Integrating bioenergy and food production—A case study of combined ethanol and dairy production in Pontal, Brazil

Energy for Sustainable Development 15 (2011) 8–16

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Energy for Sustainable Development

Integrating bioenergy and food production—A case study of combined ethanol and dairy production in Pontal, Brazil A. Egeskog a,⁎, G. Berndes a, F. Freitas b, S. Gustafsson a,1, G. Sparovek b a b

Physical Resource Theory, Department of Energy and Environment, Chalmers University of Technology, SE-412 96 Göteborg, Sweden USP- Esalq- University of São Paulo Av. Pádua Dias 11, Piracicaba-SP 13.418-900, Brazil

a r t i c l e

i n f o

Article history: Received 24 September 2010 Revised 10 January 2011 Accepted 10 January 2011 Keywords: Dairy production Sugarcane Ethanol Land-use change Greenhouse gas mitigation Brazil

a b s t r a c t Increased Brazilian sugarcane ethanol production is expected in response to increasing domestic and international ethanol demand. The Pontal do Paranapanema region, located in the western parts of the São Paulo state, is one of the regions where sugarcane is expected to expand on a large scale. This expansion will most likely affect small-scale dairy farmers in the region and may lead to displaced milk production. Interviews have been made with small-scale dairy farmers in areas where sugarcane has already been established. These interviews show that many farmers who substitute milk production for sugarcane production experience economic stagnation after the change. However, both systems can coexist, using sugarcane residues as high-quality cattle feed. This feed can easily be made at the ethanol mills using sugarcane residues and some additional protein and mineral supplements. Analyses indicate that the dairy farmers can increase their income ten-fold by adopting this integrated system. The increased total output and higher land-use efficiency in dairy production may counteract possible indirect land-use change. Greenhouse gas emissions per unit of milk produced as well as liter ethanol produced depend on several factors, including effects of diverting bagasse from other uses to feed production. © 2011 International Energy Initiative. Published by Elsevier Inc. All rights reserved.

Introduction Brazil is the world's largest producer and exporter of sugarcanebased ethanol (Dossa, 2009) and is expected to increase its production as domestic and international demand increases. Increased ethanol production will likely be accomplished based on establishment of new mills and plantations, but also requiring increased output from existing ethanol mills and fields. The greenhouse gas (GHG) emissions reduction from replacing gasoline with ethanol depends on the size of GHG emissions from sugarcane cultivation and conversion to ethanol as well as the (direct and possibly indirect) land-use change (LUC) emissions that may arise when new sugarcane plantations are established (see, e.g., Fargione et al., 2008; Gibbs et al., 2008; Lapola et al., 2010). Approximately 60% of Brazil's sugarcane production is located in the state of São Paulo (Instituto Brasileiro de Geografia e Estatística, IBGE, 2009). In this state, sugarcane occupies an area almost twice as large as the aggregated area for the next five crops (Instituto Brasileiro de Geografia e Estatística, IBGE, 2009) and during the period from 2002 to 2008 it increased by more than 70%, from 2.7 to 4.6 Mha (São

⁎ Corresponding author. Tel.: +46 31 772 31 59; fax: +46 31 772 31 50. E-mail addresses: [email protected] (A. Egeskog), [email protected] (G. Berndes), fl[email protected] (F. Freitas), [email protected] (S. Gustafsson), [email protected] (G. Sparovek). 1 Present address: Naturvårdsverket, Stockholm, Sweden.

Paulo Institute of Agricultural Economy (Instituto de Economia Agrícola, IEA, 2010a). It has been projected that the sugarcane area will increase further to reach almost 7 Mha in 2016 (Instituto de Economia Agrícola, IEA, 2010b). Further sugarcane expansion is possible in a few regions in the state of São Paulo. Freitas and Sparovek (2008) point to Pontal do Paranapanema (Pontal) in the western part of the state as one region where sugarcane expansion is likely to take place. Beef and milk cattle production presently dominates land use in Pontal, occupying about 55% of the 1.4 million ha region (Freitas and Sparovek, 2008). About half of the total area in Pontal (almost all pasture land) is judged to be suitable (from an agronomical perspective) for growing sugarcane. There are about 5000 small-scale family farmers (settlers) in Pontal living in settlements created by a national Agrarian Reform process (see, e.g., Freitas and Sparovek, 2008). The settlers received their land to produce for self-consumption and sell small amounts of surplus on local markets. Most settlers in Pontal use their land for milk production and their main income comes from selling milk and livestock (Egeskog and Gustafsson, 2007). The prevailing lowproductive and extensive milk production system in the settlements in Pontal (i.e., low-productive cows and limited pasture management) has constrained income growth for the settlers. Approximately 12% of the total land suitable for sugarcane in Pontal is located within the settlements (Freitas and Sparovek, 2008). This article presents results from a study of an integrated ethanol/ dairy system involving the settlers as sugarcane and dairy producers

0973-0826/$ – see front matter © 2011 International Energy Initiative. Published by Elsevier Inc. All rights reserved. doi:10.1016/j.esd.2011.01.005

A. Egeskog et al. / Energy for Sustainable Development 15 (2011) 8–16

and the mills as ethanol and feed producers. The system concept was developed based on a similar project in the Orlândia region, São Paulo (Burgi, 1985). The settlers can increase both milk production and net income by investing in (i) sugarcane plantations, (ii) more productive dairy cattle, (iii) pasture improvements, and (iv) supplementary cattle feed mainly based on sugarcane residues. The analyses are made for the case of sugarcane expansion only on pasture land, since this is the most common land type in Pontal. The study focuses on two main questions: • What economic benefits may a combined ethanol/dairy system have for small-scale farmers, such as the settlers in Pontal? • How may GHG emissions be affected if pastures (within and outside settlements) are converted to sugarcane plantations, milk production in the settlements is intensified, and the ethanol produced from the sugarcane replaces gasoline? In 2007 almost 20% of Brazil's total ethanol production was exported but this share is assumed to decrease as domestic demand increases (Dossa, 2009). However, the GHG emissions are estimated for the case where the produced ethanol is exported and used to replace gasoline in the European Union (EU). The rationale is that EU has so far been among the more progressive regions concerning integration of biofuel sustainability requirements into legislation. The EU may therefore be considered a target market for actors investing in the integrated ethanol/dairy production system. Methodology Two different models were developed to analyze selected effects of implementing the integrated ethanol/dairy system in Pontal; one model for quantifying the net revenues from milk production in the settlements (the Change of Cattle (CoC) model, see the Economics of milk production in the settlements (CoC model) section) and one model for quantifying the associated GHG emissions (the BIOenergy net GreenHouse Gas emissions (BIOGHG) model, see the Net GHG emissions (BIOGHG model) section). The introduction of the integrated ethanol/dairy system can also affect other actors, such as beef cattle ranchers outside the settlements and the sugarcane industry, but this is outside the scope of this study which focuses on settlers in Pontal. Readers are referred to Sparovek et al. (2009a) for a more comprehensive account of how ethanol can be integrated with milk and beef production in Brazil. Economics of milk production in the settlements (CoC model) The CoC model is constructed to represent the transition from lowproductive to medium-productive dairy cattle; it describes the settlers' incomes and expenses connected to their dairy cattle production system. The annual net income for the settlers is quantified for the time period when they make the transition from the current milk production systems with low-productive dairy cattle to the integrated ethanol/dairy system with medium-productive dairy cattle. The model is developed using information from a questionnaire survey conducted in Pontal in 2006 (Egeskog and Gustafsson, 2007). The transition from low- to medium-productive dairy cattle involves several changes. The settlers allocate part of the land presently used for subsistence and pasture to sugarcane. In exchange the sugarcane industry provides the settlers with cattle feed based on sugarcane residues and produced at the ethanol mill. The settlers also increase the number of animals they keep and reduce the area used for pasture (see Fig. 1). The CoC model only includes income and expenses connected to the cattle management and sugarcane production and leaves out additional income and expenses, such as pension, salary from other activities, and income and expenses associated with the production of

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other goods. Thus, milk, cattle, and sugarcane are the only income sources considered. This is since income and expenses from cattle management and sugarcane production are assumed to be the only parameters that change. For more detailed information regarding the CoC model, see Egeskog (2010a). The mean annual income for settlers who do not grow and sell sugarcane to the industry is almost R$ 4900 (Egeskog and Gustafsson, 2007). A R$ 18,000 loan, made available for the promotion of rural agricultural development (Pronaf, 2006), is assumed to be used during the first 3 years to cover investment costs for new cattle, cattle feed, artificial inseminations, change in pasture management, milk machines, and milk refrigerators. Improvement of cattle stock and milk production The low-productive cattle currently used by the settlers in Pontal will not produce additional milk when given supplementary feed; hence a transition to more productive cattle is necessary in order to increase milk production. This new cattle stock will need improved pastures and supplementary feed (Ricardo Burgi, BürgiConsultoriaAgropecuáriaLtda, Piracicaba, Brazil. Personal communication, November 2006). In 2006, settlers received about 70% of the average milk price paid in São Paulo, see Table 1. It is assumed that improved milk management (centralized cooling systems, refrigerators) and increased total milk production in the settlements will lead to higher milk quality, stable supply, and thus a better trade position towards the milk buyers. This will make it possible for the settlers to charge the same price as is paid on average in São Paulo. By changing from hand-milking to machine-milking, settlers are assumed to double their milking capacity (see Table 1). The number of milk-producing animals will be doubled in 4 years; after 10 additional years all milk-producing animals are medium-productive animals. However, there is no restriction set on the proportion of heifers to cows. Since the heifers only lactate during one-fourth of the year, compared to four-fifths for the cows, the annual milk production will vary over the years. A pasture area of 10 ha—50% of each settler's property—can sustain a herd of 32 milk-producing animals. However, the time available for milking is assumed to be a limiting factor and the settlers will only be able to double their herd size from 12 to 24 milk-producing cattle due to this. Full ration feed Each settler needs about 170 tons of feed per year when they have doubled the herd size. The feed is needed during the winter when the pasture cannot provide enough grass. This full ration (FR) feed is a mix of residues from ethanol production, including raw (4%) as well as steam-treated bagasse (51%), liquid yeast (29%), and molasses (1%). The FR feed also includes sorghum (8%), soybean meal (4%), urea (1%), limestone (0.5%), and minerals (1%). Producing this feed requires about 270 tons raw bagasse (3 kg raw bagasse is needed for each kilogram steam-treated bagasse), as well as 14 tons sorghum and 8 tons soybean meal. The demand for bagasse (corresponding to about 11 ha of sugarcane plantations) and other residues from the ethanol production cannot be covered by the sugarcane produced on the settlers' land alone. Additional bagasse from sugarcane grown outside the settlements (see Fig. 1) is required for the feed production, and also for covering the internal energy demand of the ethanol mill. On average, each settler can provide 70% of the bagasse needed for feed when the transition to the integrated ethanol/dairy system is completed. Cultivation of the sorghum and soybean needed for the FR feed production requires almost 4 ha of cropland each and is assumed to take place outside the settlements. The feed will be produced at the ethanol mills. As for the combined ethanol/dairy system in Orlândia, the FR feed is assumed to be sold to the settlers at a price corresponding to the production cost as an incentive for making the settlers' land available for sugarcane production. This production cost corresponds to about

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A. Egeskog et al. / Energy for Sustainable Development 15 (2011) 8–16

Ethanol plant

Within settlements 20 % for subsistence

a

Outside settlements Pasture suitable for sugarcane

80 % for pasture soy and sorghum

20 % for subsistence

b

Bagasse replacing electricity

80 % for pasture

Sugarcane on 80 % of pasture suitable for sugarcane soy and sorghum To the market

20 % for subsistence Sugarcane from 6 ha

c

30 % for sugarcane

50 % for pasture

feed

Bagasse replacing electricity

Sugarcane on 80 % of pasture suitable for sugarcane soy and sorghum To the market

Fig. 1. Panel (a) shows the present system when each settler uses 80% for pasture, panel (b) shows a system where the expansion of sugarcane only takes place outside the settlements and all excess bagasse (when internal heat and electricity demands are covered) is used to produce electricity. This electricity can then substitute electricity from other sources, e.g., oil-based electricity. All soy and sorghum produces is sold to the market. Panel (c) shows a system where the settlers are included in the sugarcane production. Part of the bagasse used for electricity and part of the soy and sorghum production which in (b) was sold to the market will in this case be used to produce feed for the settlers' cows.

50–70% of the market price for cattle feed that in 2006 was 0.18 R$/kg (Ricardo Burgi, BürgiConsultoriaAgropecuáriaLtda, Piracicaba, Brazil. Personal communication, February 2010). The capital cost associated with the feed production is low compared to other capital costs in the sugarcane ethanol industry. And, since settlers pay a price corresponding to the feed production cost, the FR feed production will be cost neutral from the perspective of the ethanol producer. Net GHG emissions (BIOGHG model) The BIOGHG model is constructed to quantify emissions connected to a scenario for sugarcane expansion in Pontal where the settlers shift to the combined ethanol/dairy system. The BIOGHG model considers GHG emissions and avoided GHG emissions associated with three different activities; (1) the use of fossil-based inputs in sugarcane and ethanol production; (2) the conversion of pastures to sugarcane plantations leading to changes in soil carbon; and (3) the replacement of gasoline with ethanol in the transportation sector and provision of electricity generated from bagasse. The annual as well as cumulative net GHG emissions are calculated for the studied period. For a more detailed description of BIOGHG, see Egeskog (2010b). In contrast to the settlers, large land owners in Pontal are assumed to shift from beef cattle production to conventional sugarcane production. Decisions about future land use by the large land owners can influence the size of GHG emissions associated with the shift to sugarcane—e.g., they may intensify their remaining cattle production and/or convert forests and other natural ecosystems to new pastures to compensate for lost beef production—but these considerations are outside the scope of this analysis, which focuses on the settlers' production. LUC emissions arising due to the new demand for soybean

and sorghum as ingredients in FR feed production are not considered within the BIOGHG model. Such LUC effects are instead explicitly treated in illustrative sensitivity quantifications in the Indirect landuse change section. The sugarcane expansion scenario The scenario for the sugarcane expansion is defined so that 80% of the area outside settlements that is suitable for growing sugarcane is used for sugarcane production by the end of the scenario period, i.e., in 2030. The remaining 20% of the suitable land is reserved in equal shares for (i) roads and industrial areas developed as part of the sugarcane expansion and (ii) protection of nature, soils, and water resources. According to Brazilian environmental legislation, 20% of private farmland in São Paulo should be protected as legal reserves (Sparovek et al. 2010). Our assumption of only 10% of suitable land set aside for protection implies that unsuitable land is also reserved for this purpose. Outside the settlements, 487,200 ha is allocated to sugarcane (based on Freitas and Sparovek, 2008). Given that each settler is assumed to allocate 6 ha for sugarcane (30% of 20 ha), 30,000 ha of pasture will be converted to sugarcane plantations inside the settlements. The expansion will proceed at a constant rate during the whole expansion period, both within and outside the settlements. Sugarcane and ethanol production Production of sugarcane. Emissions connected to production of sugarcane depend on direct emissions from the production as well as yields. Emissions directly associated with sugarcane production come from production and use of agricultural inputs such as diesel, fertilizers, and herbicides, the production, use and maintenance of

A. Egeskog et al. / Energy for Sustainable Development 15 (2011) 8–16

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Table 1 Assumptions regarding present and future situation for the small-scale dairy cattle farmers in Pontal. Milk prices are assumed to increase at the inflation rate; values for 2030 are in 2006 R$.

Milk price R$/litera Income from sugarcane (R$/ha)b Milk producing animals Emissions from milk production (kg CO2 eq./liter milk)c Animals/hab Milk production

Milk producing animals Share of property used for different land uses (each settlers owns 20 ha)b

Time spent by one person on hand milkinge Time spent by one person on milking with machinef

Pontal 2006

Pontal 2030

0.38 – 12 3 1.4 3.6 l/animal/dayb Cows 50% in lactation Heifers 25 % in lactation Cows: 10 Two-year-old heifers: 2 Pasture 80% Sugarcane 0% Subsistence 20% 3h –

0.55 300 24 1.3 3.3 12 l/animal/day Cows 80% in lactation Heifers 25 % in lactation Cows: 18–21d Two-year-old heifers: 3–6d Pasture 50% Sugarcane 30% Subsistence 20% 6h 3h

a

Based on communication with Ricardo Burgi, BürgiConsultoriaAgropecuáriaLtda, Piracicaba, Brazil. Personal communication, November 2006. Same as prices paid in 2006 (Egeskog and Gustafsson, 2007). Values based on calculations using the ALBIO model (see, e.g., Kasimir-Klemedtsson and Wirsenius, 2004). Values include CH4 emissions from the animals' enteric fermentation and CH4 and N2O emissions from manure management. d The numbers vary, but in total they never exceed 24. e Assumes it takes 1 h to hand-milk 8 cows/heifers (the productivity of the animals does not affect the time), and that milking is done twice a day by one person (Alberto Barretto, Department of soil science, ESALQ/USP, Piracicaba, Brazil. Personal communication, November 2009). f Assumes it takes 1 h to machine-milk 16 cows/heifers and that milking is done twice a day by one person (Alberto Barretto, Department of soil science, ESALQ/USP, Piracicaba, Brazil. Personal communication, November 2009). b c

machines and buildings, as well as emissions from transport (see Table 2). The average sugarcane yield in São Paulo in 2008 was 85 tons fresh cane/ha (Instituto de Economia Agrícola, IEA, 2010a), corresponding to 70 tons fresh cane/ha/year if assuming a 6-year cycle with five harvests. The annual sugarcane yield has increased on average 0.84% per year over the last 10 years (Instituto de Economia Agrícola, IEA, 2010a). Following Macedo et al. (2008), the yields are set to continue increasing at half this rate, giving an annual yield of about 94 tons fresh cane/ha in 2030. Nitrogen (N) application rate, crop type, fertilizer type, soil organic carbon content, soil pH and texture are factors that significantly

influence N2O emissions from agricultural production; a summary of available measurements and modeling show large variations in N2O emissions even when many important factors are equal (Stehfest and Bouwman, 2006). The Tier 1 methodology presented in IPCC (2006a) was used for calculating direct and indirect N2O emissions. The N fertilization is assumed to correspond to 60 kg N/ha/year (Macedo et al. 2004); residues left on the field are assumed to provide plantavailable N corresponding to 100 kg N/ha/year based on (Basantaa et al., 2003); and N in mineral soils is assumed to become available during mineralization at a rate corresponding to 1 kg N/ha/year (based on a C:N ratio of 5). Improvements in crop management, e.g.,

Table 2 Emissions from processes connected to sugarcane and ethanol production (based on Macedo et al. (2004) unless otherwise indicated) and assumptions regarding soil carbon and soil carbon change in pastures that are turned into sugarcane fields in Pontal. Emissions from activities connected to sugarcane ethanol production

kgCO2 eq./ton sugarcane

Activities affecting soil carbon levels (40 ton Change in soil carbon C/haa)

4.8–5

Mechanical harvest

Production of agricultural inputs

8.4

Manual harvest

Production and maintenance of agricultural equipment All transportf

2.8 20–22

Maximum loss of soil carbon each cycle Mechanical harvest after manuale

Production of industrial inputs Construction and maintenance of equipment and buildings Release of N2O from fertilizer decompositiong Release of CH4, N2O and COh when sugarcane is burned before harvestl

0.6 4 12.1–9.8 26

Maximum gain of soil carbon each cyclee

Agricultural operation at the sugarcane field

b

c

d,e

e

New soil carbon equilibrium 95% of start value New soil carbon equilibrium 70% of start value 10% New soil carbon equilibrium 95% of start value 5%

a The pastures in Pontal are assumed to have a soil carbon stock of 40 ton C/ha (Carlos Cerri, Department of soil science, ESALQ/USP, Piracicaba, Brazil. Personal communication, November 2006). b Linearly increased yields of sugarcane from about 70 to 90 ton sugarcane/ha lead to decreased emissions per ton from operations in the field. However, emissions from manual harvest are about half of the emissions from mechanical harvest and the area of manually harvested fields decreases. c Based on communication with Carlos Cerri, Department of soil science, ESALQ/USP, Piracicaba, Brazil. Personal communication, November 2006. d Based on Lal et al. (2006). e Based on communication with Carlos Cerri, Department of soil science, ESALQ/USP, Piracicaba, Brazil. Personal communication, November 2006. f 2.8 kg CO2 eq./ton sugarcane excluding transport to Europe. g Linearly increased yields of sugarcane from about 70 to 90 ton sugarcane/ha lead to decreased emissions from operations in the field. Values calculated based on IPCC (2006a), included direct and indirect emissions. h The global warming potential for CO is uncertain; it may vary from 1 to 3 (IPCC, 2001). Here, we assume it is 3. l Calculations based on IPCC (2006b).

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optimized use of fertilizer, may substantially reduce N2O emissions (see, e.g., Smeets et al., 2009), but the default in BIOGHG is based on present situation. Harvesting of sugarcane. It is assumed that pre-harvest field-burning— affecting soil C and leading to significant emissions of CH4, N2O, and CO (Table 2)—always takes place in fields that are harvested manually but never in fields that are mechanically harvested (see Change in soil carbon as a result of land use change from pasture to sugarcane section regarding soil carbon). The current law states that burning should be phased out by 2021 in large and flat areas suitable for mechanical harvest and by 2031 in small and sloping areas not suitable for mechanical harvest; see São PauloState law # 11,241, September 19, 2002. In 2008, the sugarcane industry union (UNICA, 2009) signed a protocol of intentions in which its associates (individually and voluntarily) set out to phase out field-burning before harvest by 2014 in areas suitable for mechanical harvest, and by 2017 in areas not suitable for mechanical harvest (Macedo et al. 2008). Although compliance with the protocol is voluntary, the state government is considering new legislation (Alves and Del Duca, 2007) and it is assumed as default that the phase-out of field burning will follow the agreement. Sensitivity analyses are made where the rate of phase-out of field burning is to show how this influences the total emissions from sugarcane production. Production of ethanol. We assume the ethanol mills will only produce ethanol, even though a majority of the presently operating ethanol mills in Brazil produce both sugar and ethanol. This assumption will however only affect the total amount of ethanol produced because of the very clear system boundaries between the sugar and ethanol production, Macedo et al. (2008). All internal process energy needs are assumed to be covered by bagasse; non-CO2 emissions from combustion of bagasse at the ethanol mill are considered relatively small (Macedo et al., 2004) and are therefore not included. Hence, the only emissions connected to ethanol production come from production and maintenance of industrial inputs and equipment (Table 2). Assuming the same rate of increase as in Macedo et al. (2008), the ethanol yields will increase from 86 l ethanol/ton sugarcane (2009) to almost 98 l ethanol/ton sugarcane in 2030. This increase only considers improvements in cane quality (increased sucrose content) and does not take into consideration the possibility of using bagasse as feedstock for ethanol production.

Brazil. Personal communication, November 2006). Based on Graham et al. (2002) and Robertson and Thorburn (2007), it is assumed that the soil carbon content gradually increases after a shift from manual to mechanical harvest and that this increase continues until the soil carbon content is equal to that in a field that has always been harvested mechanically. Table 2 presents the values and assumptions made regarding soil carbon content in Pontal and how it is influenced by land conversion and use. Based on Freitas and Sparovek (2008), 20% of the expansion in Pontal is defined to take place in areas that are not suitable for mechanical harvest. The two different harvesting practices have similar annual cost, but the mechanical harvesting involves higher capital costs due to the required investment in a harvester. We assume that mechanical harvest is always the practice when sugarcane expands in areas where manual harvest will be prohibited by 2014—and where the land is suitable for mechanical harvest—since it is very unlikely that manual harvesting systems will become established in such areas. Areas where manual harvest is allowed until 2017 are mainly owned by smaller farmers that usually have less capital available for investing in harvesters. In these areas, manual harvest with burning is assumed to be phased out gradually so that half of the area is burned in 2011 and none in 2017. Avoided emissions There are avoided emissions both from ethanol replacing gasoline and from bagasse based electricity replacing oil-based electricity on the margin. Each MJ of ethanol replaces on MJ of gasoline, with corresponding reduction in GHG emissions from gasoline use. The ethanol mills in São Paulo require on average about 94%, and at best about 80%, of the bagasse to cover internal demand for heat and electricity (Macedo et al., 2004). It is assumed that new mills will use 85% of generated bagasse for meeting internal process heat and electricity requirements and that the remaining 15% is used for FR feed production and production of electricity that is exported to the grid with corresponding reduction in GHG emissions. In 2007, hydroelectric power stood for 85% of Brazil's total generated power. About 8% was fossil fuel based, mainly natural gas and petroleum, and the remaining electricity was generated through nuclear power and from other renewables (Energy Information and Administration, EIA, 2009). It is assumed that the bagasse based electricity will replace oil-based electricity. Sensitivity calculations are made where important parameters are varied. Presentation and discussion of the results

Transport of ethanol. All of the ethanol is assumed to be transported from Pontal to Santos by truck and shipped to Europe across the Atlantic (the resulting GHG emissions are given in Table 2) where it is blended with gasoline. The additional distribution emissions arising due to the lower energy density of ethanol compared to gasoline are estimated to be small and are therefore not included. With an average transportation distance of 1000 km within EU, about 2% of total emissions would have come from this transport. Change in soil carbon as a result of land-use change from pasture to sugarcane The conversion of pastures to sugarcane plantations gives rise to different GHG emissions depending on how the sugarcane is harvested. The soil carbon content is higher in sugarcane fields harvested mechanically than in fields harvested manually (see, e.g., Razafimbelo et al., 2006; Galdos et al., 2009). Manual harvest lowers soil carbon content due to tillage and because no biomass is left in the fields (Galdos et al., 2009). With mechanical harvest, some residues are left in the field; in the first year, soil carbon decreases due to tillage, but after that, the soil carbon will remain stable since the carbon input via residues balances the loss of soil carbon from tillage (Carlos Cerri, Department of soil science, ESALQ/USP, Piracicaba,

Increased sugarcane ethanol production in Pontal to meet import demand from Europe can lead to reduced GHG emissions. The Brazilian settlers in Pontal can at the same time improve their income by integrating sugarcane and dairy production. Income from milk and sugarcane production When the settlers change from 12 low-productive to 24 mediumproductive dairy cattle, they increase milk production by more than an order of magnitude, from about 7000 to about 80,000 l annually. However, the price for FR feed and income from milk are two crucial factors for income development from the present level of about R$ 4900. If the settlers pay 2/3 (0.12 R$/kg) of the market price for the FR feed, and income from milk sales increases to the average liter-price in São Paulo (R$ 0.55), the net annual income will be fivefold higher 14 years after the transition started (Fig. 2). If instead the settlers pay the market price for the FR feed when the transition is complete, their net annual income would roughly triple. If the milk price paid to the settlers remains at the present level (70% of the São Paulo price) the average annual net income would more than double by year 14, assuming two-thirds of the market price for FR feed. However, if the

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net income

full ration feed

new dairy cattle

amortization

milk production

production cost

40

90

30

70 50

20

30 10 10 0 -10 -10 -30 -20

-50

-30

-70

-40

annual milk production (1000 litres)

annual income and expenses (1000 $R)

A. Egeskog et al. / Energy for Sustainable Development 15 (2011) 8–16

-90 2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

Fig. 2. Milk production and net income and expenses for average integrated ethanol/dairy system for a settler who starts cattle stock transition in 2010. The variation in milk production is due to variation in dairy cattle stock.

settlers pay the market price for FR feed and the milk price remains at the present level, the average net annual income by year 14 would be less than one-fourth of today's income. If the settlers maximize the herd size (32 instead of 24 animals) they would improve their net annual income but would need to spend 1 h more per day milking. During years 4 to 14 the settlers will have full costs for FR feed but lower incomes from milk. Mixed herds containing cows with a breed of low- and medium-productive animals need as much FR feed per animal as herds containing only medium-productive animals. Since these herds produce less milk, settlers need to see reduced feed prices and increased milk prices—or some type of economic support—in order to maintain their annual net income during these 10 years of transition. Experience from the Orlândia case, referred to earlier, indicates that the transition to the integrated ethanol/dairy system might not be considered an attractive option if the net annual income is substantially reduced during the transition period. The settlers need to allocate 20% of their land to subsistence food production but the remaining 80% (16 ha) could be used for whatever they want. If the 80% were used only for sugarcane, the income from it would have to be more than 875 R$/ha to match the annual net income of the fully integrated ethanol/dairy system (assuming 24 milk-producing animals, market price for FR feed and 0.55 R$/l milk). This is almost 600 R$/ha more than settlers in Pontal are paid currently (2010). Ethanol production and use In 2030, when the sugarcane expansion is complete, the total annual ethanol production in Pontal will be about 3,190,000 m³ ethanol (67 PJ). This is equivalent to 2.4% of the EU demand for renewable transportation fuel in 2030, assuming a share of 14.25 % (about 2800 PJ) renewable fuels in the transportation sector (European Commission, EC (2008). Net GHG emissions GHG emissions/liter ethanol associated with sugarcane production, local transport and conversion to ethanol decrease over time, partly due to increasing cane yields/ha and ethanol yields/ton cane (Fig. 3a/b). The transition from manual harvest (with field burning) to mechanical harvest also contributes to decreased emissions. The mechanical

harvesting requires more diesel use in the field, but this is more than compensated for by avoided emissions from field burning. Use of Brazilian ethanol in the European transportation sector leads to avoided GHG emissions (possible effects of iLUC not considered). In Fig. 4, emissions and avoided emissions as well as total accumulated avoided emissions are shown. In addition to emissions from ethanol production (Fig. 3a/b), emissions from ethanol transport to the EU, and soil carbon oxidation associated with pasture conversion to sugarcane plantations are included. Avoided emissions arise from replacement of gasoline by ethanol and of oil-based electricity by bagasse-based electricity. Emissions from soil carbon oxidation decrease as manual harvest is phased out over time. If manual harvest is totally phased out by 2017 (as in Fig. 4), cumulative avoided GHG emissions by 2030 would correspond to about 45Tg CO2 eq. (Fig. 4). This equals an average of 40 g CO2/km for all ethanol produced in Pontal during the given time period, assuming that the ethanol is used in a car running on 0.05 l gasoline/km. The car would emit 140 g CO2/km if running on gasoline, assuming direct and indirect emissions from gasoline are 2.8 kg CO2/l gasoline. If manual harvest is instead phased out completely by 2031, about 43 Tg CO2 eq. would be avoided by 2030 (46 g CO2/km). Avoided emissions from displacement of oil-based electricity with bagasse-based electricity decrease slightly over time as the demand for FR feed increases within the settlements. Assumptions about bagasse requirements for process heat and electricity production influence the results. Ethanol mills are assumed to require 85% of the bagasse for internal energy demands. If all new ethanol mills instead require 80% of the bagasse, avoided emissions by 2030 would be almost 10% higher. If 95% of the bagasse is required to meet internal energy demand—the average in São Paulo state today (Macedo et al., 2004)—the surplus bagasse would not suffice to meet the requirements for FR feed production from year 3 and onwards. Thus, bagasse would need to be transported from other plants in order to meet the total demand. N2O emissions associated with fertilizer use shown in Fig. 3a/b are calculated using the IPCC emission factor of 1%. Crutzen et al. (2008) proposed a higher emission factor and stated that N2O emissions from biofuels have been underestimated by a factor of two to three in earlier studies. However, the differences between IPCC tier 1 and Crutzen et al. (2008) arise due to use of different accounting approaches. Using the emission factor proposed by Crutzen et al.

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N2O emissions from N-fertilizers

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Fig. 3. a/b Emissions (kg CO2eq./liter ethanol, left axis; kg CO2eq./ha, right axis) from annual production of ethanol. Panel A shows emissions when burning is totally phased out in 2017. Panel B shows emissions when burning is totally phased out in 2031. The differences between the two cases are emissions from burning and emissions from agricultural operations at the field.

(2008) when calculating the N2O emissions from N fertilization of a specific bioenergy plantation makes this bioenergy production responsible for all N2O emissions taking place subsequently when part of the applied N is re-circulated into other agriculture systems where it substitutes for other N input. Since N2O emissions from the animal production system are treated separately in this study, use of the higher emission factor proposed by Crutzen et al. (2008) would likely overestimate N2O emissions associated with the sugarcane production. Nevertheless, N2O emissions can have an important impact on the overall GHG balance of biofuels (Smeets et al., 2009). Soil carbon changes As can be seen in Fig. 4, CO2 emissions arising from soil carbon oxidation can be substantial during the initial phase of the transition period when sugarcane is planted on pastures and part of the harvest

is manual. The influence on the longer term cumulative avoided emissions depends on how long it takes until a new equilibrium level for soil carbon is reached—and on the difference between this equilibrium level and that in the pastures before conversion. If the equilibrium soil carbon content in fields subject to manual harvest will remain the same as the pre-conversion soil carbon content, instead of 30% lower as is the base case, cumulative avoided emissions up to 2030 would be more than 7% higher. This assuming burning is phased out in 2017. Setting the equilibrium soil carbon content to a lower level does not affect the results, since the assumed rate of soil carbon loss is such that the soil carbon content is not reduced by 30 % of pre-conversion level by 2030 anyway. Similarly, if pre-conversion soil carbon content in pastures in Pontal is set to 50 ton C/ha instead of the base case of 40 ton C/ha, total avoided emissions would decrease by less than 2% due to the larger

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Fig. 4. Emissions per liter ethanol and cumulative avoided emissions in conjunction with an expansion of sugarcane for ethanol in the Pontal region. Manual harvest is assumed to be phased out completely in 2017. Emissions increase in the first 2 years. Possible deforestation through iLUC is not included.

soil carbon emissions. If it is instead set to 30 ton C/ha, total avoided emissions in 2030 would increase by less than 2%. The cumulative avoided emissions up to 2030 are sensitive to the pace of sugarcane expansion relative to the pace of phasing out manual harvesting. Faster sugarcane expansion in the early years would lead to larger soil carbon losses, since more sugarcane land would then be subject to manual harvesting. Conversely, soil carbon losses would be lower if sugarcane expansion is slower in the beginning of the expansion period. Diversion of bagasse from other uses to feed production Milk production using low- and medium-productive dairy cows leads to GHG emissions corresponding to 3 and 1.3 kg CO2 eq./liter milk, respectively (Table 1). Values includeCH4 emissions from the animals' enteric fermentation and CH4 and N2O emissions from manure management. The aassumptions regarding GHG emissions from dairy cattle are based on calculations in Kasimir-Klemedtsson and Wirsenius (2004)) and these calculations are consistent with IPCCs guidelines for National Greenhouse Gas Inventories (IPCC, 2006c). Both low- and medium productive dairy cattle graze, however, the medium-productive dairy cows also require additional feed, which means that additional bagasse is required for the FR feed production. The medium-productive dairy cows require almost 3.4 kg raw bagasse/liter milk produced, based on average feed requirement and average milk production for the herd after the transition. Assuming that this bagasse could have been used to replace oilbased electricity on the margin, the GHG savings lost by diverting more bagasse to FR feed production correspond to about 2 kg CO2 eq./ l milk. Hence, in this case the net effect of the transition from low- to medium-productive dairy cattle would be slightly higher GHG emissions per liter milk for the medium-productive dairy cattle (3.3 compared to 3 kg CO2 eq./liter milk). The production of the other ingredients in the cattle feed also gives rise to GHG emissions, which have not been quantified. A critical point will be whether the increased demand for these ingredients results in conversion of forest land to cropland. This is further discussed in the Land use section. Allocation of avoided emissions from ethanol to milk production Assuming that production of additional ingredients of the feed is produced on the settlers premises, each hectare (above the area used

for subsistence) will hold 1 medium-productive dairy cow; soy and sorghum production for that cow; and sugarcane enough to produce almost 3400 l of ethanol. If the avoided emissions from using this ethanol in the transport sector are allocated to the settlers milk production, emissions from the medium-productive dairy cow would be 1.6 kg CO2 eq./l milk. Emissions from soy and sorghum production have not been quantified, and if included it would increase the emissions. However, reduced demand for land, a consequence from assuming a constant milk demand, has also not been included. Increased expansion of sugarcane on the freed area would lead to reduced emissions from milk production if avoided emissions from this ethanol production were allocated to the milk. This is further discussed in the Land use section. Land use The low- and medium-productive dairy cattle produce about 660 and 3500 l milk/animal/year, respectively (Table 1). Each low-productive animal needs 1 ha of pasture while the medium-productive animal needs less than one-third of this area. However, the latter also needs the FR feed requiring additional cropland for soy and sorghum production. This corresponds to almost 0.4 ha/medium-productive dairy cow. Area requirement for bagasse production is not allocated to the milk production but to the ethanol production that generates bagasse as a by-product. While the transition to the integrated ethanol/dairy system does not obviously lead to reduced GHG emissions/liter milk produced (see the Diversion of bagasse from other uses to feed production section and Allocation of avoided emissions from ethanol to milk production section), possible GHG emissions reduction from making the transition can follow from the improved land-use efficiency. The medium-productive dairy cattle need much smaller area/liter produced milk and this can be important with respect to reducing the risk that ethanol expansion on pastures leads to GHG emissions connected to iLUC, as discussed in the next section. Indirect land-use change Sugarcane cannot be stored for long time and cannot be transported over long distances. The sugarcane plantations are therefore concentrated close to the ethanol mills. Yield gains may

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support production capacity increases in existing ethanol mills, but in general increased ethanol production is achieved by building new ethanol mills and establishing new sugarcane plantations close to these ethanol mills. When sugarcane plantations displace other crop production or—as in this study—pasture production, the lost production is compensated somehow. It can be either by (1) intensified production on existing cropland/pastures elsewhere and/or (2) extended production based on converting new areas into agricultural land and/or (3) consumption goes down due to an increase in the price of related products. When new croplands/pastures are established, this may lead to significant GHG emissions if forests or other ecosystems storing large volumes of carbon in soils and vegetation are converted (see, e.g., Gibbs et al., 2008). Intensified production may also lead to increased emissions related to the inputs required for the intensification. For instance, increased use of soybean as animal feed can lead to GHG emissions as soybean areas expand (see, e.g., Nepstad et al., 2008). Identifying and quantifying iLUC caused by sugarcane expansion in different areas of Brazil are presently not possible to achieve with high confidence due to lack of empirical data and solid model representations of Brazilian land use (Sparovek et al. 2009b). Hence, iLUC is not treated in this study of sugarcane expansion in Pontal. However, if significant iLUC occurs this would strongly impact the GHG emissions reduction from Brazilian ethanol (see, e.g., Lapola et al., 2010; Sparovek et al. 2009b). Let us assume that an area equal to 10% of the area that the beef cattle ranchers in Pontal give up for sugarcane would lead to conversion of Amazonian rainforest to pasture. Then it would take almost 10 years before the expanding ethanol production resulted in net GHG emissions reduction. This is based on the assumption that the GHG emissions due to the deforestation correspond to about 730 ton CO2/ha following Gibbs et al. (2008). Thus, development of sugarcane expansion strategies that reduce the risk of iLUC emissions should be a priority. The integrated ethanol/dairy system may be part of such a strategy because it can reduce displacement risk (since farmers invest in their existing land use) and also promotes higher land-use efficiency in dairy production. Conclusions Adoption of the integrated ethanol/dairy production systems could increase net income for settlers in Pontal and reduce land conversion pressure by increasing land-use efficiency in milk production. The reduced land conversion pressure may be important for realizing the GHG savings potential of the system since iLUC emissions can drastically reduce net GHG savings. Incentives may be needed to make settlers consider the transition as an attractive option. Investigations of the feasibility of implementing integrated ethanol/dairy system involving also large land owners are warranted. Acknowledgments Financial support from The Swedish Energy Agency is gratefully acknowledged. We would like to thank Christian Azar, Stefan Wirsenius, Ricardo Burgi, Alberto Barretto, Carlos Cerri, Fredrik Hedenus and Johan Torén for stimulating discussions and/or for reviewing earlier versions of the manuscript. References Alves R., Del Duca P., 2007. The National Year of Clean Development ForBrazil, 2007, Latin American Legal Developments Newsletter. American Bar Association Section of International Law Basantaa M, Dourado-Netoa D, Reichardtb K, Bacchib O, Oliveirab J, Trivelinc P, Timmb L, Tominagab T, Correchelb V, Cássarob F, Piresb L, de Macedob J. Management effects on nitrogen recovery in a sugarcane crop grown in Brazil. Geoderma. 2003;116:235–48. Burgi, R., 1985. Produção do bagaço de cana-de-açúcar (Saccharum sp.L.) auto-hidrolisado e avaliação de seu valor nutritivo para ruminantes (Hydrolyzed bagasse from sugarcane and its nutritional value for ruminants), Master Thesis, ESALQ/USP, Piracicaba, Brazil.

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