Competitiveness of Brazilian Sugarcane Ethanol Compared to US Corn Ethanol

Abstract:     
Corn ethanol produced in the US and sugarcane ethanol produced in Brazil are the world’s leading sources of biofuel. Current US biofuel policies create both incentives and constraints for the import of ethanol from Brazil and together with the competitiveness and greenhouse gas intensity of sugarcane ethanol compared to corn ethanol will determine the extent of these imports. This study analyzes the supply-side determinants of this competitiveness and compares the greenhouse gas intensity of corn ethanol and sugarcane ethanol delivered to US ports. We find that while the cost of sugarcane ethanol production in Brazil is lower than that of corn ethanol in the US, the inclusion of transportation costs for the former and co-product credits for the latter changes their relative competitiveness. We also find that the relative cost of ethanol in the US and Brazil is highly sensitive to the prevailing exchange rate and prices of feedstocks. At an exchange rate of US$1 = R$2.15 the cost of corn ethanol is 15% lower than the delivered cost of sugarcane ethanol at a US port. Sugarcane ethanol has lower GHG emissions than corn ethanol but a price of over $113 per ton of CO2 is needed to affect competitiveness.

Number of Pages in PDF File: 33

Keywords: economic competitiveness, renewable fuel standard, ethanol trade policy

JEL Classification: Q13

working papers series