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Low Carbon Innovation Systems in a Natural Resources Rich Developing Country: The case of Brazil

Low Carbon Innovation Systems in a Natural Resources Rich Developing Country: The case of Brazil. André Furtado Department of Science and Technology Policy Institute of Geosciences University of Campinas - UNICAMP Globelics Seminar: Learning, Innovation and Low Carbon Development

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Low Carbon Innovation Systems in a Natural Resources Rich Developing Country: The case of Brazil

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  1. Low Carbon Innovation Systems in a Natural Resources Rich Developing Country: The case of Brazil André Furtado Department of Science and Technology Policy Institute of Geosciences University of Campinas - UNICAMP Globelics Seminar: Learning, Innovation and Low Carbon Development Copenhagen, April 4-5, 2013

  2. Outline • Introduction • Biomass in the Brazilian Economy • Brazilian Sugarcane Innovation System • Problems with the Brazilian Sectoral Innovation System • Why the Brazilian sugarcane production is lagging • Final Comments

  3. Introduction • Transition to low carbon economics means in part transition to renewables sources of energy • Developing countries are expanding their energy consumption based on fossil fuels • Renewables sources of energy are part of the solution to these countries • Few developing countries have presence in renewables: • China and India (photovoltaic and wind); • Brazil (modern biomass) • Question: what are the conditions of a natural resource rich developing country to become a world leader in biomass?

  4. Biomass in the Brazilian Economy • Brazil has a very dynamic biomass productive system: 2000/2001 2012/2013 • Grains : 100 MT 186 MT • Sugarcane: 254 MT 580MT 2000 2010 • Cellulose Pulp: 7.4 MT 14.1 MT • Brazil Energy Matrix has 44% of renewables • 28% Biomass • 20% Modern Biomass • 4.6% domestic electricity from biomass • Brazil has very favorable conditions to expand its commercial biomass without harming natural ecosystems

  5. Brazilian Sugarcane Innovation System • Dynamic trajectory starts with the shift of sugarcane from Northeast to São Paulo • In São Paulo, sugarcane was surrounded by capital goods industry and research institutions (IAC and Esalq) • Federal Government regulated the sector since the 30’s  creation of IAA • In the 60’s IAA created Planalsucar for the modernization of the agro-industry • In 1975 Proalcohol program was created  promotion of the supply and demand of ethanol

  6. Crisis of Alcohol Program • The system suffered several shocks: • Middle of the 80’s • Decline of the oil prices • Decrease of government funded investments • Beginning of 90s • Closure of IAA and Planalsucar • Lack of ethanol supply  collapse of pure ethanol cars demand

  7. Reaction of the Sugarcane Innovation System • Research Level • Planalsucar was assumed by Ridesa (University Network) with private funds • CTC (private organization) assumed the leadership of research • IAC started Procana program for genetic improvement • Sugarcane production directed to sugar • Anhydrous ethanol mixed with gasoline (E25) expanded during the 90s • When in 2000 the oil prices raised again, sugarcane agro industry was prepared to respond to the new demand expansion • In 2003, car industry introduced flex fuel cars solving the demand problem of pure ethanol

  8. New Challenges to the Brazilian Sugarcane Innovation System • Transition from the 1st Generation to 2nd Generation Biofuels: • Competition with food production of 1st Generation • Introduction of genetic engineering in the genetic improvement: • Need to shorten the new variety time development (around 12 years)

  9. Government Policies to Face the Technological Discontinuity • Federal Government created CTBE (Center of Bioethanol Technologies), a research oriented center for the development of new technologies • Federal Government created new funding instruments for innovation • Finep economic subvention program  non reimbursable funds for firms • BNDES funded new mills expansion (requiring the use of co-generation facilities) • In 2011, PAISS program was launched joining FINEP and BNDES  funding innovation to the industrial level • Fapesp (Sao Paulo S&T Agency) created industrial partnerships (Braskem, ETH, Oxiteno, Dedini)

  10. Industry Weakness • There are of 2 different subsystems innovation: • Agriculture Innovation Subsystem  STI mode (Jensen et al. 2007) • Close relation between Genetic improvement programs and academic research • Programs could incorporate new biotech methodologies • Fapesp Sugarcane helped the upgrade of the Brazilian research (creation of Alellix and Canavialli start-ups) • However: • With the 2008 crisis Monsanto bought the 2 start-ups • Increasing private logic: CTC forbidden the access of IAC to its own sugarcane genetic bank

  11. Industrial Innovation Subsystem • Capital Goods industry (new mills and agriculture machines) • Subsystem guided by DIU (Doing, Using and Interacting) mode of innovation • Incremental innovations induced by demand • Very little R&D • Poor contacts with Academic research • Challenge of the transition from 1st to 2nd Generation Biofuels • Dedini: main player abandoned HDR (fast acid hydrolysis) project • Few Brazilian firms received PAISS Program funds (Petrobras and CTC), while numerous multinationals are present (Abengoa, Amyris, Bunge, Dow, Dupont, Mascoma, Novozymes, Solazymes) • Increasing foreign capital in the sugar and ethanol mills • Cosan associated with Shell  Raizen • About 40% of the mills have foreign control

  12. Why Sugarcane Production is lagging? • Crisis in the sector • In 2 last years sugarcane production decreased from 624 MT  585 MT • Ethanol production peaked in 2008 and after decreased • Reasons: • Lack of an Appropriate policy: no guarantee of prices and demand since the end of Proalcohol • Competition of ethanol with sugar market • Challenges of the geographic expansion of the sugarcane culture from 4.8 M ha (2000) to 9.1 M ha (2010)  new conditions of soil and climate (Cerrados) • Harvest mechanization is decreasing productivity • Climate Change

  13. Final Remarks • The transition to a Low Carbon Economy is accelerating the displacement of the technological frontier for the renewable energies • Countries like Brazil established their position in a mix of rich resources with incremental learning • The Brazilian subsystems are reacting differently: • Agriculture subsystem which follows a STI mode have been more able to catch-up with biotech technologies • Industrial subsystem is loosing space and is not being able to jump in the 2nd generation biofuels • However there is an increasing foreign control: national system is loosing coherence

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