Presentation on the role of biofuel production, consumption and trade for Latin America. Presentation given at the ICTSD Symposium on trade and climate change in Cancun, December 2010.

1. Biofuels trade in Latin America:
Regional and Global Perspectives
The Role of Trade and Markets in
Addressing Climate Change and
Sustainable Development
Cancun, December 8th 2010
David Laborde – d.laborde@cgiar.org

2. Overview of the presentation
• Introduction
• Where do we stand? Trade pattern in Biofuels
• Opportunities and Remaining barriers
• How to make it works?
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

3. Introduction
• Trade in Biofuels: New Hope or Phantom
Menace for mitigations
• All Biofuels are not equal
From Valin, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

4. TRADE PATTERN IN BIOFUELS
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

5. Biodiesel
Production Consumption
(thds barrels a day) (thds barrels a day)
350 350
Asia & Oceania Asia & Oceania
Africa Africa
300 Middle East 300 Middle East
Eurasia Eurasia
250 Europe 250 Europe
North America North America
Uruguay Uruguay
200 200
Peru Peru
Paraguay Paraguay
150 Honduras 150 Honduras
Guatemala Guatemala
100
Colombia 100
Colombia
Brazil Brazil
Argentina Argentina
50 50
0 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009
EIA, 2010 EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

6. Biodiesel Net trade (thds barrels a day) 2009
30
20
10
0
-10
-20
-30
-40
-50
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

7. Ethanol
Production Consumption
(thds barrels a day) (thds barrels a day)
1400 Asia & Oceania 1400
Asia & Oceania
Africa Africa
Middle East
1200 1200 Middle East
Eurasia
Eurasia
Europe
Europe
North America
1000 1000 North America
Virgin Islands, U.S.
Virgin Islands, U.S.
Uruguay
Uruguay
Trinidad and Tobago
Trinidad and Tobago
800 Peru 800
Peru
Paraguay
Paraguay
Jamaica
Jamaica
600 Guatemala 600
Guatemala
El Salvador
El Salvador
Ecuador
Ecuador
400 Cuba 400
Cuba
Costa Rica
Costa Rica
Colombia
Colombia
200 Brazil 200
Brazil
Bolivia
Bolivia
Argentina
Argentina
0 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

8. Ethanol Net trade (thds barrels a day) 2009
70
60
50
40
30
20
10
0
-10
-20
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

9. Regional Production Pattern (2009)
Biodiesel Production - LAC Ethanol Production - LAC
Honduras Trinidad and
0.0% Tobago
Paraguay Peru 0.6%
0.2% 2.1%
Guatemala
Uruguay Colombia
0.0%
0.2% 1.1%
Peru Uruguay
Jamaica Paraguay 0.2%
0.4% 0.0%
1.5%
Colombia Virgin
9.8% Islands,
Guatemala U.S.
0.3% 0.1%
El Salvador
Brazil
Other 0.5% Argentina
94.6%
2.8% 0.1%
Brazil Bolivia
47.8% 0.3%
Ecuador
Argentina 0.0%
39.9% Cuba Costa Rica
0.1% 0.3%
EIA, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

10. Regional markets vs World Markets:
Export structure of the large exporters
Argentina Biodiesel Exports Brazil Ethanol exports
(2009) (2009)
EU Costa Rica
EU USA Brazil Peru China Rest of the World El Salvador Jamaica
Colombia Trinidad and Tobaggo
Mexico USA
Asia
28%
33%
4.0%
94.3% 5.7%
0.6%
3%
0.9%
0.2%
3%
0.1% 10%
5%
3% 15%
F.O. Licht (2010)
0% F.O. Licht (2010)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

11. Regional markets vs World Markets:
Stronger regional involvement of smaller countries
Bolivia Ethanol exports Ecuador Ethanol Exports
(2009) (2009)
EU Peru Rest of the world EU Colombia Peru Rest of the world
10% 0% 0%
4%
6%
90% 90%
F.O. Licht (2010) F.O. Licht (2010)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

12. OPPORTUNITIES AND
REMAINING BARRIERS
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

13. Regional demand will grow
Country Biofuel Addition of biofuel Country Biofuel Addition of biofuel
Ethanol 5%
Argentina 7% on August 2010 Goal of replacing 15% of the
Biodiesel 10% since July 2011 Honduras Biofuel
consumption of fossil fuels
Ethanol No goals
Bolivia 2,5% since 2007 Ethanol 10%
Biodiesel Jamaica
20% on 2015 Biodiesel No goals.
Ethanol 25% México Biofuel No goals.
Brazil
Biodiesel 5% since 2010
Ethanol Between 2-5% since 2008
Chile Goal of replacing 15% of the
Biodiesel Between 2-5% since 2008 Nicaragua Biofuel
consumption of fossil fuels
10%
Ethanol
20% on 2012
Till 8% by 2010 Goal of replacing 15% of the
10% in Santander, Cesar Panamá Biofuel consumption of fossil fuels
Colombia
South, Antioch and West 10% of ethanol since 2009.
Biodiesel
of the country.
Ethanol 18 - 24%
7% in Bogota in central Paraguay
Biodiesel 5%
and eastern plains region.
Ethanol 7,8%
Ethanol till 2% by 2010
Costa Rica Peru 2% since 2009
Biodiesel Biodiesel
5% by 2011
Ethanol 10%
Ecuador República Ethanol 15% by 2015
Biodiesel 2,5%
Dominicana Biodiesel 2% by 2015
Goal of replacing 15% of
Ethanol No goals.
El Salvador Biofuel the consumption of fossil
Uruguay B2 by 2008 – 2011
fuels. Biodiesel
B5 by 2012
Goal of replacing 15% of
Guatemala Biofuel the consumption of fossil
fuels..
= x5 regional demand –
FIESP-IICA, 2010
without Brazil - for biofuels
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

14. Remaining barriers
• Remaining Barriers. Protection faced by LA
exporters
Biodiesel Ethanol
Africa 4.20% 24.22%
Asia 3.42% 85.89%
Europe 0.49% 37.60%
North America 3.09% 40.86%
Latin America 1.15% 57.72%
• But also:
• Domestic subsidies
• Export taxes structure (e.g. Argentina)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

15. US and EU policies will matter too
Real Income effects of US and Net Emissions Balance of US
EU mandates, % and EU mandates (grCO2/MJ)
-30 -20 -10 0
US 10
SSA
Mandate -20.8
LAC
Mandate and trade
IndoMalay liberalization
Mandate without -28
EU27 sugarcane ethanol
CIS
China
7.92
CAMCarib
Brazil
EU and US Mandates
-1.0% -0.5% 0.0% 0.5% EU and US Mandates and trade liberalization
EU and US Mandates without sugarcane ethanol
Al Riffai, Dimaranan and Laborde, 2010
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

16. HOW TO MAKE IT WORKS?
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

17. Define clear priorities
• Biofuels vs common sense:
• Kill two birds with one stone vs A bird in the hand is worth two in
the bush
• Environmental policy? Energy policy? Farm policy? Policy
Reduction Strategy?
• One rule in economy: One goal=one tool
• International and domestic inefficiencies (e.g. combination of
mandates and subsidies)
• Decisions to make about
• The type of biofuels, the type of feedstocks
• The scale of production & the degree of concentration
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

18. Different economic costs:
A Peruvian Illustration
0.9
0.8
0.7
0.6
USD/liter
0.5
0.4
0.3
0.2
0.1
0
Palm Oil - Palm Oil - Small Jatropha Jatropha Sugar Cane Sugar Cane Ethanol made
Commercial Holder Commercial Smallholder Ethanol (Coastal Ethanol from molasses
Region) (Amazonian (average)
Region, including
Deforestation small holders)
Laborde and Al Riffai, 2010 & FAO Deforestation
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

19. • Domestic policy vs Regional policy
• Domestic policies will lead to “protectionist” behaviour
• Regional approach requires coordination
• Managing
• Small countries, Large countries
• Agricultural exporters vs Agricultural importers
• Biofuel exporters vs Oil exporters
• If Latin America, find a regional agreement (e.g. phasing
out of trade barriers and subsidies, sustainability criteria),
it can export the model to a global basis. Otherwise, it
will strongly undermine the possibility to reach a global
agreement
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE