An Italian company is attempting to break into Brazil’s expanding bioethanol market with an agreement to build what could be the country’s first second-generation plant to produce fuel from the residue of sugar cane on a commercial scale.

Mossi & Ghilsofi (M&G), an engineering and chemicals group based in Tortona, northern Italy, said it would sign a €150m deal on Wednesday with Graal Bio, part of the Gradin family’s Graal Investimentos vehicle, in São Paulo.

The race is on in Brazil to produce on an industrial scale so-called cellulosic ethanol – fuel produced from vegetable matter such as bagasse, or the residue leaves and husks of sugar cane, rather than using sugar itself and thus avoiding competition with the food chain.

Several companies, including oil majors and US and Canadian developers of the new technology, have launched such second-generation projects that could transform the global energy industry.

Corrado Clini, Italy’s environment minister who is to attend the signing ceremony, is hoping that Italian technology will get there first and that the Brazilian plant, to be completed within a year, will start exporting fuel to the US and Europe by the end of 2014.

Clini co-chairs with a Brazilian colleague the Global Bioenergy Partnership, an initiative backed by the Group of 20 industrial nations as well as the World Bank and other international organisations. Speaking to beyondbrics, Clini stressed that the second generation technology would use agricultural waste products that would cut the amount of land currently needed to sustain production of food as well as ethanol used in cars, jets and chemical detergents.

Research developed by M&G last year attracted TPG Capital, a Texas private equity investment company, which took a minority stake in a €250m joint venture to build a second-generation bioethanol plant in Italy with plans to license its technology to others. M&G said it hoped the agreement with Graal Bio would be the first of 10 plants in Brazil.

Brazil’s full commercialisation of cellulosic ethanol promises to double the productivity of the country’s sugar cane ethanol producers, with the potential to generate abundant clean energy virtually unmatched by any other fuel source.

Brazil now has free access to the giant North American market with the lifting of US tariffs on ethanol imports last December. Clini noted that the European Union intends to increase the proportion of environmentally friendly fuel in petrol to 10 per cent by 2020.

Brazil is the largest producer and exporter of sugar with control of about half the global market. Ethanol use in Brazil took off in 2003 when “flex fuel” cars were introduced, able to use petrol or ethanol or any mixture of the two. As of 2010 some 80 per cent of new Brazilian cars used flex technology and the country today produces 30 per cent of the world’s ethanol, second to the US with a 58 per cent share.

Related reading:
A sustainable sugar rush, FT
US-Dutch plan for ‘clean’ bioethanol plant, FT
US rules boost imports of Brazilian ethanol, FT

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