5.1 Biofuels in Brazil: How and Why
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energy exporter for the first time. However, a share of its crude oil supply (11% in
2018)—usually oil of lighter quality—as well as of gasoline (11%) and diesel (23%)
consumed are still imported (EPE 2019a). Such imports mainly owe to Brazil’s
limited oil refining capacity, aggravated by stagnant ethanol production that has not
kept pace with growing demand, which has forced gasoline imports and the importation of corn-based ethanol from the US. Petrobras, the country’s state-controlled oil
company and leading fuel distributor, until the 2010s owned three-quarters of Brazil’s
refineries (EPE 2013a). However, in 2019 the government decided to sell such assets
to foreign investors—notably Chinese (EPE 2020). If Brazil’s energy strategy during
its economic heyday of the early 2010s was to double refining capacity by 2020
and eliminate diesel imports as early as 2015 (EPE 2013b), financial troubles and
government changes have maintained its import dependence on refined fossil fuels.
Domestic gasoline production is forecast to grow by a modicum of 3% between
2020 and 2029, while official projections expect oil refining into diesel to increase
by only 23% in the decade (EPE 2020). These precisely are the fuels that ethanol and
biodiesel replace, and it remains to be seen how such a persistent import dependence
will affect biofuel expansion.
5.1.1.2 Agri-Food Context
Of Brazil’s 350 million hectares (Mha) of arable land, approximately 200 Mha are
used as pastures, 35 Mha for soybean cultivation, and 10 Mha for sugarcane—these
two being the country’s most valuable crops in economic terms (IBGE 2019; CONAB
2019, 2020). More than half of the sugarcane is used for making ethanol instead of
sugar, though the exact rate varies every year as mills can switch between one and the
other based on market conditions (CONAB 2019). Soybeans, in turn, are used mainly
for animal feed, having vegetable oil as a co-product of secondary importance.
Since Brazil is a net exporter of both sugar and soybean oil, the diversion of those
crops for fuel making has not posed a supply problem. Greater diversity of uses has, in
fact, helped raise their international prices and earnings from exports. Brazil exports
the majority of its sugar production, being by far the world’s top exporter. As low
oil prices and the COVID-19 pandemic hit fuel markets in 2020, sugar production
and exports are expected to increase (Barros 2020). Soybean, meanwhile, is mostly
exported uncrushed to China or—to a much lesser extent—as soy meal to Europe
for animal feed. Soybean oil is but a by-product for which producers continually
seek new downstream markets. Since biodiesel blending mandates came into force
in 2008, soybean oil exports have significantly dropped. Exports currently take only
11% of Brazil’s soybean oil supply, and half of what stays in the country is used for
fuel, the other half as food (Ustinova 2020). Overall, if biodiesel manufacturing used
29% of Brazil’s total vegetable oil consumption in 2012, this by 2018 had increased
to 37%, a share that continues to rise as the domestic bioeconomy grows (OECD/FAO
2012, 2019).
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energy exporter for the first time. However, a share of its crude oil supply (11% in
2018)—usually oil of lighter quality—as well as of gasoline (11%) and diesel (23%)
consumed are still imported (EPE 2019a). Such imports mainly owe to Brazil’s
limited oil refining capacity, aggravated by stagnant ethanol production that has not
kept pace with growing demand, which has forced gasoline imports and the importation of corn-based ethanol from the US. Petrobras, the country’s state-controlled oil
company and leading fuel distributor, until the 2010s owned three-quarters of Brazil’s
refineries (EPE 2013a). However, in 2019 the government decided to sell such assets
to foreign investors—notably Chinese (EPE 2020). If Brazil’s energy strategy during
its economic heyday of the early 2010s was to double refining capacity by 2020
and eliminate diesel imports as early as 2015 (EPE 2013b), financial troubles and
government changes have maintained its import dependence on refined fossil fuels.
Domestic gasoline production is forecast to grow by a modicum of 3% between
2020 and 2029, while official projections expect oil refining into diesel to increase
by only 23% in the decade (EPE 2020). These precisely are the fuels that ethanol and
biodiesel replace, and it remains to be seen how such a persistent import dependence
will affect biofuel expansion.
5.1.1.2 Agri-Food Context
Of Brazil’s 350 million hectares (Mha) of arable land, approximately 200 Mha are
used as pastures, 35 Mha for soybean cultivation, and 10 Mha for sugarcane—these
two being the country’s most valuable crops in economic terms (IBGE 2019; CONAB
2019, 2020). More than half of the sugarcane is used for making ethanol instead of
sugar, though the exact rate varies every year as mills can switch between one and the
other based on market conditions (CONAB 2019). Soybeans, in turn, are used mainly
for animal feed, having vegetable oil as a co-product of secondary importance.
Since Brazil is a net exporter of both sugar and soybean oil, the diversion of those
crops for fuel making has not posed a supply problem. Greater diversity of uses has, in
fact, helped raise their international prices and earnings from exports. Brazil exports
the majority of its sugar production, being by far the world’s top exporter. As low
oil prices and the COVID-19 pandemic hit fuel markets in 2020, sugar production
and exports are expected to increase (Barros 2020). Soybean, meanwhile, is mostly
exported uncrushed to China or—to a much lesser extent—as soy meal to Europe
for animal feed. Soybean oil is but a by-product for which producers continually
seek new downstream markets. Since biodiesel blending mandates came into force
in 2008, soybean oil exports have significantly dropped. Exports currently take only
11% of Brazil’s soybean oil supply, and half of what stays in the country is used for
fuel, the other half as food (Ustinova 2020). Overall, if biodiesel manufacturing used
29% of Brazil’s total vegetable oil consumption in 2012, this by 2018 had increased
to 37%, a share that continues to rise as the domestic bioeconomy grows (OECD/FAO
2012, 2019).