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The Transferability of Brazilian Knowledge and Technology. Donald Mitchell* World Bank *Lead Economist, Development Prospects Group April 25, 2006 . Sugar cane as an energy crop. Sugar cane produces a large amount of biomass per hectare (80 tons)

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The Transferability of Brazilian Knowledge and Technology

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The transferability of brazilian knowledge and technology l.jpg

The Transferability of Brazilian Knowledge and Technology

Donald Mitchell*

World Bank

*Lead Economist, Development Prospects Group April 25, 2006


Sugar cane as an energy crop l.jpg

Sugar cane as an energy crop

  • Sugar cane produces a large amount of biomass per hectare (80 tons)

  • Cane juice can produce ethanol or sugar

  • Bagasse can be burned to produce electricity

  • Molasses can be used to produce ethanol, other alcohols and other products


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Potential as energy crop depends on:

  • Price of sugar

  • Price of energy

  • Government incentives

  • Environmental benefits


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Co-generation seems to hold the greatest promise

  • Cane residue (bagasse) is a clean burning fuel

  • High pressure boilers can produce electricity from bagasse to power sugar factory and supply electricity to national grid

  • Economically viable because bagasse has almost no other value

  • Reduces cost of sugar production by removing power plant from factory


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Ethanol economics

  • Prices of ethanol have been high and sugar low – ideal conditions for ethanol

  • But sugar prices have tripled in past two year which changes the profitability

  • Ethanol is profitable in Brazil because it is the world’s lowest cost producer of sugar and has large installed ethanol production capacity


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Equivalent prices of sugar, ethanol gasoline, and crude oil


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Understanding the risks

  • Crude oil prices are at record highs and will likely fall over the longer term

  • The global sugar market is undergoing a major restructuring and prices may not return to previous lows

  • Large investments in ethanol could become very unprofitable

  • Large subsidies to ethanol production divert resources away from more economic uses


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Crude oil prices $/bbl


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Crude oil prices are high because

  • Lack of surplus production capacity due to many years of low prices and little incentive to invest

  • Rapid demand growth from China and other countries

  • Supply disruptions – hurricanes in US, strikes in Nigeria, terrorist strikes in Iraq

  • Uncertainty about future supplies


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Crude oil prices $/bbl

Forecast


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Sugar market in transition

  • EU policy reform could make the EU a large net importer

  • Many ACP countries will reduce exports because of EU price cuts

  • Global sugar market will be restructured

  • Sugar prices may not return to previous low levels


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Sugar prices


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Sugar prices

Forecast


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Conclusion

  • Co-generation appears to be profitable and has environmental advantages

  • Ethanol production from sugar cane is not profitable for most countries even at current high prices

  • Risk to investing in ethanol production is that energy prices will fall and/or sugar prices will remain high, and …


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  • Governments could be left supporting large ethanol industries which are unprofitable

  • Resources could be diverted from more efficient uses such as food crop or export crop production


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