In the month of November, in Beijing, during the ministerial meeting of the Asia-Pacific Economic Cooperation Forum (APEC), China and United States signed a climate agreement, stablishing targets related to CO2 emissions. Summarily, China compromised itself to increase for 20% the renewable energy sources use in its energetic matrix until 2030. United States, in turn, agreed to reduce 27% of its CO2 emissions until 2015 (WHITE HOUSE RELEASE, 2014). However, what would be the implications of this agreement to the ethanol commoditization process on the energetic international stage, where Brazil is the second greatest ethanol producer?
In the face of an economic reality based mostly on non-renewable sources, the international society face an important dilemma related to the preferences definition, regarding the clear necessity of global energy diversification. It can be noticed that the alternative way is the progressive adoption of renewable sources, as observed in the Sino-American agreement. Nowadays, it’s clearly observed that biofuels are the only energy source with notorious capability of being the petroleum substitute in the quality of a large scale fuel. In this scenario, ethanol is highlighted as a chief representative of the category.
The consolidation of biofuels as an energetic alternative depends crucially on shaping an international market for the product. Structuring a process of “commoditization” of alternative fuels, particularly ethanol, requires the implementation of a series of policies. To get those aims, the increase in the number of producing countries, the technological spread, suitable for the production of ethanol and, equally, the harmonization of technical requirements needed for the production become extremely important. The lack of an institutional apparatus, directed to the establishment of a standardized international market for ethanol, only reinforces the permanence of non-tariff and tariff barriers to the commercial flow of the product by the various potential markets, as well as to the maintenance of high costs related to the development of biofuels industrial capability in different regions of the globe (KLOSS, 2012).
With notorious desire for change related to the current global energy dynamics, the agreement, signed by the 1st and 4th largest global ethanol producers, have an interesting perspective for mitigating environmental problems and, therefore, supporting, through a large cooperation process, the ethanol commoditization for sales on international markets.
Being the largest global ethanol producer, United States have considerable relative gains regarding the implications related to the Chinese agreement. The ethanol commoditization would be significant positive for the American product, since an increasing of the producing countries, technological dissemination and standardization of product would create, especially initially, a great variety of potential consumers for its own ethanol and productive technology. These sorts of advantages are, clearly, noted by United States who, in turn, has demonstrated consolidated and defined set of preferences in relation to ethanol. This level of definition can be observed on the national incentives for production such as the Energy Independence and Security Act or the Volumetric Ethanol Excise Tax Credit.
Analyzing the Sino-Brazilian energy context, it is observed that the Chinese commitment, the increasing of 20% in the participation of renewable sources in its energy matrix, opens space for the full development of its ethanol and, consequently, to the Brazilian macroeconomic performance. The currently importation of the Brazilian ethanol acquired considerable significance for both sides. In the Chinese context, this sort of importation creates advantages, at least, in three fields. In the economic field, it can be noticed a reduction of fuels supply costs through importation, since the ethanol production in China, besides of being a complex process, mainly by the lack of experience, is too much costly since, comparatively, the Chinese government does not achieve the cost production efficiency of countries such as Brazil and United States. Therefore, it can be notice that, through the quoted agreement, the importation indexes have a great perspective of increasing. Regarding the environmental context, it is seemed, in addition to the reduction of the energy dependence of countries around the oil exploration, as well as to the mitigation of the recognized environmental impacts, a clear attenuation of discussions related to the risks of the ethanol production in Chinese territories creates a food crisis. Finally, relating to the politic camp, the most relevant advantage observed is the widening of the Sino-Brazilian relations, since, being crucial commercially partners, they can expand their pertinent areas for interaction (ARAÚJO; LÜ, 2010).
The Sino-American agreement also has interesting implications for the Brazilian scenario going beyond the future macroeconomic gains. It is noted the encouraging growth of the productive process related to a demand increasing. Nowadays, by lacking of incentives, as well as by lacking of a defined set of preferences of the Brazilian government, the biofuels sector has an enormous idle capacity. As an additional externality to the Brazilian macroeconomic gains, the agreement and the Sino-Brazilian cooperation would implicate relevant technological gains which, in the currently scenario, have increased. Exemplifying this tendency, there is the last action plan between both countries on technical issues and so forth.
The perspectives convergence vis-à-vis the clear needing for diversification of the global energy matrix create interesting perspectives for a needed triangular cooperation between Brazil, United States and China, in the context of stalled bilateral actions intending to achieve the ethanol commoditization. The concerted action through institutions such as the FIB and ISO would create, in the medium term, important externalities which, in turn, would foster the environmental impact mitigation perspectives of the Sino-American agreement. Additionally, this sort of action would promote, in the long term, a global stimulus for an international regime toward the alternatives renewable sources promotion.
- ARAÚJO, Renata Rodrigues; LÜ, Kangjuan. The Ethanol Trade Development between China and Brazil. Accessed in December 02, 2014 from http://journal.a-cs-cam.org.uk/data/archive/2-010/201001-article9.pdf.
- KLOSS, Emerson Caraiola (2012). Transformação do Etanol em Commodity: perspectivas para uma ação diplomática brasileira. Fundação Alexandre Gusmão (FUNAG).
- MRE. Plano de Ação Conjunta entre o Governo da República Federativa do Brasil e o Governo da República Popular da China, 2010-2014. Accessed in December 14, 2014 from:http://dai-mre.serpro.gov.br/atos-internacionais/bilaterais/2010/plano-de-acao-conjun-ta-entre-o-gov-erno-da-republica-federativa-do-brasil-e-o-governo-da-republica-popular-d-a-china-2010-2-014.
- THE WHITE HOUSE. U.S.-China Joint Announcement on Climate Change Accessed in December 13, 2014 from: http://www.whitehouse.gov/the-press-office/2014/11/11/us-china-joint-announce-ment-climate-change.
Lucas Baggi de Mendonça Lauria é bacharelando em Relações Internacionais na Universidade de Brasília – UnB (email@example.com)