Bioethanol (ethyl alcohol) is a liquid biofuel which is currently mainly produced from organic feedstocks containing sugars - such as sugarcane, corn, wheat, sugar beet, molasses, and other crops/feedstocks containing sugar or starch - through a fermentation process. Anhydrous ethanol (ethanol with less than 1% water) can be blended with gasoline in varying quantities up to pure ethanol (E100), and most spark-ignited gasoline style engines will operate well with mixtures of 10% ethanol (E10). Cars with especially designed engines (so-called flexi-fuel cars) can run on any mix of gasoline and hydrous bio-ethanol. In literature the term “ethanol” is used more frequently than the term “bioethanol". In this paper, the term ‘bioethanol’ is used to indicate that ethanol was produced from organic feedstocks. Bioethanol can also be processed further to ETBE, which can also be blended with gasoline as a biofuel. However, within the frame of this study we only analyze the trade of bioethanol.

Production: About 60% of ethanol production comes from sugar crops, 30% from grains, 7% is made out of synthetic ethanol, and 3% from other raw materials. For decades, Brazil has been the world’s largest producer and consumer of fuel bioethanol, but it was surpassed by the US in 2006. In the USA, production of ethanol reached 19.4 million tonnes in 2007, whereas Brazil produced 15 million tonnes. Together, the two countries produced 88% of the world’s fuel bioethanol, with total world production of 39 million tonnes. Main feedstocks for bioethanol production are corn (in the US) and sugarcane (in Brazil).

Consumption: The United States consumes more bioethanol as transportation fuel than any other country in the world. In 2007, total consumption was about 20.4 million tonnes of which about 6.3% was imported. Brazilian fuel bioethanol consumption amounted in 2006 to approximately 10.2 million tonnes, equal to approximately 14.69% of Brazil’s total fuel consumption. In the EU, the consumption of bioethanol for transportation is largest in Germany, Sweden, France and Spain. Europe produced in 2006 an amount of ethanol equivalent to 90% of its consumption. Total consumption in 2007 in the EU was 1.8 million metric tonnes (FO Licht, 2008).

Global trade: Data related to fuel bioethanol trade are imprecise on account of the various potential end-uses of ethanol (i.e. fuel, industrial use, and beverage use) and also because of the lack of proper codes for biofuels in the HS. Brazil is the largest exporter, with the USA and the EU being the largest importers. In 2004, total trade of ethanol was estimated to be between 2.4 and 3.2 million tonnes, with Brazil (1.9 million tonnes) as the main exporter, and the USA, Japan and the EU as the main importers. Estimates for ethanol trade (all grades) provided by F.O. Licht indicate that trade has grown almost steadily from about 2.4 million tonnes in 2000 to 4.7 million tonnes in 2005 (i.e., about 13% of the world production). In 1995–2002 period, ethanol trade has increased from 2.2 to 3 million tonnes. If one assumes that the increase in recent years has been mostly due to trade in fuel ethanol, it is reasonable to estimate that in 2005 trade covered about 10% of fuel ethanol consumption (Rosillo-Calle and Walter, 2007).

Fuel bioethanol is traded under HS code 2207, which covers denatured and undenatured alcohol. Both can be used as fuel ethanol, but denatured ethanol is often used as solvent (UNCTAD, 2006). In this case a chemical compound is added to ethanol to make it undrinkable and removing it is expensive (Rosillo-Calle and Walter, 2006). Out of 4.7 million tonnes of ethanol traded in 2005, 3.7 million tonnes (almost 80%) corresponded to undenatured ethanol with at least 80 degrees strength (FO Licht, 2006). Trade of denatured ethanol, which corresponded to 20% of the traded volume in 2005, remained basically unchanged during the 2000-2004 period (UNCTAD, 2006).