Brazil signs deal to export sustainable ethanol

Reuters
June 25, 2008

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SAO PAULO,--- A group of Brazilian ethanol companies signed a deal to export certified sustainable ethanol to Sweden, in the world's first agreement of such a kind, they said on Wednesday.

Brazilian groups Cosan , Guarani , NovAmerica and Alcoeste agreed sell to Sweden's Sekab 115 million liters of anhydrous ethanol that will adhere to certain social and environmental standards.

"This initiative addresses European consumers' concerns related to the sustainability of ethanol," Martinho Seiiti Ono, director at trading company SCA that will manage the exports, said.

"It is the first practical application of verified sustainable ethanol and is a major step toward realizing an international standard," Ono told reporters.

Mills will receive 5 to 10 percent more for the certified product than for a similar ethanol without traceability, he said, declining to give other details.

The deal will be valid for at least nine months and the first cargo was shipped earlier in June.

Among the standards is zero tolerance for child or slave labor. Mills must use at least 30 percent mechanized harvesting today and increase this to 100 percent by 2014. An independent international company will audit all the groups production units twice a year.

Sustainable ethanol will result in a reduction of carbon dioxide emissions from farming, production and transport to Sweden by at least 85 per cent compared with petrol, Anders Fredikson, vice-president at Sekab, said.

"There have been many articles about forced labor in Brazil and also ecological issues, deforestation of the rain forest, local pollution... We are in the business and know many are exaggerated, some are false," Fredikson said.

"But the public in general (in Sweden) doesn't know what to believe and it buys the biofuel for ethical reasons... so it's important to assure its sustainability."

He said flex-fuel cars, which are normally filled with E85 in Sweden, account for 25 percent of all new cars sold. Ethanol consumption in the country will surpass that of gasoline in eight years if this trend continues.

The European Union imposes an import tariff of 0.19 euro per liter over ethanol and a tariff of 0.03 cent per liter over imported E85.

Sweden consumes about 800 million liters of ethanol per year and at least half of that is supplied by Brazil.

E85 is currently sold at filling stations in Sweden for around $1.40 per liter.

At least 10 groups around the world are currently discussing sustainability standards for ethanol and a certification criteria that could be adopted worldwide but no decision has been taken yet about this.

Brazil's industry expects to meet part of the world's demand for alternative fuels in the coming years and is preparing to address growing concerns about environment and social concerns related to ethanol production.

About 90 percent of the mills in Sao Paulo state, Brazil's largest in cane production, have signed a deal with the state government to end cane burning by 2014. A similar national agreement has been discussed with the federal government.

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