Biofuels in Emerging Markets – Potential for sustainable production and consumption in Argentina, Brazil, Colombia and Guatemala

Apr 2023

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A great potential exists for biofuels in emerging economies of Latin America, the Caribbean, Africa and Asia as these regions have a growing demand for sustainable energy, plentiful local resources and land availability to produce biofuels. As society adapts to the low carbon economy needed to meet the targets in the fight against climate change, it is crucial to understand how sustainable biofuels are in the several contexts that they are being produced across the globe. In this IEA Bioenergy Task 39 (transport biofuels) study we evaluated policy frameworks and biofuel mandates across the global south. Policy environments were classified into three categories: fully implemented biofuels market, partially implemented biofuel blending mandates, and a positive policy environment where a legal framework is in place. A methodology was developed to evaluate the sustainability of biofuels production, which included an Attributional Life Cycle Assessment (LCA) to verify reductions in greenhouse gas (GHG) emissions and a Techno-economic Analysis to verify economic feasibility.

This report presents the results for biofuels produced at scale, in large commercial quantities (High Technology Readiness Level) in Argentina, Brazil, Colombia and Guatemala. Biofuels included in the analysis were ethanol from sugarcane and corn, and biodiesel from soybean and oil palm.

Argentina has a New Biofuels Law in place for blending mandates and is currently adopting E12 and B5 using corn ethanol and soy biodiesel. Brazil has the RenovaBio National Policy of Biofuels Law that certifies and rewards producers that reduce emissions with decarbonization credits. Brazil uses hydrous ethanol, E27 with anhydrous ethanol from sugarcane, and B10 with biodiesel mainly from soybean oil and tallow. Colombia has legislation in place for ethanol and biodiesel and is currently adopting E10 and B10 using sugarcane and oil palm. Guatemala intends to implement a 10% ethanol blend in gasoline in 2024.

Land use for biofuel crops, food crops, and pastures was evaluated as well as the potential land needed to duplicate biofuels production in these countries. The total land used in Argentina, Brazil, Colombia, and Guatemala for biofuels production corresponds to 4.6%, 6.3%, 0.2%, and 10%, respectively, of the land used for pastures. Conversion of small portions of pastureland (from 0.1% to 10%) could add significant land for biomass feedstocks and double biofuel production. The payback time for soil carbon stocks of the pasture to sugarcane transition is around 2 to 3 years. Our analysis highlights best practices that, if used, can contribute to environmental benefits by decreasing emissions and helping land recovery.

The LCA indicated a 70% reduction in GHG emissions when sugarcane ethanol displaced gasoline and a 37% reduction when corn ethanol displaced gasoline. A 73% reduction in emissions was observed when soybean biodiesel displaced fossil diesel and an 84% reduction was observed when palm oil biodiesel displaced fossil diesel. Sensitivity analysis showed that the use of fertilizers is the main factor contributing to GHG emissions in biofuel production.

The techno-economic assessments showed a consolidated and feasible industry in all biofuel cases reported here. The minimum selling prices show competitiveness with gasoline and diesel prices and a high sensitivity to feedstock prices.

The study also considered the end-use aspects of biofuels. Flex-fuel vehicle technology allows consumers to choose between gasoline and ethanol according to fuel prices, availability, and preference. Hybrid ethanol vehicles are now available alongside electric vehicles, but flexfuel engines continue to compose most of the new fleet. Renewables are growing to provide electricity, and bioenergy is an increasingly important option as it can provide fuels with a high energy density that can be stored, fit in the present infrastructure, and provide building block molecules for different applications. Fleet sustainability needs to consider aspects that go beyond GHG emissions including economic feasibility. Flex-fuel technology has been an enabler of biofuels use and contributes to decrease pollution in cities, an important problem in many emerging economies. Incentives focusing on reduction of emissions of GHG through transport electrification may lead to overload of the electric grid in emerging economies since the infrastructure is not sufficient to supply the domestic demand and an electric fleet. Moreover, there are concerns related to acquisition costs of electric vehicles in these markets.

The economic impact of low carbon policies was also evaluated. Together, these four countries are annually avoiding 68 million tons of CO2eq through their biofuel implementation. For instance, if credits for 1 tonne of avoided CO2 emission were sold at $10, biofuel producers in Brazil would earn $599 million per year, and biofuel producers in Argentina, Colombia, and Guatemala would obtain additional profits of approximately $58, $21, and $3 million, respectively, based on their respective productions in 2019. We used the RenovaBio Program as an example to demonstrate that trading mechanisms for avoided GHG emissions are important to reduce overall emissions around the globe.

Further recommendations:

  • Higher feedstock yields have large impacts on emissions and can alleviate land demand; therefore, efforts on research focused on feedstock development and greening of farming should be intensified.
  • Portfolio diversification and new business models in the sugar and biofuel sectors (biogas, carbon capture and use, and hexose/pentose sugar uses for bioproducts) can stimulate innovation and economic robustness of this industry sector.
  • The sugarcane ethanol plants of these four countries could be exporting 25.9 TWh of electricity to the grid; therefore, investments to increase energy efficiency should be considered.
  • Ethanol plants that already have cogeneration units could increase the use of lignocellulosic materials (straw and energy cane) considering their on-site availability to increase use efficiency, income and reduce emissions.
  • Fuel cell vehicles with green hydrogen on board produced from ethanol may be an interesting alternative to vehicle electrification using the existing refueling infrastructure.

Figure: Current land used for biofuels, food crops and pastures in Argentina, Brazil, Colombia, and Guatemala.