Brazil's sugar-energy industry ready to double in size by 2020, meet rising global, domestic demand for products, but accelerated growth cycle can only happen with new public policies, Unica says

SAO PAULO , December 8, 2011 (press release) – The Brazilian sugar-energy industry, recognized for the most successful large-scale project to replace fossil fuels with renewable energy on the planet, is ready to double in size by 2020 and meet rising demand for its products, both domestic and global. But a new and accelerated growth cycle can only happen with the introduction of stable and consistent public policies, which are essential if the industry is to regain competitiveness.

This was the central message delivered by the Brazilian Sugarcane Industry Association (UNICA) at a dinner held on Tuesday (12/06) in Brasilia with more than 200 guests. Among them were members of Brazil's upper and lower houses of Congress, representatives from several federal ministries and government agencies linked to the sugarcane productive chain, labour, business and non-government organization leaders, as well as chief executives from major ethanol, sugar and bioelectricity producers. At the unprecedented gathering, UNICA and its partner organizations also launched a new initiative that will become more visible in coming months: the "More Ethanol Movement".

During the main presentation (in Portuguese), UNICA President Marcos Jank detailed the need for public policies that restore and consolidate the competitiveness of hydrous ethanol. "If we intend to continue supplying half the fuel used in light vehicles in Brazil and half the sugar traded in the world, we must double our production, reaching the ambitious goal of 1.2 billion tons of sugarcane per year by 2020," he stressed. He called for an approach that would replicate what has been done for gasoline, where the main policy adopted by the government to restore competitiveness and return to growth would require cutting the tax load on ethanol.

Jank brought numbers showing a sharp deline in taxation on gasoline in recent years, without similar changes applied to taxes on ethanol. A major example is a federal regulatory tax known as Cide, which in 2002 was equal to 14% of the price of gasoline at the pump, but now amounts to only 2.6%. "With this, the difference between the tax load on gasoline and ethanol is now only four percentage points, which does not take into consideration a number of benefits from ethanol, placing Brazil in the opposite direction to what is practiced in much of the world," said the president of UNICA.

The extensive list of positive impacts generated by the large-scale production and use of ethanol in Brazil includes more than a million jobs, strong economic development in more than a thousand municipalities where the industry is active, domestic technological advancement, significant export revenues totalling US$15 billion in 2010 alone, as well as measurable impacts on public health.

These include reductions in the number of cases involving respiratory illnesses and deaths stemming from respiratory diseases in major urban areas, where the substitution of fossil fuel with ethanol is more significant.

Jank also mentioned what he described as a major highlight apparently being overlooked: international recognition of sugarcane ethanol as the planet's most advanced biofuel when it comes to mitigating global warming, because of its documented ability to cut greenhouse gas emissions by up to 90% compared with gasoline. For all those reasons, UNICA finds it strange that the Brazilian tax system has treated gasoline as the priority in recent years.

Additional measures suggested by UNICA include the elimination of a federal tax known as PIS-Cofins (tax for Social Integration Programs and Contribution to Finance Social Security) on hydrous ethanol, the introduction of special financing for off-season ethanol storage, construction of new mills and measures to speed up the expansion of bioelectricity. This clean energy option advances very slowly in Brazil, because of a series of regulatory and bureaucratic barriers.

Alongside measures that need to come from government, the president of UNICA noted that the sugarcane industry is also ready to make contributions. "We have to pursue cost reductions, mainly through efficiency and productivity gains, plus the development and dissemination of new technologies that will give the industry economies of scale," he said.

According to Jank, the ‘More Ethanol Movement’ will focus on raising awareness among opinion leaders and decision makers in both the public and private sectors, through activities in partnership with agencies and companies within the sugarcane production chain. Key partners and sectors are expected to get involved, including fuel distributors, the auto industry, automotive, farm machinery and implements dealerships, and suppliers of major imputs for the sugarcane industry in general. Rounding out the effort, an awareness campaign will be launched in early 2012.

As he highlighted the main objectives of the “More Ethanol Movement,” Jank pointed to the consolidation of ethanol as a strategic issue for the economy, the environment and the country future. "We need to focus our dialogue on positive aspects of the sugarcane industry, and the prospects for economic, environmental and social gains, which will only be achieved if we are able to accelerate growth once again. Getting there involves more than our desire as an industry. It involves essential public policies that lead to solid and sustainable growth," he concluded.

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