carbon reduction value.  For IPCC/EU carbon credit information, refer to a past TEC Post section: “Impacts of the Kyoto Protocol Carbon Trading Mechanisms”.

If indeed the co-product credit for DDGS is under estimated as you suggest, the EPA needs to address this issue (with ANL probably) in addition to the updated RFA conventional corn ethanol biorefinery efficiency updates.

Also, if E-30 is the most optimal gasoline blend for state-of-art ICE designs the Auto Industry needs to be much more engaged and aggressive to selling this factor to the U.S. Government (under CAFE standards possibly) and Consumers.  Today only two grades are normally available in the U.S.; E-10 and E-85.  Based on contact and personal experience, E-85 has not been too successful in U.S. FFV’s due to lower heat content, poorer fuel mileage, and higher overall cost per mile operation for average Consumers.  A niche market has however developed for high performance/compression vehicles (on-/off-road).  LDV’s that require 100+ octane normally use Nascar fuel or Avgas to operate efficiently/effectively.  Those high performance vehicles that have FFV capabilities (fuel systems designed for high ethanol content fuels) can be much more economically operated on E-85 vs. alternative high performance petroleum gasolines.

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