Trade deal opens EU to more ethanol imports from South America

By Erin Voegele | July 02, 2019

A new trade agreement reached June between Mercosur, a South American trade bloc consisting of Argentina, Brazil, Paraguay and Uruguay, and the European Union is expected to impact ethanol producers in both regions.

The agreement includes quotas for imports of sugar, ethanol fuel and ethanol used for industrial purposes. According to information released by the EU, the trade agreement establishes a 450,000 metric ton per year quota for duty free ethanol to enter the EU. An additional 200,000 metric tons per year of ethanol for all uses, including fuel, will be subject to an in-quota duty of one-third of the current rate. According to the EU, the volume will be phased in in six equal annual stages.

ePURE, the European association for renewable ethanol, has spoken out to criticize the deal, calling the agreement a blow to Europe’s farmers and ethanol industry and stating the deal makes concessions to Mercosur countries that essentially sacrifice the EU agriculture sector and domestic production of ethanol in exchange for gains elsewhere.

“The agreement essentially trades away Europe’s ethanol industry unless the EU can act quickly and grow the European ethanol market to accommodate a flood of imports,” the group said in a statement. “That means aligning trade policy with environmental and renewable energy policy by, for example, ensuring that the EU’s long-term decarbonization strategy includes a stronger push for sustainable biofuels such as ethanol. It also means that during the implementation phase of the agreement Member States and the European Parliament fight to give EU farmers the tools to absorb the negative imports of imports originating in Mercosur.”

“In agreeing to open its markets to Brazilian ethanol, the EU is contradicting its own efforts to increase domestic renewable energy sources in transport, killing incentives to invest in advanced ethanol, and making life even tougher for Europe’s already struggling farmers,” said Emmanuel Sesplechin, secretary general of ePURE. “As Member States and the European Parliament consider ratifying the deal, they should be aware of these consequences.

“The Commission has spent several years trying to shrink the market for a fuel that helps decarbonize its transport sector and reduces engine pollutants in today’s vehicle fleet, and with this deal it is offering what’s left of that market to Brazilian producers and sugarcane farmers,” Desplechin continued. “Now it will be important for the EU to grow its ethanol market for fuel and biobased applications and make sure European farmers continue to play a vital role in the fight against climate change and in the transition to the bioeconomy."

UNICA, the Brazilian sugarcane industry association, called the trade deal fair and balanced. “Although we regret that the negotiations were not ambitious enough to comprehensively address sugar and ethanol, especially considering the European sugar demand and the remarkable potential for ethanol consumption in the framework of the bioeconomy, we recognize that the agreement stroke today represents the best deal possible based on the limitations imposed by the EU,” UNICA said in a statement.