Biofuels Industry Challenges in 2020

The European Union (EU), has imposed the deadline for certain greenhouse gas reduction goals in this 2020, which many nations will struggle to meet, especially, Brazil and United States, the vital roles of the world’s largest producer of ethanol amid the challenging environment. This is the year EU members will need to reach the target of 10% renewable energy However, the global biofuels industry is still holding steady and driving ahead with new policies, innovations and legislation to promote more robust growth in the future.

The United States is still the world leader in ethanol production with its nearly 16 billion gallons representing 54% of global output. Exports declined slightly in 2019 to 1.5 billion gallons, which was second only to the record 1.7 billion gallons shipped in 2018. Brazil and Canada were the top two destinations, taking nearly half of the U.S. exports. Canadian shipments have been stable but those to Brazil did fall in 2019 because of higher ethanol production, continued implementation of a tariff rate quota and restriction of quota volumes from September to February, the Renewable Fuels Association (RFA) said.

“Prohibitive tariffs imposed by China in connection with the trade conflict with the United States caused shipments to fall to negligible levels for most of 2019,” the RFA said. “On the other hand, longstanding antidumping duties by the European Union, which the U.S. industry had actively worked to overturn, were allowed to end.” The RFA said resolution of the trade conflict with China could reopen a large-scale market. In addition, Canadian provinces are moving to higher blends as is India.

The EU, the world’s largest biodiesel producer is utilizing 53% of its production capacity.

In Brazil, the world’s second largest biofuels producer, sugarcane has been the main staple of ethanol production. But in the last five years, corn-based ethanol production has surged and it is not slowing down. Unem, the Brazilian corn ethanol producers’ association, estimates that will jump 86% in the 2020-21 season to 2.6 billion liters as new capacity comes online. Three new plants are expected to start operations this year. Another seven corn-based ethanol plants are under construction, according to Unem, and two of the largest sugarcane mills are considering adding corn ethanol production capacity.

Although the EU is the world’s largest biodiesel producer, the region has seen its production numbers fluctuate over the last eight years. Biodiesel represents about 75% of the total transport biofuels market in the EU, the USDA said. Consumption is driven almost exclusively by mandates and tax incentives. There is information that the EU has 188 biodiesel plants with a total production capacity of 21.23 billion liters, of which only 53% was utilized in 2019. The region also has 14 renewable diesel refineries with a total capacity of 5 billion liters, which is 60% utilized.

Also, several nations were adopting E10 usage, including Denmark, Hungary, Lithuania and Slovakia, in attempts to boost the use of renewables. Increasing that to E20, or a 20% blend, could be one solution in increasing total ethanol usage. Multiple studies over the last five years have shown this could be a viable option. This determined how much ethanol would be needed by 2030 with a 20% blend under different gasoline usage scenarios. In a low gasoline demand situation, the market would require a 3.2-billion-liter increase in the volume supplied as compared to 2017 volumes. In a high demand situation, an increase of 11.5 billion liters would be required.

In the EU, 2020 is a landmark year with several goals reaching their “due-by” dates, ePURE, the European renewable ethanol group, noted. This is the year EU members will need to reach the target of 10% renewable energy in transport under the Renewable Energy Directive. They will have to determine each country’s cap on the use of crop-based biofuel for the next 10 years. So far, only two countries, Finland and Sweden, have reached the target and two others, Austria and France, are close to reaching it.

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