Growing Global Ethanol Use Four factors driving production, consumption, and trade Brian D. Healy Manager of Ethanol Export Market Development bhealy@grains.org

Contents

Expanding global use

Four factors driving expanded use of ethanol

Outlook for use and trade

Partnerships in global market development

Conclusion

More than 60 countries have biofuels policies in place. In the last year, 9 have announced significant expansions to their policies.

Expanding global use Bolivia – E20 by 2025

Brazil – 2030, 40 billion liters

China – 2020, 18 billion liters

Canada – E10 in Ontario

Ireland – E10

India – new feedstocks

Japan – new suppliers

Mexico – E10

Vietnam – E5 to E10, 2020

Global production has surpassed 100 billion liters, and is expanding

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C & S America United States Europe Canada Africa Asia/Pacific

Source: U.S. Energy Information Administration & USDA/FAS Office of Global Analysis Projections

Factors driving the expanded use of ethanol

A combination of four factors will continue to drive the use of ethanol and the development of new or expanded ethanol policies globally

Four factors driving global ethanol policies

Agricultural producers and complementary industries

Environmental benefits

Human health benefits

Feedstocks are the major (75%) component of production, boosting rural economy, and storage, R&D, infrastructure networks

COP21 – Paris Agreement commitments to overall GHG emissions reductions

Improving air quality and reducing particulate matter emissions

Octane economics – cost competitive against aromatics, with benefits to consumers & a boost to company profitability

Factors driving the expanded use of ethanol

Economics and profitability

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U.S. renewable fuel standard drives ethanol use, nearly 40% corn utilization

U.S. ethanol production – 60 billion liters

Sources: USDA Economic Research Service, USDA Foreign Agricultural Service PS&D

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MMT % for Ethanol

U.S. forecast corn production – 371 MMT, 38% destined for ethanol production

Feedstock/agricultural producers & complementary industries

Vehicle ownership set to surge boosting fuel demand & GHG emissions, creating opportunities for expansion of ethanol use

Top 15 Largest Gasoline Markets (excluding United States, 545 billion liters and China, 190 billion liters – in 2018)

Environmental and human health benefits

Countries are focused on meeting Paris Agreement Commitments or own country contributions to overall GHG emissions reductions Focus on the transport sector

Co-products support GHG emissions reductions

According to USDA, U.S. corn ethanol reduces emissions by 43% over conventional gasoline, expected to exceed 50% by 2022. Many individual plants already above 55% GHG reductions Japan

Environmental and human health benefits

High octane rating and low cost make ethanol an attractive oxygenate of choice for Korea

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Oct

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Blending octane ratings of various gasoline components

Column1 Regular-grade gasoline (87)

Source: U.S. Department of Energy and ethanol industry

Economics and profitability

Ethanol is cheapest source of octane over the last decade, holding significant economic advantages

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Average Price Comparison

Ethanol MTBE BTXSource: U.S. Grains Council

Consumers and profitability

Outlook for use and trade

U.S. exports are coming off a record year, 5.2 billion liters in MY2016/17

+ 213

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Brazil

Canada

China

India

Philippines

Peru

South Korea

Nigeria

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Sept-Feb 2016/2017

Sept-Feb 2017/2018

U.S. ethanol exports – 4.3 billion liters, through Apr. 2018 millions of liters

Outlook for use and trade

Source: Global Agricultural Trade System, *U.S. Grains Council Forecast

In global trade, major producers and exporters are also importers (MY2016/17)

Major exporters – countries with sufficient feedstock United States – 5.2 bln liters

Brazil, Canada, India, Philippines, South Korea

Brazil – 1.4 bln liters U.S., South Korea, Japan, EU

Pakistan – 450 mln liters Japan, South Korea, EU, Taiwan

India – 140 mln liters

Major importers – policies with a role for trade Brazil Canada United States Japan Philippines India

Outlook for use and trade

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Volume of World Exports U.S. Market Share (Volume)

2017 Global ethanol trade reaches 8.3 billion liters U.S. share of world exports expands to 65%

Source: Global Agricultural Trade System (UN Trade Data subset) and Global Trade Atlas, U.S. Grains Council – projections (p)

Outlook for use and trade

Prospects For Growth Outlook for use and trade

Major markets Brazil Canada China India Japan Mexico

Tier-two markets Colombia Korea Philippines Peru Taiwan EU Vietnam

New potential African markets Persian Gulf Indonesia Turkey Regional

Summits APEC

Working directly with other countries (industry and government) to develop proven

policy supports, including enforced blending mandates and/or tax incentives. Highlight the benefits to society that result from biofuels blending – GHG emissions

reductions, air quality improvements, improved engine performance (octane advantages), and energy diversification. Also, rural economic development for those countries with competitively priced feedstock.

The positive role of trade – imports can help reach blending targets if domestic production lags or does not exist.

Assistance offered through joint bilateral working groups, trade missions, reverse trade

missions, and technical and policy workshop

The U.S. ethanol industry is building global biofuels partnerships with interested countries to avoid false starts in policy development and to share best practices in expanding the global use of ethanol

Partnerships in global market development

Conclusion

Three of the four factors stand to benefit Korea in developing ethanol policy and use Environmental benefits Human health benefits Consumers and profitability

U.S. industry and government stand ready to support Korea in developing a policy with a role for trade

E10 is a starting point for new policies