Harmonized Trade Rules for Ethanol and ETBE

Cautionary note
One of the issues that is currently under international discussion is the establishment of common specifications and quality standards for ethanol. The Biofuels Conference in Brussels devoted a relatively large part of its program to discuss this issue and only few disagreed that their was a need for such a common standard. Joe Lee agrees that such a standard could simplify trade across different regions, his thought on it is more of a cautionary note. “If people start talking about specifications together, they should be doing it for the right reasons, and that is to facilitate trading, not to create potential barriers to markets. While there may be desires to protect fledgling biofuels industries within a country, quality standards should avoid being barriers to markets. Such restrictions may in the long run thwart a country in achieving its ultimate targets. I think such standard can be negotiated commercially. Government should at most agree on some sort of minimum standard for quality and car performance.

CO2 credits
The area of CO2 credits is an area where Joe Lee does see value in aligning views on how CO2 footprints are determined for biofuel products. “Whether for trading purposes or just for a country’s accounting of how biofuels help it in its drive to lower its carbon consumption, this should be an area where international agreement can be found. In considering these values, consideration should also extend to the effects these products might have in helping CO2 performance beyond their renewable sourcing. For example, adding high octane bio-components into the gasoline pool may reduce overall aromatics concentrations, reducing some of the highest CO2 contributing components in gasoline today. Whether you are doing the accounting of CO2 reductions in Tokyo or Paris, we should look to keep the methodologies aligned. The EU has already begun some work in the area of sustainability for biofuels, which ideally could be built on in a global effort.”

Knowing where to make investments
During his speech, Mr. Lee said that “with the phenomenal growth rates of today’s biofuels markets into a shipping market that is already white-hot, the challenges are quite clear. Large tankers and efficient terminals with the dock space to move such large volumes on an international scale need to be developed. Infrastructure may be the most critical need of this market in the coming years.”
Expounding on this comment in his speech, Mr. Lee explained that these challenges are mainly linked to Brazil. “When talking about the international market, you’re mainly talking about how Brazil can possibly supply other area’s. Be it Japan, or the US and Europe. A great deal of the production in Brazil is located inland. They don’t have much waterway infrastructure to the coast, if any. So they’re shipping it by truck, and a very small portion by rail. For the most part I think it’s also a question of congestion at the ports. I think those are the points of concern that I have that need to be addressed. We’ve had a lot of discussion with private companies who are interested in expanding what they want to do in Brazil. But all that takes some time. So, clearly in terms of infrastructure support for an international market place, not only on the producing side but also on the receiving side, there still need to be developments.”
“The problem is that it’s a relatively new business, and the fact that there hasn’t been any ratable transportation over time, like in the gasoline market. That market is pretty well set up so that if the U.S. has a shortage, materials can flow from Europe to the US. Those terminal facilities are already established. In the ethanol market, it’s a different story. Brazil was sending some material to Europe in 2005, and than the changes in the U.S. gasoline market came through and it got redirected. So its going to take some time for those patterns to develop. Who’s going to be ratably exporting, who’s going to be ratably importing.? That development is key to knowing where to put those investments. Governments who are clear in their policies and understand where those patterns are going to develop, will help investments and create the security that people need, knowing they are doing the right thing.”