1. april/2008 The regulation and development of the biofuels industry in Brazil

2. Brazil GDP – US$ 1,5 trillion - a 5.4% expansion in 2007 Population – 186,5 million Area – 8.547.403,5 km 2 60% of preserved areas and other usages (cities, roads etc) 40% of arable area 29 sedimentary basins with oil and gas exploration potential (7,5 million km²) Biofuels, oil and natural gas regulated under the same institutional environment (same law, same agency). biofuels ethanol biodieselregulation Brazil conclusion

3. Energy within a worldwide context Accelerated growth of demand and prices Strong dependence on non-renewable energetic sources Negative impact on climate conditions Instability within producer countries. Challenges Security in the supply Free and moderate prices Control of the environmental impact. biofuels ethanol biodieselregulation Brazil conclusion

4. Brazil within the worldwide energetic context Brazil is where the world wants to get to Brazil automotive fuel matrix – 2007 About 18% of fuel consumed by the Brazilian fleet are already renewable Source: ANP/Simp biofuels ethanol biodieselregulation Brazil conclusion

5. Biofuel Legal definition A fuel produced from renewable biomass for use in internal combustion engines or, in accordance with regulations, for other types of energy generation, that could partially or totally substitute fossil fuels. (Law 11.097/2005) biofuels ethanol biodieselregulation Brazil conclusion

6. 1973 FIRST OIL CRISIS 1974 BRAZIL CREATES THE PROALCOOL PROGRAM 1977 ADDING OF 4.5% OF ALCOHOL TO GASOLINE 1979 ADDING OF 15% OF ALCOHOL TO GASOLINE 1980 SECOND PETROLEUM CRISIS 1983 ALCOHOL-POWERED CARS REPRESENT MORE THAN 90% OF SALES 1985 PERCENTAGE OF ALCOHOL ADDED TO GASOLINE REACHES 22% 1989 PETROLEUM PRICES DROP AND GASOLINE PRICES BECOME EQUIVALENT TO THOSE OF ALCOHOL 1992 RIO 92: SIGNATURE OF DOCUMENT ON CLIMATIC CHANGES The 90’s ALCOHOL BECOMES 20 TO 25% OF THE GASOLINE MIXTURE 2003 BIOFUEL-ENGINE CARS ARE PUT IN THE MARKET 2005 THE NATIONAL BIODIESEL PROGRAM IS LAUNCHED 2007 THIRD PETROLEUM CRISIS January 2008 MANDATORY B2 STARTS March 2008 April 2008 ALCOHOL CONSUMPTION EQUALS THAT OF GASOLINE MANDATORY B3 IS ESTABLISHED BY CNPE AS OF JULY,2008 biofuels ethanol biodieselregulation Brazil conclusion

7. The Brazilian Industry of Ethanol The choice for sugar-cane Amount of energy obtained from each unit of fossil energy matter (gasoline or diesel) employed during the process of biofuels fabrication. Sources: Unica, National Geographic e Luiz Horta Nogueira biofuelsethanol biodieselregulation Brazil conclusion

8. The Amazon is improper for sugar cane culture and is a protected area Brazil has the biggest area for agricultural expansion in the world: 100 million hectares see map Sources: IBGE, Conab e Unica Use of soil in Brazil biofuelsethanol biodieselregulation Brazil conclusion (850 million hectares) (340 million hectares )

9. Applications and benefits to the environment ProductApplicationEnvironmental Impact Anhydrous ethanol Fuel blendedLess CO 2 in atmosphere Hydrated ethanol Flex fuel vehiclesReduction of fossil fuel BiomassEnergy generationLower costs EthaneChemistry industries and biodegradable plastic Recyclable products biofuelsethanol biodieselregulation Brazil conclusion

10. 2006 2007 mil m³ 9.242 6.187 Hydrated ethanol consumption 49,39% Vehicles sells FLEX + Ethanol Gasoline - 500 1000 1500 2000 2500 mil veículos 2004 2005 2006 2007 Flex Vehicles Gasoline Vehicles 42,6% 27,3% Total 29,3% 356 producers 22.556 billion liters production in 2007 biofuelsethanol biodieselregulation Brazil conclusion

11. A fuel produced from renewable biomass for use in compression- ignition internal combustion engines or, in accordance with regulations, for other types of energy generation that could partially or totally substitute fossil fuels. (Law 11.097/2005) Biodiesel Legal definition biofuelsethanolbiodiesel regulation Brazil conclusion

12. Base of the program To discourage any action that may generate environmental damage or predatory competition with foodstuff cultures. biofuelsethanolbiodiesel regulation Brazil conclusion

13. Raw Materials Soy Castor beans Animal fat or lard Palm Sunflower Rapeseed Babassu Peanut Tucuma biofuelsethanolbiodiesel regulation Brazil conclusion

14. Participation of biodiesel in the diesel market biofuelsethanolbiodiesel regulation Brazil conclusion

15. Consumption 2006 2007 Diesel and biodiesel market Biodiesel production 2006 2007 2005 736 69.002 402.726 biofuelsethanolbiodiesel regulation Brazil conclusion 1.000 m³

16. Regulation: the role of ANP biofuelsethanolbiodiesel regulation Brazil conclusion

17. Biodiesel Law # 11.097/ 2005 - Introduces biodiesel to the Brazilian energy matrix and defines ANP´s assignments CNPE Act # 5/2007 - Establishes the acquisition of biodiesel through public auctions to be held by ANP MME Regulation # 284/ 2007 and MME Regulation # 301/2007 – Define policies for the implementation of the auctions to be held by ANP ANP Act # 33/2007 - Establishes the minimal mandatory levels of biodiesel to be contracted in the auctions for 2008 CNPE Act # 2/ 2008 - Increases the minimal percentage of biodiesel added to diesel to 3% Supply Regulations biofuelsethanolbiodieselregulation Brazil conclusion

18. Ethanol Law # 11.097/ 2005 - Defines ANP´s assignments regarding biofuels, including the authorization process for all activities related to the national supply of ethanol, with the goal of guaranteeing adequate supply ANP Regulation# 116/ 2000 - Regulates retail sale activities ANP Act # 36/2005 – Defines anhydrous ethanol and hydrated ethanol specifications for automotive use and mandatory addition of coloring to a anhydrous ethanol ANP Act # 5/ 2006 - Electronic register of productive plants, remittance to ANP of data related to the commercialization of ethanol, and rules of commercialization to be adopted by productive plants. ANP Act # 7/ 2007 - Limits to operations among distributors and observance of the brand. Supply Regulations biofuelsethanolbiodieselregulation Brazil conclusion

19. Ethanol Specifications ANP Act 36/2005, from December 6th 2005 (AEHC and AEAC) Key points Produced from sugar cane Anhydrous: The compulsory use is 25% in the blend Hydrated: use pure in flex fuel vehicles Inhibition of ethanol fuel adulteration Brazilian solution: after 30 years of use, experience shows that the 0,4% level defined in Brazil does not create problems for final use in the 25% fuel blend. biofuelsethanolbiodieselregulation Brazil conclusion Relevant difference: water level (White Paper)

20. Biodiesel Specifications ANP Act 07/2008, from March 19th 2008 Key points Takes regional diversity into account Ester level (96,5%): Related to the purity of the product Water level (500 ppm, max.): Related to performance Stability to oxidation (6h, min): Related to stability during transportation and storage White Paper Difference in end uses (light and heavy vehicles); Differences in composition and blends (B100 in Europe; B20 in USA and B2 in Brazil); Source differences; Difference on legislated emissions. biofuelsethanolbiodieselregulation Brazil conclusion

21. Creation of worldwide specification must cover all ranges of products (wider feedstocks base) and be consistent with different engines. biofuelsethanolbiodieselregulation Brazil conclusion Challenges to the usage of biofuels in the global market Elimination of technical barriers is vital for sustainable biofuels in the world market. Acceptance of the biofuels in the market depends on transparency and trustworthiness of the fuel which should be obtained by standardization. Development of consistent terminology and reference materials. Deepening of standards harmonization has to take into account essentially the development of world test methods appropriate for fuels from different sources, and also limits of properties wherever possible.

23. Thank you! Nelson Narciso Director nnarciso@anp.gov.br Tel: 55 21 2112-8152