Agriculture Reference
In-Depth Information
Some articles of the old French newspaper "L'illustration" published during June 1902
are worth reading for our subject. They described the problem faced by beet growers to
export their surplus of sugar without subsidizes and their efforts to promote ethanol from
beet to substitute for gasoline imported from USA or Russia. However, it required to heavily
tax petroleum products.
The same story has since repeated itself each time when either an outlet for the locally
grown crop has to be guarantied, or crude oil become expensive to import. The latter
occurred with the shocks of oil price during the seventies. But once the price receded
during the eighties, agro-ethanol production fell to negligible quantities, except in Brazil
with cane.
The former motivation occurred in the nineties as a result of the negotiations to lib-
eralize global markets such as those of sugar and cereals. They tended to end any form
of protectionism (sugar production under quota in European Union, i.e. with a guarantied
price, must be phased out in 2017 [3]). Productions of agro-ethanol and fuels from oil
rich crops were then encouraged in industrialized countries to reduce stocks of agriculture
products difficult to export without some help, similar to the situation in 1902.
At the beginning of 2000s these countries started as well enacting measures to reduce
the dependence on imported fossil fuels. They have been reinforced by the five fold rise of
crude oil price since 2002. New price situation results from the exhaustion of supergeant
oil fields (initial reserves larger than 5 billion barrels or 5 Gb) discovered before the 70s.
New fields, now, rarely exceed 1 Gb reserve and are located in difficult environments. The
situation should thus be lasting as long as a cheaper substitute for crude oil is not available.
In addition to classical motivations, production of agro-ethanol has benefited from pol-
itics to limit emission of fossil greenhouse gases considered as the main responsible for
current climate change, large part of them originating from petroleum products.
In France agro-fuel production has been supported by the obligation for fuel retailers to
incorporate a certain amount of it (7% of the low heat value LHV of fuel since 2011), and
a partial devolution of taxes levied on transportation fuels [3]. Since 2011 the devolution
amounts to 140 e per m
3
of agro-ethanol, to be shared with retailers. Fig. 1 shows the
sudden rise of alcohol production from agriculture plants after 2005 in order to comply
with the mandate, along with the demise of the production of synthetic ethanol.
Due to the obligation of incorporation, agro-ethanol producers can benefit from a high
price, 637 e per m
3
in average for 2012 or 28.7 e per
GJ
LHV
(according to the quotation
of ethanol T2 FOB at Rotterdam). By comparison gasoline price was 605 e per m
3
or
about 19 e per
GJ
LHV
(according to the quotation of Eurobob gasoline by Platts). It
should be noted that prices, and taxes, are fixed on a volumetric basis, as if 1 L of ethanol
and gasoline were energy equivalent. Yet the volumetric LHV of gasoline is 50% higher
than ethanol one, giving a substantial benefit to ethanol producers - and State income - to
motorists detriment.
However, ethanol price also results from a competitive market with a shrinking demand
in France as not all the ethanol production is incorporated. Gasoline consumption is de-
creasing due to the rise of diesel share in road transportation fuels. In July 2014 ethanol
price had fallen to 21.1 e per
GJ
LHV
, while gasoline one before tax was still high at 17.2
e per
GJ
LHV
.
