Biofuels Experience Growth Spurt

Biofuels Experience Growth Spurt

High oil prices, economic rebound, new mandates spur growth of ethanol, biodiesel.

The world's appetite for biofuels is surging because of high oil prices, a global economic rebound and new laws and mandates, according to research done by the Worldwatch Institute's Climate and Energy Program.

Global production of biofuels increased 17 percent in 2010 to reach an all-time high of 105 billion liters, up from 90 billion liters in 2009, the research found.

The United States and Brazil remain the two largest producers of ethanol. In 2010, the United States generated 49 billion liters, or 57 percent of global output, and Brazil produced 28 billion liters, or 33 percent of the total. Corn is the primary feedstock for U.S. ethanol, and sugarcane is the dominant source of ethanol in Brazil.

"In the United States, the record production of biofuels is attributed in part to high oil prices, which encouraged several large fuel companies, including Sunoco, Valero, Flint Hills, and Murphy Oil, to enter the ethanol industry," said Alexander Ochs, Director of Worldwatch's Climate and Energy Program. High oil prices were also a factor in Brazil, where every third car-owner drives a "flex-fuel" vehicle that can run on either fossil or bio-based fuels. Many Brazilian drivers have switched to sugarcane ethanol because it is cheaper than gasoline.

"Although the U.S. and Brazil are the world leaders in ethanol, the largest producer of biodiesel is the European Union, which generated 53 percent of all biodiesel in 2010," said Ochs. "However, we may see some European countries switch from biodiesel to ethanol because a recent report from the European Commission states that ethanol crops have a higher energy content than biodiesel crops, making them more efficient sources of fuel."

Proposed legislation in the U.S. Senate would cut current ethanol production subsidies while maintaining tax credits for related infrastructure such as refilling stations. If supports like subsidies and tariffs are removed in the United States, sugarcane ethanol from Brazil will likely become more prevalent. Although sugarcane ethanol has the benefit of being cheaper and more efficient to produce, there are concerns that increased production will speed deforestation in Brazil as more land is cleared for feedstock cultivation.

Additional study findings included:

The U.S. became a net exporter of ethanol for the first time, sending a record 1.3 billion liters abroad, a 300 percent increase over 2000, largely because of unsteady ethanol production in Brazil.

Sugarcane ethanol supplies 41.5 percent of the energy (48 percent of the volume) for light-duty transportation fuels in Brazil.

Asia produced 12 percent of the world's biodiesel in 2010, a 20-percent increase from 2009, mostly using palm oil feedstock in Indonesia and Thailand.

Virtually all of the 1.5 billion liters of Argentina's biodiesel exports, representing 71 percent of total production, went to Europe.

Canada has national mandates for the production of E5 (5 percent ethanol and 95 percent gasoline) and B2 (2 percent ethanol and 98 percent gasoline), and four Canadian provinces have individual mandates up to E8.5.

In the United States, eliminating the $0.54 per gallon import tariff and $0.45 per gallon blenders' credit would reduce the ethanol industry's profits by 7 percent and its margins by 20 percent, according to the University of Missouri's Food and Agricultural Policy Research Institute.

Brazil plans to build 103 new sugarcane mills by 2019, increasing production capacity by 66 percent.
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