In 2009, a number of factors such as decreased corn prices and increased sugar prices contributed to a reduction in ethanol imports from Brazil and Caribbean Basin Initiative (CBI) countries. With more favorable economics and an increasing supply, the United States even began exporting small volumes to Brazil in late 2009 and boosted existing exports to Canada.
In 2010, the United States became a significant net exporter of ethanol, adding shipments to Europe, India, and Mexico as well as expanding existing shipments to Brazil and Canada. U.S. ethanol export growth was spurred by a relaxation of trade restrictions by partner countries. Brazil, facing domestic ethanol supply shortages as a result of lower sugarcane production and more profitable sugar prices compared to ethanol, eliminated its own 20% ad valorem import duty through at least 2011. At the same time, E90 exports to Europe may have benefited from both the U.S. blending tax credit ($0.45 per gallon of ethanol) and lower European import duties on ethanol/gasoline blends (compared to pure ethanol imports). Through the first five months of 2011, continuously growing volumes of ethanol have been exported to Brazil, Canada, Europe, Jamaica, and the United Arab Emirates. Over this period, U.S. ethanol exports more than doubled compared to the same period in 2010. For the remainder of 2011, it is likely that the United States will surpass Brazil as the world's largest ethanol exporter due to recent supply shortages and resulting high sugar prices in Brazil. U.S. ethanol has been relatively less expensive and has supplied markets that previously imported Brazilian ethanol.
Looking forward, prospects for U.S. ethanol exports will depend in part on the ability of the U.S. transportation fuels market to absorb additional volumes of ethanol in the form of E15 and/or E85. All else equal, E15 is likely to be a more economically attractive market to domestic ethanol producers. Future developments in agricultural markets for corn and sugar will continue to impact the direction and magnitude of ethanol trade flows. Oil market developments will also be a factor, reflecting the fact that Brazil and some other important global markets allow consumers to choose between renewable and non-renewable motor fuels based on economic criteria.
Finally, Federal and State-level policies in the United States will continue to play an important role in ethanol trade. Besides policies regarding tariffs and subsidies, which directly impact trade, the details of renewable fuels policies are significant. For example, under regulations implementing California's Low Carbon Fuel Standard (LCFS), Brazilian sugarcane ethanol has a much lower carbon value than domestic corn-based ethanol, which significantly favors its use by refiners seeking to meet their obligation to reduce the carbon content of their fuels under the LCFS program. Similarly, Brazilian sugarcane ethanol, unlike domestic corn-based ethanol, qualifies as an "advanced biofuel" under the RFS program. In a setting where production of cellulosic biofuel that also counts as advanced biofuel is expected to fall well short of the level specified in the legislation establishing the RFS, the U.S. Environmental Protection Agency (EPA) specifically identified increased imports of Brazilian sugarcane ethanol as one of the most likely sources of compliance with the requirement for advanced biofuels in 2012 in its recent proposed rule for implementation of the RFS program in 2012. In this context, it is not hard to envision a scenario in which the United States continues to export corn-based ethanol to Brazil while at the same time importing sugarcane ethanol from Brazil to comply with California LCFS and Federal RFS requirements.