CODEL MARKEY EXPLORES BRAZILIAN BIOFUELS AND FLEXFUEL

UNCLAS SECTION 01 OF 02 RIO DE JANEIRO 000043 SIPDIS SIPDIS NSC WASHDC USDOC WASHDC USDOE WASHDC USDA WASHDC STATE FOR WHA/BSC, WHA/EPSC AND GREG MANUEL EB/ESC JAMES EIGHMIE USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DRAMBO USDOE FOR RHIA DAVIS AND CAROLYN GAY USDA for U/S FFS KEENUM AND FAS ADM YOST E.O. 12958: N/A TAGS: ENRG EPET PREL BR SUBJECT: CODEL MARKEY EXPLORES BRAZILIAN BIOFUELS AND FLEXFUEL AUTOMOBILES IN RIO DE JANEIRO RIO DE JAN 00000043 001.2 OF 002 ¶1. Summary: On February 18-19 Rep. Ed Markey (D-MA),Chair of the Select Committee on Energy Independence and Global Warming, led a congressional delegation to Rio de Janeiro to learn more about the market aspects of Brazil's sugarcane ethanol industry, renewable energy policy, flexfuel automobile technology, and next steps in biofuel research. Other members of the delegation were: Rep. Thomas Davis (R-VA),Rep. Lois Capps (D-CA),Rep. Barbara Cubin (R-WY), Rep. Michael Ferguson (R-NJ),and Ref. Jeff Flake (R-AZ). The delegation met with representatives of the Sao Paulo Sugarcane Agroindustry Union (UNICA),Brazil's Energy Planning Office (EPE), the Brazilian National Association of Automakers (ANFAVEA),and Petrobras' Research and Development Center (CENPES). End Summary. THE ARGUMENT FOR SUGARCANE ETHANOL -------------- ¶2. Sugarcane production does not pose an environmental or deforestation threat in Brazil, said Dr. Mauricio Tolmasquim, Director of Brazil's Energy Planning Office (under the Ministry of Mines and Energy). Current sugarcane and ethanol production is predominantly concentrated in the center-south region around the state of Sao Paulo. To meet increased demand for ethanol, Brazil plans to use degraded pasturelands for sugarcane production. According to industry analysts, an additional 200 million acres of pastureland could be shifted relatively quickly for sugarcane production. This estimated area lies outside of the Amazon Biome Region. ¶3. In addition to being a renewable source of energy, ethanol is a low-pollutant fuel and actually reduces overall greenhouse gas emissions. According to Marcos Jank, CEO of the Sao Paulo Sugarcane Agroindustry Union (UNICA),sugarcane is the most competitive feedstock to produce ethanol because of its higher yield and low cost (competitive at US$ 40 the barrel of crude). It also has very positive energy and environmental balances. UNICA represents 108 members, which are responsible for 50% of the Brazilian alcohol production and 60% of the Brazilian sugarcane and sugar production. UNICA urged CODEL Markey to consider commoditization of ethanol markets, increased technical and scientific cooperation, and common standards. Although the U.S. and EU have set up new governmental incentive programs on biofuels, UNICA argued that the global ethanol market continues to be small and very volatile in the short term due to high tariff and non-tariff barriers. ¶4. Rep. Capps was particularly interested in the idea that biofuels represent an opportunity for developing countries. By growing sugarcane, nearly 100 countries could potentially become biofuel suppliers as opposed to the current 20 oil producers who provide fossil fuels to the rest of the world. Brazil is already reaching out to Angola and Mozambique because these countries have excellent conditions for sugarcane production, according to UNICA. BRAZILIAN CONSUMERS CHOOSE FLEXFUEL CARS -------------- ¶5. CODEL Markey was interested in learning more about the popularity of flexfuel cars in Brazil and what, if any, specific government policy decisions were made to provide an incentive for the Brazilian public to purchase flexfuel cars. Flexfuel cars were first introduced in Brazil in 2003 (by an American automaker). Now, there are 10 brands and 63 models on the Brazilian market. Eduardo Feijo of the Brazilian National Association of Automakers (ANFAVEA) explained that these vehicles run on gasoline, ethanol (E100),or any blend of gasoline and ethanol (from E22 to E100). Through special electronic sensors, the on-board computer recognizes the fuel and properly adjusts the engine combustion parameters without any action required from the driver. ¶6. Dr. Tolmasquim, who was Deputy Minister of Energy from 2003-05 (when flexfuel cars were introduced in Brazil),recalled that no specific government action was taken to support flexfuel cars. Rather, the push came from the automakers themselves. Feijo added that the popularity of the flexfuel car in Brazil is a phenomenon that is entirely attributed to consumer choice. The delegation was able to see several models of flexfuel vehicles at the Petrobras Research and Development Center (CENPES),where cars were being tested for biofuel efficiency. RIO DE JAN 00000043 002.2 OF 002 BIOFUELS RESEARCH -------------- ¶7. In addition to visiting a flexfuel automobile testing lab, CODEL Markey visited an ethanol from sugarcane bagasse pilot plant at CENPES. Bagasse, the leftover sugarcane biomass after juice is extracted, is currently burned to produce heat energy to power sugar mills. Petrobras hopes to develop commercially a viable method to process excess bagasse into ethanol. According to Carlos Thadeu Fraga, CENPES Director, Petrobras estimates that bagasse can yield an additional 40 percent more ethanol per unit of sugarcane than current methods. Other biofuel-related R&D projects at CENPES include biodiesel, HBIO (vegetable/animal oil hydrogenation, and non-conventional bioethanol (lignocellulosic bioethanol, castor seed cake bioethanol and synthetic biofuel). ¶8. This message was cleared/coordinated with Embassy Brasilia. MARTINEZ