Verified Sustainable Brazilian Ethanol in Swedish Pumps

31 December 2008

While exporting and importing governments are often at loggerheads over the legitimacy of sustainability criteria for biofuels, private companies have agreed on a certification scheme that allows verifiably sustainable ethanol to be imported from Brazil to Sweden.

Over the past year, Sekab - a leading European supplier of renewable fuels in Sweden - and four Brazilian sugarcane ethanol producers have developed the Verified Sustainable Ethanol Initiative. Under the scheme, Cosan, Guarani, NovAmerica and Alcoeste agreed to sell to Sekab 115 million litres of anhydrous ethanol that meets certain social and environmental criteria. The trade associations BioAlcohol Fuel Foundation (BAFF), which represents the ethanol market in Sweden, and the Brazilian Sugarcane Industry Association (UNICA), are jointly driving the process to move the Brazilian ethanol industry toward a more sustainable production.

The aims of this initiative are to provide a guarantee to Swedish consumers that they are filling up with certified sustainable ethanol, to increase the offer of verified biofuels in close collaboration with the Brazilian sugar industry, to persuade other countries in Europe to develop systems for quality and sustainability assurance, and to expedite the development of international regulations for sustainable biofuels.

Sustainability Requirements

The certification requires at least an 85-percent reduction in fossil carbon dioxide compared with petrol, from a field-to-wheel perspective. CO2 emissions are calculated using a methodology from the UK Renewable Transport Fuel Obligation (RTFO) principles, which cover all significant sources of greenhouse gas emissions, including cultivation, production and transportation. Certified ethanol must also be consistent with UNICA's provisions on the protection of forests close to water areas and resources, water management, soil conservation and the reduction of production-related environmental impacts. In addition, all harvesting must be mechanised by 2014 - up from 30 percent required today - as mandated by the 2007 Green Protocol between UNICA and the state government of São Paulo. Mechanisation eliminates the need to burn sugarcane leaves, thereby reducing local pollution, improving working conditions and energy balance. With respect to social criteria, the certification scheme has zero tolerance for child labour and non-organised working conditions (slave labour). It also calls for producers to put in place health, safety and minimum wage policies in accordance with United Nations guidelines.

Sekab's selection of partners in the certification scheme was based on a shared view of what was important from a sustainability perspective. The producers understood and supported Sekab's sustainability concerns and agreed to be audited by a neutral third party. According to Mark Lyra, Ethanol Commercial Director at Cosan, the world's largest ethanol exporter, the sustainability requirements were already in line with the company's practices. The only challenge was to clearly define the criteria and to establish a methodology to measure them.  Even the extensive documentation confirming they met the standards was available in Cosan's data management system since this data is used for everyday operations, such as employee management, crop monitoring and purchasing. Mr Lyra said he hoped that the verified ethanol would help curb criticism of the sugarcane industry, as well as dispel doubts about Brazilian ethanol's climate-related, environmental and social impacts.

The international quality assurance company SGS performs on-site checks to ensure that the producers meet the system's requirements. Only minor instances of non-compliance have been identified so far, such as low quality equipment for employees, Anders Fredriksson, vice president of Sekab BioFuels & Chemicals, said. Procedures are in place to ensure that non-compliance is corrected and does not reoccur.

While Sekab covers the costs of the verification process, the additional expenses associated with the certification scheme are borne by the producers. This may prevent small producers from participating in the initiative as they often lack the funds to comply with certification, especially when price premiums cannot be charged or are insignificant. They see costly certification requirements as non-tariff barriers to international trade.

Swedish Use of Ethanol

Sweden is far ahead of most EU countries in the use of biofuels. The country consumes about 800 million litres of ethanol a year, at least half which is supplied by Brazil. Ethanol use in Sweden has grown steadily since 2000 mainly due to increased use of E85.  In 2007, 11.5 percent of all cars sold in Sweden could run on ethanol (E85). The national targets for the use of biofuels and other renewable fuels were set at 3 percent for 2005 and 5.75 percent for 2010, calculated on the basis of energy content.

Verified sustainable E85 (for flexifuel cars) and ED95 (for heavy vehicles with ethanol engines) have been available at Swedish pumps since August 2008. Last year, Sekab provided more than 95 percent of the Brazilian ethanol that went into E85 and ED95.

EU Context

The European Union is currently in the process of drawing up core sustainability criteria for biofuels. However, consensus among member states has so far proved elusive and it is unclear when the proposed directive on the promotion of the use of renewable energies will come into force. Despite the delay, Magnus Nillson, a transport analyst at the Swedish Society for Nature Conservation, thinks that the initiative on verified sustainable ethanol will eventually be superseded by EU-wide standards, which are likely to cover many of the criteria included in the private certification programme.

Sekab sees the certification scheme as a way of bridging the gap between the production of sustainable and non-sustainable ethanol until EU legislation is in place. "The criteria will gradually be developed over the coming years and synchronised with international regulations when these are in place," Sekab's Anders Fredriksson said. "The EU is developing regulations with requirements for sustainable biofuels, but it will take time before these are ready, so we are taking the lead."

Private vs Governmental Initiatives

In parallel with the industry initiative, the governments of Sweden and Brazil signed a bilateral agreement on bioenergy co-operation, including biofuels, in September 2007. The agreement includes provisions on policy dialogue, research and development, co-operation in third countries and trade and investment promotion. Both parties will collaborate to promote the deployment of bioenergy technologies and the creation of a world market for biofuels.

They will also seek to promote harmonised global standards and codes for biofuels in relevant the fora, as well as intensify collaboration between their research and development organisations and institutions with the aim of improving technical performance, increasing cost-efficiency and promoting sustainable development. In addition, Sweden and Brazil are set to investigate the possibility of assisting developing countries set up a regulatory framework to promote renewable energy, including biofuels production and use. Although Brazil has not yet ratified the agreement, both countries are due to meet by the end of the year to discuss concrete steps to prepare its implementation.

While certification programmes mandated by governments must be consistent with WTO provisions, private initiatives, such as that on verified sustainable ethanol, are not bound by multilateral trade rules on non-discrimination, abstention from creating unnecessary obstacles to trade, proportionality and transparency. However, private standards can be captured under the General Agreement on Tariffs and Trade as governmental measures if there is a strong linkage between the private action and the governments in question, as in the case where a country decides to grant incentives to certified biofuels and in doing so relies on the certification scheme developed by a private body (UNCTAD, 2008). It remains to be seen whether Sekab's certified sustainable ethanol could fall within this category.

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