Transcript The Value Added Benefits and Economic Impacts of Biofuel

Economic Impacts and ValueAdded Benefits of Biofuel in the
United States
Hosein Shapouri
United States Department of Agriculture
Office of the Chief Economist
[email protected]
International Convention on
Biofuels-Driving India’s Future
November 7-9, 2002, New Delhi, India
Overview
• World Crude Oil Price and Demand
Projections
• Biofuels:
Fuel Ethanol and Biodiesel
Incentives
Value Added Benefits
Economic Impacts
World crude oil price and demand projections,
2000-2020
30
140
Dollars per barrel
100
20
80
15
60
10
40
5
20
0
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Oil price
Oil demand
Million barrels per day
120
25
Crude
2000
Gasoline
2001
MTBE
2002
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept
August
July
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept
August
July
June
May
April
March
Feb
Jan
Dollars per gallon
Crude oil, gasoline, and MTBE prices
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Gasoline
2000
MTBE
2001
Ethanol
2002
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept.
August
July
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept.
August
July
June
May
April
March
Feb
Jan
Dollars per gallon
Prices of gasoline, MTBE, and ethanol
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Biofuels
• Ethanol:
Feedstocks-Starch (grains, roots)
Sugar (sugarcane, sugar beets, molasses)
Other biomass (wood, grass, agricultural residues, etc.)
• Biodiesel:
Feedstocks-Oilseeds (soybeans, rapeseed, sunflower, jetropha,
mahua, karanja, jojoba, etc.)
Animal fats (lard, tallow)
Others (recycle oils “yellow grease”)
Biodiesel
(Catalyst)
100 pounds +
Soy Oil
or
Animal Fats
10 pounds = 100 pounds
Methanol
Biodiesel
+ 10 pounds
Glycerine
B100 = Biodiesel
Specified by ASTM D 6751
B20 = 20 % B100 blended with 80% petrodiesel
Production Process
Transesterification
Process Input Levels
=
Process Output Levels
Methanol 12%
Catalyst 1%
Neutralizing Agent 1%
Oil 86%
Nothing is wasted
Methanol 4%
Fertilizer 1%
Glycerine 9%
Methyl Ester 86%
Comparison of Fuel Ethanol and
Gasoline Prices
• In general, biofuel production costs are
higher than costs of petroleum products.
• Biofuel plants are small relative to
petroleum refineries, therefore, they are
price takers and practically have no
influence on ethanol prices.
2000
Gasoline
2001
Ethanol
2002
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept
August
July
June
May
April
March
Feb
Jan
Dec
Nov
Oct
Sept
August
July
June
May
April
March
Feb
Jan
Dollars per gallon
Wholesale prices of gasoline and ethanol
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Diesel fuel
2001
Biodiesel
2002
July
June
May
April
March
Febraury
January
December
November
October
September
August
July
Dollars per gallon
Wholesale prices of soy-biodiesel and diesel fuel
2.5
2
1.5
1
0.5
0
Fuel Ethanol and Biodiesel
Incentive Programs
• Federal tax incentives: alcohol blended
credit, straight alcohol credit, and small
ethanol producer’s credit
• State incentives
• The USDA’s Credit Commodity
Corporation (CCC) Bioenergy Program
Fuel Ethanol and Biodiesel
Incentive Programs, Continued
• Current ethanol tax credit is $0.53 per gallon and is
scheduled to drop to $0.52 by 2003, declining $0.51 by
2005. Under the current law, the Federal exemption
expires on December 31, 2007.
• At least 13 States have some kind of ethanol incentives,
ranging from $0.01 per gallon excise exemption in
Connecticut, to $0.40 per gallon producers payment in
Wyoming.
• The CCC Bioenergy Program provides cash incentives to
producers of ethanol and biodiesel for incremental
production. This Program was first implemented during
FY 2000 and funded for 2001 and 2002 at $150 million
each year.
Fuel Ethanol and Biodiesel
Incentive Programs, Continued
• The 2002 Farm Bill:
The CCC Bioenergy Program has been extended for FYs 2003 through
2006 under the 2002 Farm Bill ($150 million per year).
• The 2002 Energy Bill:
Renewable Content of Motor Vehicle Fuel--This bill will eliminate the
oxygen mandate, phase out MTBE use and increase renewable fuel use
to 5 billion gallons by 2012.
Biodiesel Used as Fuel--Includes a mixture of biodiesel V made from
virgin vegetable oils, and biodiesel NV made from animal fats and
non-virgin vegetable oils with diesel fuel. Biodiesel is monoalkyl of
long chain fatty acids derived from vegetable oils and animal fats for
use in compressional-ignition engines.
Value-Added Benefits, U.S.
• Corn to ethanol:
•
•
•
•
•
Corn 1 bushel
-$2.40
Ethanol 2.8 gallons +$3.39
Byproducts,DDGS +$0.60
CO2
+
Value of ethanol & byproducts
+$3.99
Value-added
+1.59
• Soybean oil to
biodiesel:
•
•
•
•
Soybeans 1 bushel
-$5.60
Biodiesel 1.5 gallons +$2.94
Byproducts, soymeal +$4.53
Cost of methanol = Glycerin
credit
• Value of biodiesel & byproducts
+$7.47
Value-added
+$1.87
Value Added Benefits, U.S.
• Sugarcane to sugar:
Sugarcane -$28.77/metric
ton
Raw sugar @ 120 kg x
$0.46/kg= $55.2
Molasses @ 37 Kg x
$0.05/kg = $1.85
Value of sugar and
molasses $57.05
Value-added +$28.28
• Sugarcane to ethanol:
Sugarcane $28.77/metric ton
Ethanol @ 20.3 gal. x
$1.21/gal. = $24.56
Vinasse 1,000 liters @
/liter and excess electricity
Value of ethanol $24.56
Value-added -$4.21
Value Added Benefits, India
Source: Nizam Sugars Limited, P. Srimannarayana, General Manager, Hyderabad, India
• Sugarcane to sugar:
Sugarcane $19.08/metric ton
Plantation white @ 100
kg x $0.268 /kg=
$26.80
Molasses @ 40 Kg x
$0.041 kg = $1.64
Value of sugar and
molasses $28.44
Value-added +$9.36
• Sugarcane to ethanol:
Sugarcane -$19.08
/metric ton
Ethanol @ 19.79 gal. x
$1.25/gal. = $24.74
Vinasse 1,000 liters @
/liter and excess electricity
Value of ethanol $24.74
Value-added +$5.66
Value Added Benefits, Brazil
Source: UNICA, Sao Paulo Sugarcane, Agroindustry Union, Mr. Luiz Carlos Correa
Carvalho, Consultant
• Sugarcane to sugar;
Sugarcane -$6 /metric
ton
Raw sugar @ 120kg x
$0.13/kg =$15.60
Molasses @ 37 kg x
$0.03/kg = $1.11
Value of sugar and
molasses $16.71
Value-added +$10.71
• Sugarcane to ethanol:
Sugarcane -$6
/metric ton
Ethanol @ 20.3 gal. x
$0.70/gal. = $14.21
Excess electricity ?
Value of ethanol
$14.21
Value-added +$8.21
Economic Impacts
Data
Models
Scenarios
Past studies
Results
Data
• Agricultural commodities, supply, demand,
and price projections, U.S. Department of
Agriculture Baseline
• Energy consumption, production, and price
projections, U.S. Department of Energy
• Volumes of biofuels demand projections,
Energy Bill or Congress
Models
• Food and Agricultural Policy Simulator Model
(FAPSIM) of USDA/ERS was used to estimate the
changes in major crops and livestock prices, major
crop supply and demand, retail food prices, and
net farm income due to higher farm product use
scenario.
• The Input-Output (I-O) multiplier model was used
to estimate the direct and indirect changes in
employment for each scenario.
Scenarios
• Higher ethanol demand on farm economy
and employment
• Higher biodiesel demand on commodity
markets, farm income, and employment
• Elimination of Federal excise tax on ethanol
production, farm economy, and employment
Past Studies
• Economic effects of Renewable Fuel Standards on
commodity markets, farm income, balance of trade, and
employments, Senator Tom Harkin, August 1, 2002
• Economic impacts of soybean-oil biodiesel production on
commodity prices, farm income, balance of trade, and
employments, Senator Charles Grassley, July 10, 2001
• Economic effects of eliminating the production of cornethanol on farm economy, Senator Harkin, 2000
• Economic effect of increased corn-ethanol production on
land use, U.S.Department of Energy, 1999
Economic Impacts
• Biofuel production:
– Generates new demand for agricultural
commodities and increases the commodity
prices
– Utilizes the unused resources
– Increases farm income
– Improves the balance of trade
– Creates new jobs
Economic impacts of increasing corn-ethanol
production by 1.4 billion gallons in 2012
18
16
14
12
10
Percent
8
6
4
2
0
Area planted
Price
Industrial use
Total use
Value of
production
Farm income
Total exports
Economic impacts of increasing soy-oil biodiesel
production by 125 million gallons in 2012
10
8
6
4
Percent
2
0
-2
-4
-6
Soybean oil
price
Soybeans
price
Soybean
meal price
Soybean oil
use
Soybean oil
production
Area planted
Value of
production
Total exports
Net farm
income
Conclusions
• Many countries in the world have problems of
overproduction and lower commodity prices, i.e.
corn and soybeans in the United States, sugarcane
in Brazil, India, and Cuba, and wheat, oilseeds,
and sugar in European Union.
• Converting surplus commodities to biofuels and/or
bioproducts will create new jobs, increase
commodity prices, increase farm income, improve
the balance of trade, and reduce country’s
dependency on imported fuel and chemicals.