Considerations of ecological sustainability of the Brazilian Biodiesel Program

As Brazil ramps up its biodiesel program with the current mandatory 5% blend (B5) expected to increase to 7% or even 10%, serious considerations on sustainability should be examined and addressed before 1) irreversible damage to the environment negates the gains of the program, and 2) infrastructure investments create sunk costs that perpetuate inefficient production schemes.

Current conditions indicate that about 90% of the biodiesel produced in the country will come from soybean oil for the foreseeable future[1]. However, because other feedstock such as palm oil (or microalgae in the future) are more efficient than soybeans, it stands to reason that the desire to develop these crops for biodiesel production will increase in the short to medium term. But if the needed infrastructure is built around soybeans, it will serve as a perverse incentive to continue relying on soybeans to the detriment of other potentially more efficient methods.

For example, the West-Central state of Mato Grosso has been the center of soybean agriculture for decades, and recently a spate of biodiesel refineries were built there so that the state now has the most refineries (23 out of 64) and the largest refining capacity (almost 1.2 million m3/yr) in the country[2]. This is in obvious anticipation of the continuing dominance of soybean oil in the production of biodiesel. And if the government expands financing of transportation infrastructure to facilitate soybean agriculture, it will only entrench the soybean interests, further exacerbating the problem.

Soybean not most sustainable

Such reliance on soybeans erodes the sustainability of the program as a whole. Other crops such as palm and sunflower may be more efficient in their oil output per hectare[3] but, for now, soy agriculture is a well-established practice in Brazil and the economies of scale give it clear advantage over other crops. Brazil is already the world's second largest exporter of the grain behind the United States, and domestic demand is expected to grow significantly in response to biodiesel demand. Some critics have noted that the soybean lobby is a powerful political force in Brazil and that the biodiesel program amounts to little more than guaranteed revenue for big agribusiness interests.

The current difficulties of the Spanish Feed-in-Tariff system should sound a cautionary note to a policy's unforeseen consequences. With no environmental protection provisions included, the costs to society may well exceed the benefits so ecological certification should be enacted to mitigate the impacts of industrial agricultural methods spurred by policy incentives. As biodiesel production rises worldwide, the time is ripe for a serious discussion on biofuel sustainability.

There are several problems raised by reliance on soybeans to meet demand for biodiesel. They include indirect land use changes (ILUC) leading to increased deforestation, and the preference for mechanized agriculture that increases water pollution, soil depletion and excludes or displaces small family farmers[4]. Additionally, an increase in transportation infrastructure has been linked to soybean agriculture and is further driving deforestation in the West-Central region's cerrado savanna and southern Amazon forests[5].

Oil palm is a much more efficient crop, with oil yields per hectare ten times higher than soybeans[6]. However, oil palm plantations also cause negative environmental impacts such as a higher demand for water meaning it would have to be cultivated in the Amazon region, leading to deforestation there. Nonetheless, at least one study has shown that palm is ecologically more efficient than soybean when all inputs - land use, fertilizer, water, energy, etc - are aggregated, normalized and compared[7]. In general, palm oil seems to be by far the most efficient oil producer. So shouldn't the refining capacity be built with an eye to diversification of the feedstock?

Regional differences

It is important to remember that Brazil is a country of continental proportions and that each crop has its optimum region. Oil palm will not be efficient in the West-Central region where soybean thrives so that refineries built near the soy-growing regions will be far removed from potential palm or castor bean plantations. This is why infrastructure built in the West-Central region will represent a sunk cost favoring soybean as the main feedstock. And because the greenhouse gas and energy balance of soybeans is modest, the potential gains of the program would be compromised. Brazil already has about double the refining capacity that it uses but new refineries are still being built around the soybean model. Archer Daniels Midland and Cargill have joined forces recently to invest up to US$560 million in new refineries and Bunge Ltd just received approval for a refinery with capacity for 100,000 gallons/day to process soybean oil exclusively[8].

Consequences of ILUCs associated with soybeans can be significant enough to negate one of the main benefits for biofuels, namely, Greenhouse Gas (GHG) reduction potential. Because a significant improvement in soybean productivity is extremely unlikely, the only possible option is increasing its cultivated area. Although most land converted to soybeans comes from livestock ranching, several studies show that this in turn pushes the ranchers closer to the deforestation frontier increasing pressure on virgin forests[9]. In fact, the Brazilian National Space Research Institute (Instituto Nacional de Pesquisas Espaciais - INPE) has just released satellite data showing that deforestation in the West-Central region of the country has increased sharply in the first five months of 2011 after having been in decline for several years. Some speculate this is in anticipation of the potentially more stringent regulations of the new Forest Code currently making its way through the Brazilian Congress. The new Code has generated plenty of controversy and the main sticking points revolve around agriculture-driven deforestation of the cerrado savanna biome of the West-Central region[10].

Another often-overlooked aspect of Brazilian biodiesel in particular is that it uses sugarcane ethanol as an input in the refining process, around 130 Kg per 1000 L of biodiesel produced[11]. Therefore, an increase in biodiesel production implies an increase in sugarcane cultivation, which is also expanding rapidly in the West-Central region of Brazil for the same reasons as soybeans: inexpensive land, flat topography suitable to mechanized agriculture, and favorable soil and climate conditions. The pressure on virgin stands of the cerrado and Southern Amazon is therefore compounded.

Water a concern

Soybean and sugarcane grown in Brazil use rainwater exclusively so direct impacts on water resources are limited to water quality issues. However, by displacing other types of agriculture from regions with ample rainfall to areas requiring irrigation (such as the arid Northeast), soy and sugarcane cause indirect impacts on water quantity as well. Moreover, significant changes to the region's rainfall patterns have been attributed (at least partially) to deforestation[12]. Recent droughts have caused a reduced sugarcane harvest that, coupled with a high international price of sugar, makes it more lucrative to turn cane into sugar than into ethanol. As a consequence, in 2010 Brazil became a net importer of ethanol, importing 70 million litres of corn ethanol from the United States[13]..

Yes, the United States. Recent expansion of biodiesel production in Asia has already caused a significant rise in prices of palm oil used for cooking[14] and in Brazil, beef tallow prices doubled in response to demand for biodiesel production[15]. International demand for soybeans has also been on the rise, particularly from China, so a rise in biodiesel demand might well contribute to rising soybean prices. In the event of drought causing reduced harvests, Brazil might be forced to import biodiesel or expand deforestation to meet its quotas. Even if this may seem an unlikely scenario in the short term, energy policy should always be a long-term endeavor. And, given that agricultural yields are subject to climatic conditions, medium-term climate change should be part of the cost-benefit analysis[16].

Energy production does not happen in a vacuum but by counting only the positive but not the negative impacts of increased agriculture, the biodiesel program treats it as if it did. There is no environmental accreditation scheme to address negative impacts but there certainly should be one to ensure the highest water and soil use efficiency, minimal deforestation from land use changes or related infrastructure, and enough flexibility to ensure usage of crops with the highest oil yields.

Environmental accreditation is at the heart of the recent controversy surrounding European biofuels policy. The European Commission was sued over the accreditation schemes and the lack of transparency on how they were created. The World Bank has also halted financing of palm oil projects because of negative socio-environmental impacts, and a discussion of accreditation schemes has emerged. The Roundtable on Sustainable Fuels (RSB) is one initiative trying to address the problems[17]. The Brazilian government is using incentives to generate investments in biofuels, and forcing refineries to purchase socially certified feedstock from family farms. The program should also create mechanisms that reward ecological efficiency, thus making other crops more competitive with industrial soy.

As the world's forests continue to dwindle, Brazil's Amazon will surely only increase in value. A robust ecological accreditation scheme would ensure that this treasure is protected from mindless degradation that can very well be prevented with minimal cost to development. Such a long-term outlook that includes and encourages other crops to gain dominance in the biodiesel feedstock mix would prevent putting all our bets in the soybean camp and finding ourselves stuck with misplaced infrastructure that takes decades to build and amortize.

REFERENCES

1) Nogueira, LAH. Does Biodiesel Make Sense? Energy 36 (2011) 3659-3666.

2) Oilseeds and Products Annual - 2010 Annual Oilseeds Report. USDA Foreign Agriculture Service report. April 2010. Citing data from Brazilian Agência Nacional do Petróleo. Accessed online here.

3) Nogueira 2011. ibid.

4) The social inclusion clause requiring refiners to purchase up to 50% of feedstock from family farms has had mixed results at best and, in some regions has failed to improve small farm participation. [See for example, Garcez, CAG and Vianna JNS. Brazilian Biodiesel Policy: Social and Environmental Considerations of Sustainability. Energy. 34 (2009) 645–654].

5) Vera-Diaz, MC; Kaufmann, RK; and Nepstad DC. The Environmental Impacts of Soybean Expansion And Infrastructure Development in Brazil’s Amazon Basin. Global Development and Environment Institute. Working Paper No. 09-05. May 2009. Accessed online here. This paper also shows that if environmental impacts are included in the cost-benefit analysis (CBA) of paving the Cuiabá-Santarém highway then a net loss to society of US$762 million to US$1.9 billion would be incurred. Without the inclusion of ecosystem services losses and environmental impacts in the analysis, the CBA shows the paving would generate savings of about US$10/ton in the transport of soybeans from the Northern part of Mato Grosso state. Paving this major highway would also expand the area where growing soybeans is economically feasible by about 70%, and would generate some US$180 million for soybean farmers over a period of 20 years.

6) Nogueira 2011. ibid.

7) Anderi, GS and Marzullo RCM. Comparison Between Palm and Soybean Oils Eco-Efficiency for Biodiesel Production. Presentation to GP2 Group of Pollution Prevention Life Cycle Assessment VIII. Seattle 2008.

8) Ausick, P. Alternative Energy Watch: More Biodiesel Planned in Brazil; Solar Struggles on Two Continents; So Does Wind (ADM, BG, LNT). 24/7 Wall Street. Accessed online here.

9) Lapola, DM, Schaldach, R, Alcamo, J, Bondeau, A, Koch, J, Koelking, C and Priess, JA. Indirect land-use changes can overcome carbon savings from biofuels in Brazil. Proceedings from the National Academy of Sciences of the United States of America. Feb 23, 2010. Volume 107. Number 8. Pages 3388-3393. Accessed online here. This paper also estimates that: a) ILUCs would increase the carbon emissions payback time from soybean biodiesel by 246 years (p.3389). b) Oil palm would only require an additional 4,200 Km2 of expansion compared to 108,100 Km2 for soybeans. "... results show that if the smallest area and carbon debt from LUC are given priority, then oil palm would be the best feedstock for biodiesel by far." (p.3390) b) The paper predicts that, as biofuels displace ranching, livestock density will increase. "The modeled livestock density increases by 0.09 head per hectare. But a higher increase of 0.13 head per hectare in the average livestock density throughout the country could avoid the indirect land-use changes caused by biofuels (even with soybean as the biodiesel feedstock), while still fulfilling all food and bioenergy demands. We suggest that a closer collaboration or strengthened institutional link between the biofuel and cattle-ranching sectors in the coming years is crucial for effective carbon savings from biofuels in Brazil." (p.3388). This again points to the availability of mechanisms to mitigate the negative effects of increased oil crop cultivation. What is needed, but conspicuously missing, is a government effort to coordinate stakeholders in a comprehensive attempt to ensure the socio-environmental sustainability of the program.

10) For a summary of news items covering the whole debate surrounding the Forest Code see here  [In Portuguese].

11) Bartholomeu, DB and Silveira, LT. Impactos do Programa Nacional do Biodiesel na economia brasileira: uma aplicação do modelo Minimal de Equilíbrio Geral. Organizações em Contexto. 6 (3) September 2007. [In portuguese] This paper also states that most other countries that do not have a robust bioethanol program like Brazil, use petroleum-derived methanol as the input in the trans-esterification process. Methanol trans-esterification is more efficient than its ethanol counterpart, requiring 90 Kg of methanol per 1000 L of biodiesel produced.

12) Magalhães, GMO. Avaliação do Impacto de Biocombustíveis na Disponibilidade Hídrica do Cerrado. Master's Thesis. University of Brasília. 2007. [In portuguese]

13) Brazil Imports of US Ethanol Soar. Financial Times. May 5, 2011. Accessed online here.

14) The other oil shock: Vegetable oil prices soar. The New York Times. Jan 01, 2009.

15) de Almeida, EF; de Souza e Silva, CM. The Performance of Brazilian Biofuels: An Economic, Environmental and Social Analysis. FURJ Working Paper 5. OECD International Transport Forum. Accessed online here.

16) Lucena et al. The Vulnerability of Renewable Energy to Climate Change in Brazil. Energy Policy: 37 (2009) 879–889 17) Roundtable on Sustainable Biofuels. Also available online.