Brazil sugarcane industry eyes EU biofuel market

(SAO PAULO) - Brazil, the world leader in making ethanol from sugarcane, is homing in on Europe's biofuel market following a decision by the European Commission to combat climate change by reducing the dependency on petrol.

The EU plan calls for biofuels to be used in at least 10 percent of fuels used in transport in the 27-nation bloc by 2020.

For Brazil's sugarcane industry, the news is seen as a golden export opportunity.

"We see this as very positive because it will allow the development and consolidation of the European biofuel market, which was in doubt without the defining of these goals," said an international advisor to the Brazilian Sugar Cane Industry Association (UNICA), Geraldine Kutas.

The group, the biggest in the sector representing Brazil's sugarcane producers, also welcomed the criteria Europe was to apply to biofuel use.

Brazil considers itself the world leader in biofuel production, with more than 30 years' experience. Also, sugarcane has proven more efficient than other biomass, such as maize (corn), to make ethanol.

A recent UN Development Program report observed that Brazil was more efficient than the European Union and the United States in producing ethanol.

It estimated that sugarcane ethanol created up to 70 percent fewer greenhouse gases than fossil fuels, whereas maize -- most used in the United States -- permitted a reduction of only 13 percent.

Nevertheless, at the moment the EU plan "is more a perspective than a real opportunity" because of the high EU tariffs -- 60 percent -- applied to Brazilian ethanol, Kutas said.

Brazil in 2007 sent 800 million liters of ethanol to Europe, which represented 30 percent of European consumption of the fuel, according to UNICA.

The sector predicts the EU energy plan could increase demand by another 21,500 liters of ethanol per year. That is more than Brazil's current total production of 20,100 liters, 80 percent of which is consumed domestically.

Plinio Nastari, the head of analysis firm Datagro, said Brazil was hard pressed keeping up national demand.

"Export opportunities, if they come, will oblige Brazil to prepare itself and commit to medium- and long-term supplies, which we don't see happening today," he said.

Environmentalists have also warned that rising demand for ethanol could cause encroachment on protected land despite assurances from the industry and government that sufficient zones were available. Brazil also rejects arguments that increased farming for biofuels could destabilize prices of food.

Brazil is the world leader in ethanol exports, and it and the United States currently account for 70 percent of total ethanol production.

More than 80 percent of new cars in Brazil are "flex" models, meaning they can operate on ethanol, petrol or a mix of both.

UNICA said 45 percent of fuel in light vehicles in Brazil was ethanol from sugarcane, which allowed the country to reduce carbon dioxide emissions by 25.8 million tons last year.