Partnership Brazil Austria English Version

ENHANCING THE BIO-DIESEL PRODUCTION CHAIN CLUSTER IN THE SEMI-ARID REGIONS OF BRAZIL

goal Jatropha curcas crop for oil extration to produce bio-diesel in the most vulnerable region of the State of Minas Gerais, Brazil : Jequitinhonha and Mucuri Valleys, promoting sustained development and poverty alleviation, creating opportunities and a new model for the intensive and extensive use of the energy biomass potential of the State.

particularly important to the economies of developing countries because they provide a means of bringing much needed capital and diffusing knowledge to the linked firms. Such linkages can help to promote production efficiency, productivity, growth, technological and managerial capabilities and market diversification (UNCTAD 2004). The benefits provided through such linkages tend to be of greater competitive significance than those among domestic firms because of the comparatively stronger knowledge and skills base of many foreign affiliates. Linkages with foreign affiliates can therefore be a great driver of dynamism and competitiveness in a developing country’s domestic enterprise sector. The foreign affiliates, in turn, benefit from linkages, frequently from reduced costs, local market and product intelligence and enhanced assets (UNCTAD 2001). The ability of foreign affiliates’ linkages activities to contribute to domestic supplier development depends, to a large extent, on the domestic markets and local firms’ capabilities. IPA interventions are important to the extent that investors believe that IPAs can assist firms in identifying and introducing reliable local firms with whom the investors can partner. The promotion of partnerships between TNCs and local firms is becoming integrated into the overall efforts of IPAs to attract FDI, as more attention is now being paid to ensure that sustainable development gains result from FDI. As noted above, an effective business linkages programme is believed to be one of the fastest and most effective ways of upgrading domestic enterprises; facilitating the transfer of technology, knowledge and skills; improving business and management practices; and facilitating access to finance and markets.

principles

Sustained development ƒ Integration of economic, social and environment objectives ƒ

Participation and consensus

Strategic planning ƒ

Public administration commitment

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comprehensible and coherent process

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Clear goals; continued resources and monitoring

vision “Take joint actions and improve efforts to work together at all levels to improve access to reliable and affordable energy services for sustainable development sufficient to facilitate the achievement of the MDGs, including the Goal of halving the proportion of people in poverty by 2015, and as a means to generate other important services that mitigate poverty, bearing in mind that access to energy facilitates the eradication of poverty” ( Summit on Sustainable Development in the Johannesburg Plan of Implementation )

Market scenario and prospects

the price of crude oil tripled between early 2002 and mid2005 while natural gas reaches a level six times greater than ten years earlier.

The growing gap 9 energy companies have not invested in building enough refinery capacity to meet the growing level of world demand. World oil production has gone up by 40% in the past 20 years while refinery capacity has only gone up 15%. 9

9companies have not been able to find enough new oil and gas fields to replace the exhausting ones. 9Oil is being pumped out of the ground three times faster than it is being replaced by new oil finds.

9the oil reserves discovered between 1950 and 1980 are being run down.

Will oil prices rise further? "There are not enough large-scale projects in the development pipeline right now to offset declining production in mature oil fields and to meet global demand growth beyond 2007". (Chris Skrebowski, the editor of the Petroleum Review )

The total amount of energy that the world gets from oil and gas will begin to decline after 2010.

What alternative sources to fill the gap?

9The global demand for oil is increasing by just over 2% every year at present. 9This increase in demand added to the gap being created by the declining supply, implies new energy sources each year equivalent to 4-5 per cent of the world's current oil production:

around 1,800 million barrels of oil a year. 9In 2015, when world gas output ceases to increase to meet the its growing demand , the new energy sources would have to increase the annual rate at which they grew

by another 900 million barrels.

What will be the effect on the global economy?

a fall in global oil output will cause the global economy to collapse.

What alternative sources to fill the gap? 9 The only truly sustainable energy sources are those based on the flow of energy from the sun: solar, hydro, wind, wave, biomass. 9These flows are very large in comparison with humankind's use of energy. 9Renewable sources can therefore meet all the world's energy needs, both now and in the future. 9The amount of energy supplied by renewable sources could be 120 times its present level . The problem is to develop these sources quickly enough to fill the gap as it opens up.

Biofuels: a Booming Industry The world is on the verge of unprecedented growth in the production and use of biofuels , by virtue of: 9 Rising oil prices, national security concerns, the desire to increase farm incomes, and a host of new and improved technologies . 9The two most prevalent biofuels are ethanol and biodiesel. World production of ethanol more than doubled between 2000 and 2005, while production of biodiesel quadrupled.

Biofuels: a Booming Industry

Brazil and United States dominate the world ethanol production and use.

The European Union, and Germany in particular, dominates world biodiesel production and use.

New Technologies, New Gains

Biofuel production has become substantially more efficient over the last 25 years as Brazil and the United States have scaled up their industries. Such incremental gains are likely to continue for years to come.

However, the greatest potential for biofuels lies in the development of new technologies that will significantly expand the range of biomass feedstock, increase conversion efficiencies, and lower production costs.

Biofuels – the emerging solution for everyone “ Only in the Sun Country occurs the magnificent encounter

of the solar irradiation with the water, which generates a stunning energetic profusion in its soil. This energy is a heritage inherent to the Brazilian people and so it should be exploited and used to promote its social and economic development.” Artur Augusto Alves The ability to grow energy crops in addition to food crops could transform agriculture more profoundly than any development since the green revolution - helping to achieve the United Nations’ Millennium Development Goals

Biofuels: A New Future for Rural Communities One of the main benefits of biofuels is their potential to increase farm incomes and strengthen rural economies. The World Bank reports that biofuel industries require about 100 times more workers per unit of energy produced than the fossil fuel industry. In 2004, the Brazilian sugarcane sector was responsible for 1 million jobs (direct)/4 million (indirect) corresponding to the production of 350 million tonnes of cane (UNICA, 2003 and Goldemberg, 2003). The dispersed nature of agriculture makes it unlikely that biofuel production will become as centralized as the oil industry. Re-circulating biofuel revenues in the local economy can maximize the economic benefits of shifting away from imported fuels. In countries and regions where access to modern forms of energy is limited or absent, government and development agency support for small-scale biofuel production can help provide clean, accessible energy that is vital for rural development and poverty alleviation.

Further benefits 9In general, biofuels have a solidly positive GHG balance. Energy crops have the potential to reduce GHG emissions by more than 100 percent (relative to petroleum fuels) because such crops can also sequester carbon in the soil as they grow. 9Large deforested areas could be recovered by crops producing vegetable oils in order to produce biofuels. 9Even with subsidies, the economic savings with biofuels from avoided oil imports are considerable: between 1975 and 1987, ethanol saved Brazil $10.4 billion in foreign exchange while costing the government $9 billion in subsidies. This investment paid off even more in subsequent years: studies show that from 1976–2004, Brazil’s ethanol production substituted for oil imports worth $60.7 billion—or as much as $121.3 billion including the avoided interest that would have been paid on foreign.

RET OPPORTUNITIES

¾ Renewable energy will have to supply a greater share of the world's energy requirements. ¾ It is estimated that the market for clean energy technologies could be worth $1.9 trillion by 2020. The financial sector has a key role to play in developing and promoting this market. ¾ In the next 25 years, the world will consume all that has been produced in fossil oils so far. ¾The world´s dramatic increment for fuels should be supplied by biofuels. ¾ In the future, In the short run, ETHANOL and BIO-DIESEL are the main bio-fuels.

Renewable energy is both a solution and a business opportunity; BUSINESS AS AN AGENT OF WORLD BENEFIT

Biodiesel - a Mutual Profitable Partnership between Brazil and Austria ¾As oil prices and environmental concerns have risen in the past few years, investment in new biofuel facilities has mushroomed in Brazil. ¾The Brazilian National Program for use and production was incorporated in the Brazilian energy matrix by Law nr 11.097/2005 . ¾The crop area required to produce the blend of initial mandatory 2% of biodiesel will be 1.5 million hectares, equivalent to only 1% of the total acreage under crops or available for agriculture throughout Brazil (150 million hectares). ¾ Despite of still small production of biofuels, Austria accounts for advanced and growing technologies in this sector.

Brazilian energy matrix

Brazilian ethanol´s use and production

¾

PRODUCTION CAPACITY: 18 billion liters/year

¾ PRODUCTION: 15 billion liters/year (seed/2004/2005) ¾ EXPORTATION: 2.4 billion liters in 2004 ¾SUGAR CANE PLANTED AREA: 5.6 million hectares ¾POTENTIAL FOR AGRICULTURAL EXPANSION IN BRAZIL: ¾90 million hectares of arable lands – Without any forest removal ¾INTEGRATED PRODUCTION OF SUGAR AND ETHANOL: ¾Provide production flexibility ¾UTILIZATION OF ETHANOL IN VEHICLES IN BRAZIL: ¾Automobiles, light commercials, motor-cycles and aircrafts ¾Flexible Fuel light vehicles: reached 37% of internal market sales in 2005

Brazilian National Plan for Biodiesel The Nacional Program for use and production of Biodiesel (PNPB) is a Federal Interministerial program with an aim at implementing a sustained development , technically and economically. The emphasis lies on social inclusion and employment/wealth generation and regional development

Brazil: a global benchmark in RET Brazil has ideal conditions for becoming a major world producer of biodiesel. It has a vast amount of arable land, part of which is not suitable for food crops but has the right soil and climate for growing a range of oilseeds. Biodiesel will make Brazil a global benchmark in the use of renewable fuels.It first won this position in the 1970s with the introduction of ethanol made from sugarcane to power automotive vehicles. The National Alcohol Program, Proálcool, was the largest fossil fuel substitution program in the world automotive market. It is still considered a global example of excellence, and Brazil remains the largest producer and consumer of fuel alcohol in the world. The experience Brazil has accumulated through the Proálcool serves as a strong foundation for implementing the biodiesel program and maximizing the nation’s competitiveness in a relatively short period.

BRAZILIAN DOMESTIC MARKET PROJECTION

¾ Law 11 097/2005: it sets forth a mandotory use of biodiesel mixture to diesel and monitors the introduction of new fuels into the market.

2020 2020

2012

2%

Authorized Potential market: 800 millions liters/year Source: MME

2%

Mandatory 5% 5%Autorizativo authorized Firm market: 1 billion liters/year

5%

Mandatory Firm market: 2.4 billions liters/year

20% 12,4 12,4 billions billions liters/year liters/year

BRAZIL’S EXPORT POTENTIAL With the launch of commercial production, Brazil becomes a potential exporter of biodiesel. The EU aims to ensure that 2% of all the fuel consumed in the region is renewable by 2005, but it has limited acreage available for growing rapeseed, the main feedstock produced in Europe, and industrial capacity is insufficient to meet the stipulated demand. Despite these constraints, the proportion of renewable fuels is set to reach 5.75% by 2010 according to EU Directive 30, ratified by the European Parliament in May 2003. Given the limitations for production growth in Europe, Brazilian biodiesel enjoys an unprecedented opportunity to build market share in the continent Europe.

POSSIBLE COUNTRY PARTNERS FOR BRAZIL

Countries undergoing some of these needs:

⊲ High agricultural production costs ⊲ Need to fulfill internal/external obligations of emission reduction (Kyoto Protocol and other compromises) ⊲ New cultivation lands not available ⊲ Need strategic alternatives for diesel supply

PROSPECTS OF AUSTRIA/BRAZIL BIOFUEL COOPERATION

Possible areas of interest: ¾Utilization of Austrian technology for biodiesel plants in building, logistics, utilization of glycerin and other byproducts, specification, engine tests, etc. ¾Sale of carbon credits (MDL) obtained through the utilization of ethanol or biodiesel in Brazil. ¾Exportation of ethanol/biodiesel to Austria and EU. ¾Partnerships in biodiesel, ethanol and Flex-Fuel Vehicles.

MINAS GERAIS STATE: THE IDEAL PLACE FOR INVESTMENTS IN BRAZIL 9 9 9 9 9 9 9 9 9 9

Strategically located in the Southeast region of Brazil: concentrating 78% of Brazilian consuming market . 18 million people. Territory greater than many European countries. Third largest South American economy. Excellent infra-structure Abundant energy and modern communication. Modern law on on Public-private partnerships, respecting obligations with investors and partners. Expedient and practical action from Public Administration Strong competitiveness for new enterprises Highly qualified labor

MINAS GERAIS State stands at a vibrant moment in its development, introducing entrepeneurial changes, innovation, paradigm shifts, and openness for consideration of new alternatives and investments.

ENTREPRENEURIAL GOVERNMENT CULTURE

The Government is seeking improvements in the efficiency of the public apparatus, through rationalization and by increasing productivity: DO MORE WITH LESS. “There is nothing inconvenient in the fact that public managers act to implement conditions that increase productive capacity, directing investments and creating policies that make it possible to take advantage of productive potentials, having in view domestic and foreign market opportunities and the generation of business and job opportunities.” (FERNANDO DOLABELA,2003) “Entrepreneurship means social protagonism, breaking the chains of dependence, belief in the capacity of individuals and communities to construct their own development through cooperation among diverse political and social spheres.” (FRANCO, 2003)

The State efforts 9To achieve the efficacy, the State Government has undertaken a profound revision of its structure, including the empowerment of the development apparatus with a greater flexibility in order to meet the new demands of society . 9 The objective of Minas Gerais development is now to increase the competitiveness of its economic base, targeting the state’s supply chains, transforming comparative advantages into real and enduring competitive advantages. 9The new model gives primacy to the private initiative in determining the economy’s dynamic as well as an elevated degree of openness to the international economy. 9Bio-fuels production has deserved special attention from the State Government.

State program for bio-fuels The program has the following goals: Research and technology development; Technology transfer to the private sector; Job posts creating and improvement of income distribution; Reduction of fossil diesel imports; Reduction of gas pollution emission; Development of Feed-stock production Targets up to 2007/2008 : 250.000 hectares crop plantation for production of B2 (blend 2% ), reaching 625.000 he for production of B5 in 2013; Direct income generation to 100.000 families, corresponding to about 500.000 job posts up to 2007.

Geographical area: brazilian semi-arid; Jequitinhonha & Mucuri Valleys Total semi-arid area: 1.219.021,50 Km2, equivalent to about 1/5 of Brazil – comprising ten States Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco, Alagoas, Sergipe e Bahia and Minas Gerais. Population: 1/3 of Brazil. Total area of Jequitinhonha/Mucuri Valleys: Resources limitations: 9 Large area extensions under severe semi-arid climate; 9 Small proportion and dispersion of areas with favorable soils and topography; 9 Scarcity of hydro-energetic potentials causing prolonged droughts .

Environment devastation & opportunities

As a result of constant predatory activities, degradation and poverishment of nature is remarkable in the region. The absence of effective policies towards preservation of the fragile regional ecosystems, besides threatening the survival of the vast majority of species, has created serious risks to the human occupation owing to an accelerated process of desertification. URGENT INTERVENTION IS REQUIRED!

Jatropha curcas: the feedstock Perennial crops of Jatropha Curcas will be used to protect lands that are vulnerable to erosion and to restore lands degraded by grazing.

The yields of currently used biofuel feedstock vary widely. Jatropha seeds have proven advantageous in several spheres.

Jatropha curcas: the feedstock Jatropha is identified under the physical-chemical platform of biomass energy conversion route. It is a drought-resistant perennial, living up to 50 years and growing on marginal soils (HENNING, 1996). The remote rural communities of the Brazilian semi-arid in drought regions will be able to address their energy needs using the Jatropha resource. The Jatropha Curcas was especially selected because the plant is not an invasive species (GÜBITZ ET AL., 1999) and permits the growth of other plants in its vicinity, so it does not negatively affect the ecosystem.

Jatropha curcas: the feedstock Jatropha Curcas L. has been widely accepted as a favorite agricultural solution for all subtropical and tropical locations for sound logical reasons: 9 It is not competing with food grade oils. 9 It’s toxicity is sensed by animals and therefore not foraged on. 9 It is high yielding (1000 liter per hectare). 9 It has a very high oil content of approximately 42%. 9 The oil seed is collected by hand, after dropping to the ground. 9 It requires only moderate rainfall (approx. 600mm only) and can withstand long periods of drought, but will thrive under higher rainfall. 9 It is a permanent, uncomplicated crop that, once established, can last for many decades. It therefore eliminates normal annual seedbed preparations and planting. 9 Due to its low demand on soil fertility, it is ideal to replant marginal lands to prevent desertification.

9 Given the drought-prone difficulties and lack of rural employment opportunities, growing a crop for renewable energy provides the answer for long term prosperity.

Professional management

Implementation

goals Internal analysis

External analysis SWOT analysis

monitoring

Roles of stakeholders Resources management

Action plan

strategies

Development model

The development model is based on the working relationship between the community benefiting from the BIO-VALE project, a local technical NGO, an enterprising development agency , a foreign development agency, Government stakeholders and a corporation. Each entity has its respective and important roles that complement, harmonize and support one another leading to the ultimate success and sustainability of the project. “The private sector can play an important role towards furthering development, for development cannot occur without conditions that are amenable to the conduct of business.” (United Nations)

ESTRATÉGIA GERAL DE INTERVENÇÃO

General intervention strategies

9 Competitiveness and productivity:

MARKET SIGHT

SOCIAL SIGHT

adoption of compatible mechanisms

9 Inclusion

9 Participation 9 Equity

SPACE SIGHT

9 Regional clusters

formation BUSINESS SIGHT

9Attractiveness to private sector 9Favorable climate 9Compatible working tools

Development model: local NGO VALE DA CIDADANIA is a not-for profit organization oriented to assisting the rural poor in the Jequitinhonha and Mucuri Valleys, recognized by UN as the 4th poorest region in the world. VALE DA CIDANIA will support following types of interventions: 9 establishing effective monitoring and evaluation systems, working closely with cooperating institutions to improve impact assessment and supervision, and strengthening partnerships with a range of different players. 9 promoting a global policy environment that increases market access for the rural poor. 9 directly responsibility to the community - directly involved in the energy crop cultivation and oil extraction than the development agency, assessing the communities’ organizational capacity and their potential to complete and manage an energy project. 9 providing technical, organizational advice, support and training to the community

Development model: Foreign Development Agency

Direct main responsibilities of the development agency : 9 To provide seed money and matching grants that can initiate and support the efforts of the NGO to raise the money needed for a project and/or provide capacity grants which help to build their organizational capacity. 9 To popularize the NGO achievements in developing sustainable energy systems and related environmental protection plans through the media, internet, and other written and visual sources (SLUIJS & BODE, 2001). 9 To facilitate trainings for NGOs such as; community surveys of power demand and potential usage, site selection, the budget process, choice of appropriate technology, environmental assessments, feasibility studies, civil design, operational & fiscal management, micro-enterprise development, long term planning, and grant writing (SLUIJS & BODE, 2001).

Development model: Investment agency MINASINVEST, a not-for profit investment agency, will be primarily in charge of the social-economic factors coordinating the efforts among the various stakeholders, which includes: enhancing logistics, building market information systems. Identifyng the best source from which to buy project equipment for the community; Developing policies and strategies to improve competitiveness; Strengthening the producers´negotiating position ; Providing well-researched analyses; Promoting global trade; Government and institutional relationships involved in the project.

Development model:The Community

The local community possesses direct responsibility towards the daytoday running of the biofuel project . Particular emphasis is given on the socio-economic empowerment of women, thus women groups will be specially utilized to manage the project. The role of the community should therefore be: ● Provision of land for Jatropha plantation and site for the establishment of the oil extraction unit. ● Responsibility for the day-to-day management of plantation, including: cultivation, harvesting, extraction and sale of the oil. ● Commitment of human resources for project development such as unskilled labour (to handle farmlands), access to skilled labour. In order to help the community in their quest towards sustainable development, it is very important that they should be the main recipient of all benefits accrued from the project.

Empowering the poor groups Sustained growth can be achieved only by creating conditions in which poor groups can increase their productivity and output. Empowering these poor groups is not a diversion from promoting growth. On the contrary, it is an effective, and perhaps the only, way of achieving sustainable growth. But empowerment will serve little purpose if the material means for increasing production and incomes are not available to the poor. Enhancing their skills and building the human capital of the poor will have a major impact on both their economic productivity and their human dignity. By improving the productivity and sustainable management of land and water, technological advances offer the potential to address many of the obstacles that the lack of assets imposes on the poor. Access to extension services, market and technology must be relevant to the conditions of the poor and they must have access to it.

our challange In modern economies, largescale poverty imposes an enormous economic loss, wasting the talents and energies of hundreds of millions of men and women, diverted from socially productive activities that could create wealth for society to the struggle for mere survival. The partnerships should be at the global level, at the country level with national stakeholders and external partners acting together, the private sector and civil-society institutions collaborating to create conditions that emancipate poor groups.

But the fundamental partnership, and ultimately the only one that counts, is with the poor themselves. They have the talents, the skills and the knowledge of their own environment.

End goal & management The BIO-VALE project can bring about major economic empowerment by providing income and employment opportunities to both the rural communities and entreupreneus. The project can be utilized as a crucial element to stimulate a circular system combining ecologic, economic, and income-generating effects (HEN. 1994), particularly to the drought prone rural communities of the Brazilian semi-arid regions. The project promotes the main aspects of development, which combine to help achieve a sustainable way of life for village farmers in terms of provision of renewable energy, erosion control, economic empowerment through job creation and poverty reduction and economic development. Authorization for the use of bio-diesel, the onset of widespread distribution, the differential tax regime recognizing the importance of oilseed production by family agriculture units– and the introduction of the “Social Fuel” label are regulatory instruments designed to promote social inclusion throughout the new fuel’s production and value chain.

How to make the project workable

Market

Structure &

Strategic

sight

skills

alliances

FUNDING

EFFICIENT MANAGEMENT

Amenable methodologies

Technological innovation

Competitiveness and sustainability

planning