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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

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 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
potential as energy crop depends on
Potential as energy crop depends on:
  • Price of sugar
  • Price of energy
  • Government incentives
  • Environmental benefits
co generation seems to hold the greatest promise
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
ethanol economics
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
understanding the risks
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
crude oil prices are high because
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
sugar market in transition
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
sugar prices13
Sugar prices

Forecast

conclusion
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 …
slide15
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