Japan's impending biofuel policy that requires a 50% reduction in greenhouse gas emissions will likely use US-produced ethanol to meet targets, a recent study prepared for the US Grains Council said.
"Japanese regulations for greenhouse gas emissions are similar to European regulations," Steffen Mueller, principal economist at the University of Illinois at Chicago and study co-author, said Friday. "We've exported to Europe in the past, so we can use similar models."
Mueller said the demand that the new regulation would create is unclear. As the Japanese market for biofuels is new under this regulation, there are no firm expectations of volume demand.
The study, released by the USGC on Thursday, looked at production methods at various US ethanol plants and found 82 plants that produce ethanol with a 50% greenhouse gas reduction when including direct land use carbon sequestration credits. Without the credits, 52 plants qualify.
In the first group of plants there is 6.068 billion gallons of annual ethanol production capacity and 3.848 billion gallons in the second group.
The study said plants have invested in infrastructure and efficiency upgrades over the past several years to increase greenhouse gas reductions.
Japanese regulators will decide next spring whether to include US corn ethanol in Japan's biofuel policy for implementation in 2018.
Brazilian ethanol meets the 50% requirement, and the study sought to demonstrate that US ethanol can meet the requirement as well, Mueller said.
Currently, the US imports Brazilian ethanol into the Gulf Coast, converts it to ETBE and then ships it to Japan. Using US ethanol would be cheaper.
"With US ethanol significantly less expensive than Brazilian ethanol, having US ethanol qualified for inclusion in Japan's policy should reduce the cost of purchasing ETBE from the US or producing ETBE in Japan from imported US ethanol," Michael Dwyer, chief economist for the US Grains Council, said in a statement statement Thursday.
