Master Thesis

BIOFUEL DEVELOPM ENT IN LATIN AM ERICAN AND THE

CARIBBEAN: RI SKS AND OPPORTUNITI ES

ENTWICKLUNG VON BI OTREIBSTOFFEN IN LATEINAM ERIKA

UN D D ER KARI BIK: RI SI KEN UND M ÖGLI CHKEI TEN

By Cinthya Guerrero

Submitted to:

Brandenburg University of Technology, Cottbus, Germany

In partial fulfilment of the requirements for the degree of Master of Science in

Environmental and Resource Management

Date of Submission: 15 October 2008

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"

SUPPORTED BY THE

PROGRAMME ALBAN, THE EUROPEAN UNION

PROGRAMME OF HIGH LEVEL SCHOLARSHIPS FOR LATIN

AMERICA, SCHOLARSHIP NO. E06M100312MX"

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ACKNOWLEDGM ENT

Several persons have been actively involved in allowing this thesis to be concluded. First

of all, I would like to thank my first supervisor, Prof. Dr.-Ing. Gerhard Lappus for

accepting my topic and enable me to work in this particular field. I would also like to

acknowledge my second supervisor, Dr. Jörg Becker for his time and consideration

giving me useful hints and thought-provoking ideas. He provided me with the most

valuable guidance and critique for the completion of this thesis.

My friend Andrea Tönjes deserves credit as well because of her support teaching me how

to put together the pieces of my (sometimes) disjointed thoughts. Additionally, I would

like to thank PD Dr. Oliver Dilly from the Chair of Soil Protection and Recultivation for

his important inputs to this thesis.

Thanks also to MSc. Piotr Jaworski for the time he invested providing me with scientific

support.

I would also like to thank my "Cottbus family" for their encouragement for developing

this topic (I will not forget that late night kitchen-debate that shaped the beginning of this

wonderful project - Thanks Lauro!). Juan Pi Gutierrez deserves a special mention. He

managed to be surer of my ability than myself from the beginning of this venture.

Moreover, I would like to give my appreciation to Ivan Zaleta, with who I am immensely

indebted for his inspiration and support, professionally and personally.

Naturally, I would also like to thank my family, which makes everything I do, possible.

Finally, I would like to express my gratitude to the Programme Alßan. Without its support

it would not have been feasible for me to carry out and to complete this project.

AFFIDAVIT

I hereby declare that all information disclosed in this thesis is a product of my original

and individual work. Neither this work in its complete form, nor any of its parts has been

submitted to any university other than the Brandenburg University of Technology for the

award of any academic degree.

Furthermore, I confirm that all sources other than my own have been duly acknowledged.

Place, Date

(Signature)

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FOREWORD

In the light of availability concerns and environmental implications of fossil fuels,

attached with the remarkable rise in the price of oil during the past several years; biofuels

are getting a significant increase in interest worldwide from governments, private

investors, farmers and the public in general.

Nevertheless, the use of cropland for biofuels had become a very controversial topic.

On one hand, promoters state that biofuels represent opportunities to increase the energy

security and to generate environmental and social benefits (through greenhouse gases

emissions reductions and poverty alleviation through rural development respectively).

On the other hand, topics such as the effects on food prices and availability, soil fertility

and erosion, competition for scarce land and water resources and biodiversity loss are

also widely discussed as important concerns related to further development of bioenergy.

Notwithstanding this, several developing countries around the world are turning into the

biofuels direction to satisfy the demand of developed countries while contributing to their

economical growth and/or diversifying their current options of energetic arrangements.

For Latin America and the Caribbean (LAC), a geographical area with privileged natural

resources; home-grown energy crops emerge as an appealing possibility, especially given

the example of Brazil, a historical leader in ethanol production.

After assessing some core elements of the biofuel′s debate, the evidence seems to

suggest that biofuels may represent a valuable source of renewable energy. Nonetheless,

in order to represent a promise to the LAC region, local governments will be required to

firmly normalize land use and agricultural activities, while cautiously shaping public

policies. Whether the biofuels′ boom will represent an opportunity or a risk for the LAC

region would depend on how each country regulate agricultural and manufacturing

practices, including how many small farmers and workers from rural areas would benefit

from the industry.

Keywords:

Renewable resources, Biofuels risks and opportunities, Latin America and

the Caribbean, Ethanol, Biodiesel, Food vs. Fuel debate, GHG reduction, Holistic

approach to biofuels.

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TABLE OF CONTENTS

Acknowledgment

iii

Affidavit

iii

Foreword

iv

Table of contents

v

List of abbreviations

vii

List of tables

viii

List of figures

ix

1. Introduction

1

1.1 Motivation

1

1.2 The area under investigation

2

1.3 Research objectives and scope

3

1.4 Intended significance

3

1.5 Structure of the paper

4

1.6 Research methodology

5

2. Global energetic overview

6

2.1 Latin America and the Caribbean: Regional profile

8

2.1.1 Natural resources

9

3. Biofuels and their production

11

3.1 Definition of biofuels

11

3.1.1 Sources of biofuels

12

3.1.2 Alternative biofuels production pathways

13

3.1.3 Vehicle fuel compatibility

18

3.2 Biofuels globally

21

3.2.1 Production

21

3.2.2 Consumption

23

3.2.3 Future perspectives

24

4. Brazil

25

4.1 Outlook

25

4.2 History

29

4.3 Is Brazil ethanol really a model to follow?

33

5. Latin America & the Caribbean and the use of bioenergy

37

5.1 Latin America and the Caribbean: biofuels drivers

38

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5.2 Regional potential

42

5.3 Biofuel policy implementation

46

5.4 Biofuel production

51

5.5 Conclusion

56

6. Biofuels opportunities

59

6.1 Green House Gases (GHG) reduction potential

59

6.2 Energy security

66

6.3 Rural development

68

7. Biofuels risks

70

7.1 Food security- the "food vs. fuel" debate

70

7.1.1 Food price inflation

71

7.1.2 Proposed action

74

7.2 Environmental impacts and biodiversity loss

75

7.3 Water scarcity

79

8. Discussion and criticism

82

8.1 Latin America and the Caribbean: Undeniable potential

86

8.2 Biofuels in Latin America and the Caribbean: Key questions

87

8.3 Other externalities

89

8.4 Measures

90

8.5 Extras

93

9. Conclusions

95

Annex 1: Glossary

97

References

101

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LIST OF ABBREVIATIONS

CO2 carbon dioxide

CONCAWE Conservation of Clean Air and Water in Europe

E-5 5 % blend of ethanol/ gasoline

E-10 10 % blend of ethanol/ gasoline

EIA Energy Information Administration

EU European Union

FAO Food and Agriculture Organization of the United Nations

GHG greenhouse gases

ha hectare

IEA International Energy Agency

IPCC Intergovernmental Panel on Climate Change

JNCC Joint Nature Conservation Comitee

Kg kilogram

L liter

LAC Latin America and the Caribbean

OAS Organization of American States

OECD Organisation for Economic Co-operation and Development

OLADE Organización Latinoamericana de Energía (Latin American Organisation of

Energy)

UNCCD United Nations Convention to Combat Desertification

UNDP United Nations Development Programme

NNEC Network for New Energy Choices

UNFPA United Nations Population Fund

USCIAUnited States, Central Intelligence Agency

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LIST OF TABLES

Table 1

Top five fuel ethanol producers in 2005

22

Table 2

Top five biodiesel producers in 2005

23

Table 3

Brazilian′s ethanol exports in million of litres

28

Table 4

Latin America and the Caribbean countries′ energetic profile

39

Table 5

South American countries′ biofuel potential

43

Table 6

Central American countries′ biofuel potential

45

Table 7

Caribbean countries′ biofuel potential

46

Table 8

South American countries′ legal framework development in relation to biofuels

47

Table 9

Central American countries′ legal framework development in relation to biofuels 49

Table 10

Caribbean countries′ legal framework development in relation to biofuels

50

Table 11

South American biofuel production

51

Table 12

Central American biofuel production

55

Table 13

The

Caribbean biofuel production

55

Table 14

US fuel ethanol imports by country (2002-2007)

55

Table 15

Ethanol from grains

62

Table 16

Ethanol from sugar beets

63

Table 17

Biodiesel from Fatty Acid Methyl Esters

64

Table 18

Ethanol from Cellulosic Feedstock

65

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LIST OF FIGURES

Figure 1

World energetic consumption (1981-2006)

6

Figure 2

Regional consumption pattern (2006)

7

Figure 3

Ethanol Production steps by feedstock and conversion technique

13

Figure 4

World fuel ethanol production, (1975-2005)

21

Figure 5

World biodiesel production, (1975-2005)

21

Figure 6

Percentage of global production of fuel ethanol and biodiesel (2006)

22

Figure 7

The Brazilian energetic matrix (2005)

26

Figure 8

Brazilian′s ethanol production (2000-2010)

27

Figure 9

Ethanol fuel production by year

32

Figure 10

Potential for expansion of farm land once an E5 blend has been achieved

56

Figure 11

Potential for expansion of farm land once a B5 blend has been achieved

57

Figure 12 Index of per capita food energy supply

73

Figure 13 Holistic approach to the problem (1)

83

Figure 14 Holistic approach to the problem (2)

84

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1. I NTRODUCTION

1.1 M OTIVATION

Today, the modern global community is greatly dependent on non-renewable resources,

especially, on fossil fuels. Growth of their employment for long periods of time had taken

place as if there were not limitations in terms of availability or environmental implications.

Nevertheless, fossil fuels (especially oil) are distressed by geopolitical complexities that

augment price instability, affecting the economy in global terms.

In the light of the remarkable rise in the price of oil during the past several years and

considering that they can replace petroleum fuels in today′s vehicles; biofuels are getting a

significant increase in interest from governments, private investors, farmers and the public

in general worldwide. Therefore, it should not be a surprise that biomass is considered by

some players as a feasible alternative to comply with the current energy requirements.

Promoters state that biofuels represent opportunities to increase the energy security and

to generate environmental and social benefits (through greenhouse gases emissions

reductions and poverty alleviation through rural development respectively).

On the other hand, topics such as the effects on soil fertility and erosion, competition

for scarce land and water resources, and biodiversity loss are also widely discussed as

important concerns related to further development of bioenergy.

Maybe the most controversial implication of biofuels expansion is the significance of

agricultural resources for food security worldwide. This aspect has been intensively

discussed in the scientific and political sphere.

This last point is exactly from where the main motivation of this research came from.

It came from the concern about the possibility that large scale political decisions in this

matter would be justified notwithstanding social and environmental costs. This unease

might have been aggravated by the fact of coming from a net food importing country.

1

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