75 Green Businesses You Can Start to Make Money and Make a Difference. Glenn Croston
(Energy Information Administration, 2005). Brazil gets about 40 percent of its auto fuel (not including diesel cars) from sugarcane ethanol, producing 282,000 barrels of ethanol a day in 2005 (Nature, December 7, 2006). Although the United States currently imposes a $0.54-per-gallon import duty on Brazilian ethanol, it is attracting worldwide attention and money from investors such as George Soros, who is investing $900 million.
Objections often have been raised to the environmental impact of growing sugarcane and producing ethanol from it. The ideal biofuel does not just displace petroleum but can be produced without damaging the environment, providing a sustainable-fuel alternative. The 2006 report “Sustainability of Brazilian Bioethanol” from Utrecht University in the Netherlands, gave it a score of “average” to “very positive,” confirming its overall climate benefit. While cane fields in the past were burned, new practices encourage cane to be farmed more sustainably, leaving residue in fields to compost rather than burning it. Many new distilleries in Brazil burn cane waste as fuel instead of burning fossil fuels, and many of Brazil’s sugarcane growers are signing agreements to use sustainable production methods. Increasing awareness of the need for sustainably produced fuel will drive some buyers on the international ethanol market toward fuel that is certified as being produced in an environmentally sustainable manner.
The sugarcane approach is being developed in other regions with tropical and subtropical climates, trying to replicate Brazil’s success. The Brazilian story took decades of work farming, harvesting, distilling, distributing, designing fueling stations, and developing cars that could handle the fuel. This process takes time and effort, but if Brazil has done it, others can too, particularly if the price of oil continues its upward climb. Barring policy changes in the United States, it may be more productive to invest in sugarcane production elsewhere. The U.S. market is big for biofuels but it is not the only one. There is room around the world for greater cane production without cutting into food production, and if the cane is grown responsibly and sustainably, it will have the same impact on climate and oil use whether the crop is grown in India or in Florida.
What about importing Brazilian ethanol to the United States? The current tariff makes this expensive, pricing Brazilian ethanol above U.S. corn ethanol. The US corn lobby will put up a stiff fight before the ethanol tariff changes, and it would take a brave politician to support this move. It may not be likely, but if the tariff is lifted, it would create an instant opportunity for importing, distributing, and supplying ethanol from Brazil.
What about U.S. production of ethanol from sugarcane? Sugarcane in the United States is produced mainly in parts of Florida, Louisiana, and Texas along the Gulf Coast. Climate is one factor restricting sugarcane production and use for ethanol, but it’s not the only factor. The US Department of Agriculture published a report in 2006 on “The Economic Feasibility of Ethanol Production from Sugar in the United States,” finding that production of ethanol from molasses was cost-effective in the United States but production from cane sugar was less so.
INFORMATION RESOURCE
You can find the 2006 report at the USDA website, usda.gov, by searching for “sugarcane ethanol.”
Why does ethanol production from cane work so much better in Brazil? One important reason is government policy. The U.S. sugar program keeps the price of sugar about twice as high in the United States when compared to the rest of the world, making the cane sugar too expensive to use for ethanol production. With increased support for sugar-to-ethanol production, the process can be more competitive. Hawaii already is moving to increase ethanol production from cane by requiring that gasoline there include 10 percent ethanol. Sugarcane ethanol probably is never going to be as big in the US as Brazil, but with lower sugar prices and greater incentives, more cane sugar would be used for ethanol production.
One opportunity to move sugar-to-ethanol production in the United States forward is to use sugar mixed with starch from corn during fermentation, thereby increasing the overall yield of ethanol production. This strategy has been proven to work in the past when the price of sugar was low. Another path forward is by combining fermentation of sugar with the cellulose of the rest of the sugarcane plant. Today, this material often is considered waste but improved cellulosic ethanol production would increase sugarcane ethanol productivity and lower its cost. Locating ethanol production close to where cane is grown and creating ethanol production co-ops in these areas also keeps costs low and helps build viable businesses.
RELATED TREND
Finding coproducts from sugarcane plants in addition to ethanol can allow more money to be made from the same amount of crops, potentially reducing the number of plants needed to get started. Academic, government, and industry researchers around the world are finding creative ways to use parts of the sugarcane plants to make other products.
The barriers to making ethanol from cane sugar in the United States may seem daunting, but they are no more daunting than the obstacles standing in the way of other transportation solutions. Sugarcane ethanol can be produced economically, as Brazil has demonstrated. What is blocking the U.S. market is government policy, not science or technology. The same cannot be said of cellulosic ethanol (See Opportunity 5) or hydrogen fuel-cell cars. Policy may seem immovable, but it’s not written in stone; it can change, and a chink in the armor already may be developing. One provision of the North America Free Trade Agreement (NAFTA) of 1994 stipulates that Mexico can export unlimited sugar to the United States starting in 2008. Under current sugar policy, the U.S. government may be obligated to buy hundreds of millions or even billions of dollars worth of sugar to maintain current price supports and then sell it at a steep loss to ethanol producers.
INDUSTRY INFO
For the sugarcane industry’s perspective, see the American Sugar Cane League (amscl.org).
Types of sugarcane-to-ethanol opportunities include:
We often are looking for “the solution” to our energy needs, the one answer that provides low-cost energy without polluting, degrading cropland, raising food prices, destroying habitat, or contributing to climate change. Cane sugar might not ever supply all of our energy needs, or provide the solution for everything, but entrepreneurs supplying ethanol from sugar can build a good business with the right conditions in place. With the continued pressure to increase our energy security and fight climate change, a shift in U.S. policy to encourage the production of ethanol from sugarcane might be just around the corner.
OPPORTUNITY 5 Breaking the Cellulosic Ethanol Barrier
| The Market Need | Cellulosic ethanol still is not a cost-effective business |
| The Mission | Make cellulosic ethanol cost effective |
| Knowledge to Start | Farming, distribution, fermentation |
| Capital Required | $$$$ |
| Timing to Start | Years |