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Selwyn Johnston

INDEPENDENT COMMUNITY REPRESENTATIVES'

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(Cairns... Far North Queensland)

 

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Selwyn Johnston

 

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ETHANOL

BLENDED FUEL

 

INDEX

AUSTRALIA - Wood-Ethanol

Executive Summary - Wood Ethanol Report

BIOFUEL

      Microbiogen... Yeast Technology for a Sustainable Future

ETHANOL (Countries)

Asia - Ethanol

Brazil - Ethanol

United States - Ethanol

QUEENSLAND'S SUGAR INDUSTRY

 

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ASIA - ETHANOL

Asian countries may see ethanol as a potential money-spinner or environmental saviour, but doubts still hang over the economics of producing the trendy fuel in a region where old-fashioned petrol rules supreme.

Agricultural powerhouses, like Thailand or Australia, blessed with crops that could be used in ethanol production, are making tentative steps towards building up capacity to capture a slice of the growing world market for ethanol.  

Brazil, the world's largest ethanol producer, is expanding output to meet anticipated higher global demand. It sees China and Japan as part of a potentially big Asian ethanol market, especially if ethanol/petroleum blending policies are implemented.  

But Asian industrial countries, such as Taiwan and South Korea, appear hesitant about embracing the leading biofuel amid unresolved questions over costs of the blend.

Taiwan's energy commission, facing growing environmental concern over additive MTBE (methyl tertiary butyl ether), told Reuters in Taipei it would conduct a feasibility study into ethanol as a blend in petroleum.  

However, South Korean industry sources told Reuters in Seoul there were no plans to use ethanol as a fuel because of its relatively high cost compared to regular petroleum.

"Ethanol is too expensive to be used as a fuel," an industry source said, adding ethanol cost four to five times more than petroleum as a raw material.  

THAILAND INITIATIVES  

Thailand, a producer of ethanol raw materials like sugar cane, tapioca, corn and rice, is well placed to supply regional markets, notably China with which it is establishing business links to feed the energy-hungry giant.  

The authorities have tried to boost ethanol production by encouraging private firms to set up plants to supply the domestic market and to fill growing demand in other countries.  

Thai media has reported that one of China's big chemical and pulp manufacturers, Shandong Jinyimen Chemical Group, had proposed spending 500 million baht ($11.4 million) to build an ethanol plant in Thailand for export to China.  

In another initiative in Thailand, major sugar mills group Wang Kanai plans to invest 800 million baht to build a molasses-based ethanol plant, Boonyarit Na Wangkanai, Managing Director at Wang N.T. Paper Co Ltd, told Reuters.  

Thailand's Wang Kanai would soon apply to the National Ethanol Development Committee for a licence to produce the ethanol, Boonyarit said.  

Construction would start soon after approval is granted, with the plant scheduled to be completed within 18 months, he said.  

The plant, to be located next to one of its sugar mills, would have production capacity of 150,000 litres a day, turning out an alternative fuel for automobiles, Boonyarit said.  

The plant is a breakthrough for Thailand, where no private firms produce at significant levels for industry, traders said.  

TAIWAN PONDERING

In Taipei, an energy commission official said the Taiwanese feasibility study had been partly triggered by California's decision to ban MTBE and use ethanol as its oxygen-enhancing chemical additive to make cleaner-burning gasoline.  

California banned MTBE from 31 December, 2002.  

"We commissioned professional agencies to study using ethanol as a petroleum additive, and also on how badly MTBE could contaminate groundwater," the official said.  

Taiwan's feasibility study would assess the economic impact and availability of ethanol, covering a wide range of issues including the cost of a shift to ethanol fuel.

It was doubtful the government would introduce immediate petroleum regulations to force the use of ethanol, the energy commission official said.  

"As the United States is a major corn-growing country, it can easily produce ethanol using surplus crops. But we cannot. This is our problem," he said.

State-owned Taiwan Sugar Corp, the island's sugar monopoly, produces around 20,000-30,000 kilolitres of sugarcane-based ethanol every year, but only for food use.  

KOREA IMPORTING  

Korea, meanwhile, imported 77,497 tonnes of ethanol between January and October in 2003, up from 71,216 tonnes a year earlier, Korea Trade Information Services (KOTIS) data showed.  

So far this year, Korea has imported 34,833 tonnes from China, 28,029 tonnes from India and 13,664 tonnes from Brazil.  

Korea imported a total of 88,224 tonnes in 2000, almost all of it for producers of alcoholic beverages.

 

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Brazil - Ethanol

The time is ripe for Brazil to relaunch its fuel alcohol program but consumers must be assured of regular supplies at competitive prices, government and industry leaders told a renewable energy forum.  

"We now have a great opportunity to reactivate the program," Trade, Industry and Development Minister Sergio Amaral told the forum at the start of an international sugar and fuel alcohol trade fair in northern Sao Paulo state, Brazil's sugar heartland. "But this won't be possible if we can't guarantee supplies here and abroad."  

Brazil is the world's biggest producer and exporter of sugar and fuel alcohol. Renewed tensions in the Middle East have rekindled fears about oil supplies, pushing prices higher and renewing interest in alternative fuel sources.  

Amaral noted tremendous interest in the green fuel on recent trade visits to India, China, Japan and Mexico.  

Brazil's first Pro-Alcohol Program, conceived in the mid-1970s to combat rocketing oil prices, slowed at the end of the 1980s when supplies of sugar cane-based fuel alcohol, also known as ethanol, dried up.  

Construction of a "flex" fuel car - running on alcohol, petroleum or a mixture of both - in Brazil in the next 18 months will provide an extra boost, Amaral added.

Production has been held up, however, by wrangling over tax incentives to cover higher output costs.  

Amaral noted that Brazil was harvesting a record crop of sugar cane, from which fuel alcohol is produced.  

SPARE CAPACITY

During its peak in the 1980s, Brazil produced up to 16 billion litres of fuel alcohol per year, but this year is expected to make only 11 billion litres in the key centre-south region in which Sertaozinho is strategically located.  

Demand for cars with special hydrous alcohol designed engines is slowly recovering after sinking to a trough of 0.1 percent of new car sales in 1998, from a peak of 90 percent in the mid-1980s, according to Anfavea, the Brazilian Automobile Manufacturers Association.  

Anfavea President Ricardo Luis told the forum that Brazilian auto-makers had installed capacity to produce 3.2 million fuel alcohol vehicles a year but only turned out 1.8 million units in 2001. "The market commands. Manufacturers produce to order," he said.  

Several sugar producers, however, complained about a long delivery delay for alcohol-powered vehicles.  

"We have to wait up to three months," said a local producer, while another said that automakers were giving priority to offloading huge stocks of petroleum cars that had accumulated as Brazilian economic growth slowed.  

But Anfavea's energy and environmental head Henry Joseph said that sales of alcohol cars rose to 3.3 percent of total sales in the first eight months of 2001 and reaching 5 percent for full-year 2002.  

Although emission controls have become stricter, the key factor is price.  

"Alcohol needs to be at least 30 percent cheaper for more than six months before buyers react," Joseph told Reuters. Fuel alcohol is sold at a discount because it is less energy efficient than petroleum.  

Maurilio Biago Filho, who built up the Santa Elisa mill into one of Brazil's biggest, said that fuel alcohol prices have slid to one third those of petroleum.  

The breakdown in fuel alcohol supplies at the end of the 1980s was due to the inefficiency of the government controlled distribution system, he said, adding that there were 280 million litres stored at Ribeirao Preto.  

The head of the Sao Paulo Cane Agro-industry Union (Unica) said that the creation of a privately financed supply would help guarantee that fuel alcohol prices remain stable.  

"It takes out the price peaks and troughs," Carvalho told Reuters, noting that petroleum prices could swing by up to 50 percent during a year.  

The problem is that when international sugar prices rise, millers crush more cane into sugar instead of alcohol in order to maximize foreign exchange returns.

 

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Ethanol - US National Scene

The ethanol industry contributes positively to the U.S. economy, particularly rural communities where ethanol production is based.  The economy is increased by providing direct and indirect jobs, and increasing corn prices and rural income. The U.S. Department of Agriculture has concluded that a 100 million gallon ethanol facility could create 2,250 local jobs for a single community.  

A report by the Renewable Fuel Association about the economic outlook of the U.S. ethanol industry over a seven-year period, 1996 to 2002, concluded:

Ethanol will add $51 billion (1996 dollars) to the entire U.S. economy.  The goods and services purchased by ethanol producers represent increased demand for other industries.  These include purchases of grain, natural gas, electricity, water, telephone, and accounting and legal services. Farm income for crop producers will be $2.2 billion, or nearly 3% higher, each year because of ethanol production.  Increased demand for grain grown by American farmers provides market support for prices and incomes.

Ethanol supports 55,000 jobs.  Ethanol production directly accounts for over 5,800 jobs in the food/fuel processing industry in 17 states.  Additionally, the spending by ethanol manufacturers on goods and services indirectly supports an average of 48,900 jobs annually throughout all other industries in the entire economy.  Increases in ethanol production offer enormous potential for overall economic growth and additional employment in rural communities where ethanol production is often based.

Ethanol production will increase total household income by $12.5 billion over the next seven years.  The ethanol industry directly pays $277 million in wages to employees.  These employees and their families spend this income, thereby creating demand.  The indirect impact of ethanol production adds another $1.8 billion to household income annually.

Ethanol generates $555 million of net tax revenue for the Federal treasury annually through personal and business income tax collections.  Additional revenues, provided by taxes on household and farm income that are generated and supported by the ethanol industry, offset the cost of the partial ethanol excise tax exemption for ethanol-blended gasoline.

Ethanol contributes over $2 billion annually to the U.S. trade balance.  The U.S. currently imports 54% of its petroleum demand.  Use of ethanol reduces the trade deficit by about $1.3 billion annually by replacing imported MTBE. Another $800 million is gained annually due to export of the by-products of ethanol, corn gluten feed and gluten meal.   

According to the American Coalition for Ethanol, more than $3 billion has been invested in 60 ethanol production facilities operating in 20 different states across the country.  

IOWA  

Ethanol, a home-grown fuel, is made from corn, which is grown in abundance in Iowa.  Iowa produces about 440 million gallons of ethanol annually, making it the second largest ethanol producer in the nation.  This industry uses 175 million bushels of corn each year, or about 8% of Iowa's corn crop.  Farmers benefit because ethanol production provides consistent demand for surplus corn and improves corn prices.  Iowa's general economy benefits because the ethanol industry creates 2,550 jobs and nearly 10,700 indirect jobs in related industry and services.  

AGRICULTURE  

Ethanol is made from farm-produced raw products, which are usually in surplus. Corn is preferred in ethanol production and supplies most of the raw material needed.   

Ethanol production creates domestic markets for corn and adds four to six cents a bushel for each 100 million bushels used.  Better prices mean less reliance on government subsidy programs and more income and independence for farmers. Ethanol production consumed 535 million bushels of corn in 1994. (5.3% of the record 10 billion bushel corn crop) 

In a report by the Midwestern Governors' Conference, an association of 21 mid-western governors joined to foster regional development, the ethanol industry has become an important value-added market for agriculture.  Ethanol production is the third largest user of corn, behind feed and export uses.  Ethanol production uses about 7 percent of the nation's corn crop.  The conclusions of the report verify that the federal ethanol program is cost effective.  The partial excise tax exemption for ethanol blends creates jobs, stimulates economic activity, and reduces our trade imbalance.   

This February 1997 report concludes that the ethanol industry:

Increases net farm income more than $4.5 billion

 Boosts total employment by 192,000 jobs

 Improves the balance of trade by over $2 billion

 Adds over $450 million to state tax receipts, and

 Results in net federal budget savings of over $3.5 billion

The report also states that the impact of the demand for ethanol can have the following effects.  The projected 1997 demand for ethanol was estimated at 1.52 billion gallons, or 0.6 billion bushels.  Corn production would increase by 0.42 billion bushels and raise the corn price by 45 cents per bushel.  The increase in production and price would raise gross farm income by $5.0 billion and net farm income by $4.5 billion in 1997.  The increase in farm expenditures and employment opportunities in the ethanol industry in 1997 due to the demand for ethanol will be 192,000 jobs.  

As the domestic ethanol industry continues to grow, it is witnessing a surge in the construction of farmer owned ethanol production facilities.  Farmers are realizing the added benefits to the ethanol industry through ownership of manufacturing plants.  

Over the past 15 years, more than 12 billion gallons of high quality, high performance ethanol fuel has been produced using about 5 billion bushels of corn.  Ethanol's importance to agriculture includes:

Ethanol creates value-added markets for America's farmers, stimulating rural economies by increasing corn prices and rural income.

Each 100 million bushel increase in the demand for corn results in a corn price increase of 4 to 6 cents per bushel.

Ethanol accounts for 14 cents of the value of every bushel of corn marketed by American farmers. Price response will vary according to crop prospects, carryover levels, and global supply and demand. 

Ethanol accounts for 6.2 percent of the total corn utilization in the U.S. and is the third largest individual use of corn, behind only feed and exports. 

Each 100 million bushels of corn used in increased ethanol production effects the price of other commodities adding 2 cents per bushel to the wheat price and 10 to 13 cents to the price of soybeans.

The production of ethanol does not mean less corn is available for food.  Instead, ethanol production produces many valuable high protein food and feed co-products. An acre of corn (125 bushels) produces 313 gallons of ethanol, 1,362 pounds of 21% distiller's grains, 325 pounds of 60% gluten meal, and 189 pounds of corn oil.  

Distillers grain can be used for feed in most every type of animal system and are used as a cost efficient, nutritional, digestible, and palatable protein feed for cattle, swine, and sheep.  Approximately 1.4 billion tons of distiller's grain is produced annually.  

PRODUCTION & PRICE  

Advances in technology in ethanol production process have substantially reduced costs.  A shift to larger production plants along with improved yeast strains and enzymes have reduced cost by more than 50 percent.   These innovations have lowered production costs from $1.40 per gallon in 1980 to less than $1.00 in 2001.  

Still newer plants and improved technologies have further reduced costs to an approximate current average of $1.09 to produce one gallon of ethanol.  This trend is expected to continue.  Corn yields; corn costs, and markets for co-products will also affect the cost of producing ethanol.  

Consumer prices at the service station pump for E-10 ethanol blend is usually the same price per gallon as unblended fuel.  This is also true for E-85 blends.  The price at the retail gas pump reflects federal and state tax exemptions, loan guarantees, and other government subsidies.  

Offsetting the cost of these tax incentives is a reduction in farm subsidies and the increase of tax revenues.  According to the U.S. Department of Agriculture, if ethanol use does not continue to grow, "deficiency payments for corn and other program crops will increase by $580 million for crop year 1998 and $740 million by the year 2000"-more than the cost of the tax incentives.   

The economic activity attributable to the ethanol industry will generate $3.5 billion in additional income tax revenue over the next five years - $1 billion more than the cost of tax exemptions.  The U.S. ethanol industry will create a net gain to the taxpayers of almost $4 billion over the next five years.  

The oil industry began receiving federal subsidies as early as 1916 to promote development of an energy industry.  As the oil industry became more profitable, the subsidy payments continued.   

In 1984, the oil industry received over $8.5 billion from the federal government.   

During the same time period, renewable fuel industries - solar, wind, geothermal, hydropower, and alcohol fuels - received only $l.7 billion.

 

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AUSTRALIA: Wood-Ethanol: Liquid fuel from trees

A new report from the Joint Venture Agro-forestry Program (JVAP) has found significant potential for an alcohol fuel industry based on trees harvested from farm forestry.  

Titled 'Wood for Alcohol Fuels': Status of technology and cost/benefit analysis of farm forestry for bio-energy, the report states the potential market for these fuels in Australia is considerable and a liquid fuels industry using biomass may be a driver for tree planting on a massive scale.  

The report said the alcohol fuels methanol and ethanol can be obtained from trees. Ethanol is already in use in a number of countries, both as a liquid transport fuel in its own right and via blends of ethanol and petrol.  

Currently, there is a relatively large price gap between the cost of alcohol fuels from biomass and the ex-refinery cost of petrol. Alcohol fuels cannot be expected to compete on a simple economic basis (with no accounting for environmental or other benefits) against petrol unless there is a large, and sustained, increase in the price of crude oil. 

However, the report said it is recognised the cost of alcohol fuels from wood should come down with technical improvements over the next few years. In addition, alcohol fuels can provide significant benefits in terms of greenhouse gas reduction, both over petrol and over many other renewable fuels. 

The planting of trees in selected areas is also anticipated to bring about salinity benefits and potentially other benefits to the environment and rural Australia. In this study, greenhouse gas benefits and on farm salinity benefits have been assessed in terms of their ability to "close the gap" that is identified for biomass based fuels. 

The report includes preliminary cost conversions and price estimates which allow for initial comparisons between the cost of renewable liquid fuels and their fossil fuel counterparts now and in the future. 

It is possible that other products could be produced in conjunction with the manufacture of alcohol fuels from trees. Work underway in Western Australia with integrated processing of mallee eucalypts for renewable electricity, activated carbon and eucalyptus oil is one example of multiple products supporting improved project economics. 

Co-products relevant to liquid fuel production include oils extracted from leaf material and new products from the lignin. If produced in sufficient quantities or at sufficient value, such co-products would improve the commercial viability of alcohol fuel production. 

Rural Industries Research & Development Corporation reports can be downloaded free of charge from the website: http://www.rirdc.gov.au, which has more than 800 research reports on a wide range of rural industries. Hard copies can be purchased online or by phone (02) 6272 4819. A free publication catalogue is also available. 


Source:
Rural Industries Research & Development Corporation

 

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