Sweden signs biofuel accord with Brazil; abolishes tax on imported ethanol

The Swedish government has signed a biofuel cooperation agreement with Brazil and will remove its heavy import tax on ethanol produced in the South. The move is seen as a way to push EU member states to do the same. Both governments will also work together to help African countries become biofuel producers who can supply global markets. Sweden is thus creating the kernel of a genuine 'biopact'.

The deal comes after the publication yesterday of an OECD report that was written at the request of the Swedish government, Europe's largest importer of ethanol (earlier post). This document says there is an urgent need to liberalise the global biofuels market. The report urges the removal of subsidies for inefficient biofuels made in the North, and the abolishment of taxes in the EU and the US on imported ethanol, in order to allow the use of sustainable and carbon-reducing biofuels made in the South (more here).

These fuels, such as ethanol from sugar cane, are much more efficient than biofuels made in the North which do not substantially reduce greenhouse gas emissions and which push up food prices because they rely on food crops such as corn and wheat. Sweden is Europe's staunchest supporter of a 'biopact' in which the North imports efficient biofuels from the South instead. For this reason, it has been leading a diplomatic effort to remove trade barriers (more here).

Towards a free market
The country is now putting its money where its mouth is. Sweden has agreed to abolish the heavy import tariff on ethanol under a biofuels accord signed during a visit of Brazilian President Luiz Inacio Lula da Silva. This is a major success for the Brazilian head of state, who is currently on a biofuel diplomacy tour in Europe.

We intend to abolish this special tax that was introduced on January 1, 2006 in Sweden. We want to take away this tax as fast as possible. - Swedish Prime Minister Fredrik Reinfeldt.

The European Union member states currently impose a 19 eurocent per liter tax on imported ethanol (equivalent to around US$1/gallon). Sweden, Europe's leading green nation, expects to remove this tax as early as January 1, 2009. From then on, European biofuel producers will no longer be protected by the heavy tariff and face direct competition from Brazilian producers whose production costs are much lower. At least in Sweden, which imports 80 per cent of its ethanol. However, under the biofuel accord, Sweden has vowed to push for an EU-wide abolishment of the tax.

South-North-South
The agreement also furthers cooperation between the two countries to help African nations realize their large biofuel potential. Under the accord, Sweden and Brazil will facilitate the creation of bilateral and multilateral biofuel agreements between developing countries and industrialized countries, as a way to create a global market for sustainable biofuels. This is another area in which the Brazilian government has been very active (more here and here). According to the FAO, biofuel production in Africa can stimulate an 'agricultural renaissance' on the continent and reduce poverty on a large scale (earlier post).

The African continent has a very large potential to produce biofuels without threatening forests or food, fiber and feed supplies. The sustainable potential is estimated to be around 410 Exajoules by 2050 under an optimal scenario (earlier post). This is roughly the equivalent of the world's total current energy consumption:
energy :: sustainability :: ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: tariff :: Sweden :: Brazil :: Africa ::

Bio-ethanol made from sugar cane is the most efficient source of biofuel and is also a market where Brazil hopes to expand its global reach. The production model can be transferred to Africa, where land is abundant and agroclimatic conditions are very suitable for the production of biofuels that effectively reduce carbon dioxide emissions.

Sweden is strongly in favor of globalising the biofuel market and sees a great role for developing countries who can utilize the opportunity as a way to boost their own energy security and alleviate poverty on a massive scale. The vision has received support from the FAO and the WorldWatch institute, who say biofuels offer a chance for an 'agricultural renaissance' in Africa.

Commenting on his diplomatic success in Sweden, president Lula said: "I'm very happy to be backed by Sweden. The relations between Sweden and Brazil are extraordinarily good. There are 200 Swedish companies in Brazil, but it's not only because of the number of jobs that are generated by Swedish companies but also because of the political thinking, the way we (have worked) together for so many years."

Lula said that in the face of climate change, "we can no longer keep blaming someone else for being responsible" for threats to the planet. "If each party takes ... responsibililty to do things right, then we have a chance to save our planet."

Lula was to take part in a seminar on biofuels on Wednesday before leaving for Denmark. He will then visit Oslo on Friday and will arrive in Madrid on September 17.

References:
Swedish Government: Brasiliens president Luiz Inácio Lula da Silva träffar statsminister Fredrik Reinfeldt [webcast] - September 11, 2007.

AP: Sweden, Brazil sign biofuels deal during Lula visit - September 12, 2007.

Correio de Bahia: Lula estreita cooperação com a Suécia - September 12, 2007.