Increased global bioethanol use is only a well-constructed policy decision away in markets like Argentina and Chile. The U.S. Grains Council (USGC) traveled to both countries in June to investigate their existing ethanol markets and discover how new or improved ethanol policies could boost demand while opening the door to imports.
“New market development opportunities for ethanol continue to arise in the Western Hemisphere,” said Mike Dwyer, USGC chief economist and lead on ethanol promotion globally. “The Council is discussing with governments and industries how to meet increasing demand for fuel and achieve economic, environmental and human health benefits through the use of blending ethanol into their gasoline supplies.”
After participating in the Ethanol Summit of the Americas in Houston in October 2017 (an event sponsored by the Council and its domestic partners), another South American country, Bolivia, decided to dramatically boost its commitment to bioethanol by starting at E10 in January 2019 and rising to E25 by 2025. The Council decided to visit Argentina and Chile with the hope officials there would see the value of enacting similar policies but with substantially more gallons involved.
In Chile, inexperience using ethanol is hindering U.S. ethanol export opportunities. Government regulations do allow blending of ethanol into fuel between two and five percent. However, importers and domestic refiners have selected MTBE (methyl tertiary butyl ether) – a substance displaced by ethanol in the United States due to potential health effects in drinking water – as the preferred oxygenate based on a lack of knowledge of how to use ethanol and insufficient domestic feedstock production. As a result, Chile is the third largest user of MTBE in the region.
The Council delegation gauged interest in using ethanol as a biofuel in addition to investigating the major regulatory and technical obstacles to adopting a national ethanol program in Chile.
“Our meetings in Chile opened the door for future technical dialogues between the U.S. ethanol industry and Chilean refineries,” Dwyer said. “The use of ethanol could help the Chilean government fulfill fuel quality requirements and comply with Chilean environmental standards – all at a price economically advantageous to Chilean fuel blenders.”
Argentina, in contrast, has both an existing ethanol policy and domestic ethanol industry to supply octane for the 2.4 billion gallons of gasoline consumed annually. The biofuels program, established in 2006, has encouraged the development of a domestic industry that uses both corn and sugarcane as feedstock.
The current E12 blend results in 278 million gallons of ethanol consumption annually, pulled equally from both corn and sugarcane via a government quota.
The sugarcane industry has been unable to fill its portion of the ethanol quota in months preceding the harvesting season when supplies of sugarcane are at their lowest (May-June). Despite goals to increase plant capacity by up to 20 percent, the domestic ethanol industry in Argentina also has geographical constraints that limit sugarcane production in the northern region of the country. These dynamics led to temporary ethanol imports of 1.3 million gallons (5 million liters) in the second quarter of 2018 to compensate for the deficit in local sugarcane-based ethanol production.
In contrast, the country’s corn-based ethanol industry – with five refineries – could increase production but is awaiting the government to signal support before increasing infrastructure investment.
Policy changes could come by 2021, including price liberalization for ethanol. Ethanol producers are in discussions with the government regarding whether to move to the Brazilian model of flex-fuel vehicles that can use pure E100 hydrous or to stay with anhydrous ethanol blended with gasoline at a rate not to exceed a 27 percent blend.
The Council delegation explored how these projected changes could affect the future of the ethanol industry in Argentina. The group also planted the concept of adjusting these policies to allow for trade when domestic supplies of feedstock are short, allowing for consistency in fuel blending and stability that would support the domestic industry’s growth.
“The Council will continue strengthening relationships with the ethanol industry in Argentina and Chile,” Dwyer said. “We saw in these markets the importance of engagement on how to build a robust ethanol program with a role for trade when domestic ethanol supplies are insufficient. We would like them to see the United States as a reliable partner – both in terms of import supply to supplement domestic production and as a source of technical and policy advice as they seek to decarbonize their fuel markets in the years ahead.”
We’re working every angle to make corn farming more profitable for Illinois farm families.Learn More
Ethanol displaced an amount of gasoline refined from roughly 550 million barrels of imported crude oil, keeping $36 billion in the U.S. economy in 2018.Learn More
“We’re proud of the impact we have on our economy, our environment and our everyday lives," says Don Duvall from Carmi, IL.Learn More