U.K. energy company BP Plc and U.S. agricultural trader Bunge Ltd. are combining their sugar and ethanol assets in Brazil, a merger that will boost BP’s supply of more environmentally-friendly fuels as the globe seeks to cut carbon dioxide emissions.
Burning ethanol releases 39% fewer greenhouse gases than gasoline, the U.S. Agriculture Department said in April. In Brazil, which is the second-biggest ethanol-producer after the U.S. and responsible for about half of global exports, most vehicles run on ethanol due in part to tax breaks.
Though a renewable fuel, ethanol is still criticized. Vast amounts of energy are required throughout its production and land is set aside for growing sugar.
“The land used and energy expended to make ethanol mean that it’s definitely not as environmentally beneficial as solar or wind,” said Chris Barber, head of refining biofuels analysis for ESAI Energy LLC, an energy consultancy in Wakefield, Massachusetts.
- Biofuel use is expected to grow about 3% a year for the next five years, the International Energy Agency said in 2018. That’s short of the 10% required to meet the Sustainable Development Scenario, the IEA guideline for cleaner, wider energy output.
- Favorable Brazilian government policies are expected to boost ethanol use in the coming years. Brazil’s sugar-based ethanol industry is more efficient than the corn-based fuel production in the U.S.
- In the U.S., ethanol production fell last year after federal rules changed to help small refiners; President Trump is said to plan measures to boost output, the Wall Street Journal reported last month.
- BP Bunge Bioenergia, the stand-alone entity created by the deal, will have 11 biofuels mills in Brazil, with 32 million tons of crushing capacity per year, BP said in a press release.
- Karma Takeaway: While the deal is a vote of confidence in the fuel, ethanol still takes heat for not being as environmentally friendly for the environment as solar and wind power.