DUBAI – The world’s attention in the closing days of COP28 in Dubai has been firmly focused on the likelihood of a “fossil fuel phase-out” making it into the final cover text. Before that, the hype was around the pledge to triple renewables and double the rate of energy efficiency, and the 130 countries that signed it. For advocates of other low-carbon technologies such as biofuels, there is a risk of COP28 leaving them feeling a bit left out.
“There are certainly lots of people interested in talking about biofuels, but I think there has not been enough focus [on them here at COP28],” said Caio Dafico, new business and opportunities vice-president at Atvos, Brazil’s second-largest producer of the biofuel ethanol, in an interview with Energy Monitor.
“We want to raise the profile of biofuels, and have a global discussion about how they can be used to accelerate the global energy transition”.
Little-known outside of Brazil, Atvos is a Brazilian energy giant, employing 10,000 people and capable of producing enough ethanol (3.3 billion litres) to power 60 million ‘flex-fuel’ cars on 100% ethanol per year.
Flex-fuel technology – which is installed in 85% of light vehicles in Brazil – allows Brazilian cars powered by internal combustion engines to use up to 100% ethanol as their fuel.
Ethanol’s origins in the Brazilian car market relate to the 1973 Opec oil embargo, which led to oil prices quadrupling and brought Brazil’s energy supply – it imported 80% of its petroleum – to its knees. The military dictatorship at the time subsequently began a major policy push for what has become the largest biofuel industry in the world.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
Since flex-fuel was launched, ethanol use has prevented 630 million tonnes of CO₂ equivalent being released into the atmosphere, according to UNICA, the Brazilian Sugarcane Industry and Bioenergy Association. The presence of biofuels in the transport sector – as well as the fact that Brazil generates 80% of its electricity from hydroelectric plants – means that Brazil has one of the cleanest energy mixes in the world, with 50% renewable energy consumption (and 32% of renewable energy from biofuels).
Globally, biomass is expected to be a key pillar of net zero: demand for ‘modern bioenergy’ (which excludes ‘dirty’ biomass like charcoal for cooking) increases from 40 exajoules (EJ) in 2020 to 100EJ in 2050, according to the Net Zero 2050 pathway produced by the International Energy Agency (IEA). Industries like paper and cement, as well as heavy-duty transport, power and heating, are set to be major consumers of solid, liquid (biofuels) or gaseous biomass, says the IEA.
However, biomass – and biofuels – remain controversial in some circles, with critics arguing that they produce toxic pollution when burnt, and can drive deforestation if not sourced from ethical suppliers.
Others have criticised biofuels as threatening food security at a time when risks like Russia’s invasion of Ukraine as well as the escalating climate crisis threaten global harvests. When Russia first invaded Ukraine, critics of biofuels pointed out that some 3.3 million tonnes of wheat were used in 2020 as feedstock for EU biofuels, which is equivalent to around one-fifth of Ukraine’s 2020 wheat exports (16.4 million tonnes).
In the case of Brazil, there are long-established concerns from environmentalists over the destruction of natural habitats by the agricultural sector. Well-publicised investigations have linked illegal deforestation in the Amazon with meat and dairy products found in Western supermarkets.
However, says Atvos, the land that sugarcane grows best on means there is no such threat to the Amazon from the bioethanol industry.
“Our operations are based in the centre-south regions of Brazil, which is a savannah landscape and far away from the Amazon,” said Dafico. “The best place to grow sugarcane is on degraded land, such as that which has previously been used for cattle pasture. Growing sugarcane actually improves the land.”
He also points to the fact that – so long as you are not operating illegally – Brazil has some of the most developed environmental regulations in the world for agricultural companies.
“Globally, a lot of negative stories come out of the agricultural sector in Brazil, and it is not that we should forget about them, but there is a risk that these crowd out the good solutions that can help the world meet its environmental targets,” he said.
David Tsai, projects coordinator at the Institute for Energy and the Environment, a Brazilian nonprofit engaged on biofuels, who was also present at COP28, concurred that sugarcane plantations are not located in the Amazon region, that they can be grown on degraded land, and that they require much less space than other crops like soy.
Atvos came to COP28 with a bold biofuel expansion plan. Abu Dhabi state investor Mubadala Capital has invested heavily in the company, acquiring a stake worth 31.5%. With this new financial backing, the company is looking to expand into other sectors requiring biofuels in their energy transitions, such as sustainable aviation fuel (SAF) production, and also to begin exporting outside the Brazilian market.
The company has plans to invest $1.6bn (7.93bn reais) in new production over the coming three years, and is lobbying hard for more amenable biofuel regulations in other markets. COP28 and its partnership with the United Arab Emirates give it a platform to take biofuels to the next level.
“Mubadala is looking to use us as a platform to push biofuels worldwide, and we intend to start exporting [bio]ethanol worldwide,” said Dafico. “We want to create global ethanol markets and begin trading it as a commodity like iron ore or crude oil, rather than the country-orientated market specifications that currently exist.”
He added that electrifying the car sector by mid-century is unrealistic in a lot of developing countries with limited charging infrastructure and electricity grid coverage. Atvos believes that the model of Brazil’s flex-fuel cars could be replicated worldwide.
It is a bold idea, but others are not so sure it could become a reality.
“Companies have been pledging to develop Brazilian ethanol for export year after year, but the truth is, Brazilian ethanol producers cannot even fully supply their own market,” said Tsai. “This is due to the cost of production: there tends to be a pattern that Brazilian car markets nearer sugarcane and ethanol production are supplied with ethanol, while those further away are supplied with gasoline, which is cheaper.”Keep up with Energy Monitor: Subscribe to our weekly newsletter
Tsai adds that the future of flex-fuel remains uncertain in Brazil itself, given the fact that the majority of global car manufacturers are now planning to phase out the combustion engine as old models are replaced with electric vehicles.
Nevertheless, given expected new demand for biofuels in other sectors, and the prospect of new clean energy policies on the back of COP28 to accelerate progress towards net zero, it makes sense to be a company poised to seize the opportunity of potential new biofuel markets.
Brazil also has land to expand ethanol production, with around 20% of the country’s landmass currently classified as “degraded”, and therefore able to grow sugarcane.
“We are blessed with an incredible clean energy matrix in Brazil; we want to share what we have learned with the world so that other countries can also benefit,” says Dafico.