|Energy as an Instrument for Socio-economic Development (UNDP, 1995, 114 p.)|
|OVERVIEW: ENERGY AS AN INSTRUMENT FOR SOCIO-ECONOMIC DEVELOPMENT|
|PART 1: ENERGY AND SUSTAINABILITY|
|1. Energy Needs for Sustainable Human Development|
|2. Energy as an Obstacle to Improved Living Standards|
|3. Energy's Role in Deforestation and Land Degradation|
|4. Energy Needs for Sustainable Human Development from an Anthropological Perspective|
|PART 2: REMOVING THE OBSTACLES: THE SMALL-SCALE APPROACH|
|5. From Energy Efficiency to Social Utility: Lessons from Cookstove Design, Dissemination, and Use|
|6. PV, Wind, and Other Dispersed Energy Sources|
|7. Renewable Energy Benefits Rural Women in China|
|8. Community Biogas Plants Supply Rural Energy and Water: The Pura Village Case Study|
|PART 3: REMOVING THE OBSTACLES LARGE-SCALE APPROACH|
|9. Biomass Plantation Energy Systems and Sustainable Development|
|10. Converting Biomass to Liquid Fuels: Making Ethanol from Sugar Cane in Brazil|
ISAIAS DE CARVALHO MACEDO1
Considered simply from the standpoint of a renewable-intensive energy future, biomass would be a widely used fuel of choice.2 It would be grown on a sustainable basis, and converted with high efficiency to fuels or electricity. However, the possible effects of widespread use of biomass must be analyzed from a broader perspective, including aspects not usually within the scope of conventional economic analyses.
The most commonly cited benefits of biomass use are reductions in air pollution and carbon dioxide, and diversification of fuel supply. An important additional consequence of biomass utilization for energy is related to its ability to promote jobs in rural areas, even for unskilled workers.
This case study analyzes the "large-scale" production of fuel ethanol from sugar cane in Brazil from the perspective of job creation. It is estimated that ethanol production corresponds to nearly 700,000 jobs in Brazil, 75 per cent of them direct jobs. Technological and economic issues make so-called "large scale" biomass conversion to energy in fact a large collection of small-scale systems; in the Brazilian case, this corresponds to the scale of agriculture generally. The socio-economic differences among ethanol-producing regions in Brazil give each of the regions different equilibrium points in the trade-off between job quality and number of jobs.
The ethanol programme has been an important factor in creating job opportunities, in both more and less developed regions of Brazil. In some regions, it has been remarkable at evolving from lower to higher-quality jobs, reducing seasonal unemployment, increasing wages and social benefits, and introducing new technologies in a timely way.
The Fuel Ethanol Programme
One of the largest commercial efforts to convert biomass to energy anywhere in the world today is the substitution of sugar-cane-based ethanol for gasoline in passenger cars in Brazil.
Fuel for cars and light vehicles in Brazil is either neat-ethanol (94 per cent ethanol, 6 per cent water) or gasohol (78 per cent gasoline, 22 per cent ethanol). The programme to promote ethanol production was established in 1975 to reduce the country's dependence on imported oil, and to help stabilize sugar production in the context of cyclical international prices; it includes government-sponsored incentives to promote private production. By 1989, production reached 12 million cubic metres annually and continues at that level.
The creation of new skilled and unskilled jobs was an important part of the programme's objective from the start. Additionally, the programme is almost entirely based on locally manufactured equipment, helping to establish a strong agro-industrial system, with a significant number of indirect jobs. It has demonstrated technological developments, in both agriculture and cane processing, leading to lower ethanol costs and the possibility of a large surplus in biomass-based (bagasse and trash) electricity. This could contribute to creating a carbon-dioxide-free energy source.
The two-decade-long experience has been important in its many positive aspects as well as in its shortcomings. It has helped to reduce oil imports, to stabilize and promote the growth of the sugar industry, to create quality jobs, and to reduce automobile pollution in urban areas. It is a model for biomass-to-energy programmes in Brazil and elsewhere. It has provided valuable information about the trade-offs in using land for food or energy, as well as about the number and quality of jobs the renewable energy industry can create.3
Converting Biomass to Energy
The size of any biomass-based energy production system is determined by at least two factors: the energy conversion (industrial) unit must have a minimum size to achieve a reasonable efficiency, but transportation costs set an upper limit to how much biomass is efficiently available. This is very important for wood-to-electricity systems (leading to development of wood gasifiers and gas turbines), for higher efficiencies at low power levels); and it is also true for sugar cane to ethanol systems.
Thus, the so-called large-scale ethanol production system in Brazil is actually composed of a large number (approximately 400) of industrial units, with cane production areas in the range of 5,000 to 50,000 hectares. This much smaller-scale system is further decentralized by the fact that sugar cane is produced by more than 60,000 suppliers. External suppliers produced approximately 38 per cent of the sugar processed in 1986, with mill owners themselves providing approximately 62 per cent.4
The seasonality of sugar cane production has a big impact on its ability to create high quality jobs. Climatic conditions and agronomic characteristics of the crop limit the harvesting season to six months out of the year in Brazil. The amount of manpower needed during the harvesting and the off season is largely determined by the level of agricultural technology employed. Because the work associated with sugar cane production is highly seasonal, jobs tend to be temporary; this, in turn, leads to high turnover, difficulty in training and, consequently, low wages.
The large number of cane growers (varying from small to very large in terms of production area), the seasonal nature of the jobs, and the fact that two thirds of the cost of ethanol comes from the cost of the sugar cane mean that employment in this sector resembles that in the conventional agricultural sector in Brazil. In fact, employment levels, costs, and wages are always compared to those of "other crops."
Analyses conducted in 1990 showed that, on average, direct labour and social taxes made up 21 to 24 per cent of the total cost of sugar cane production (including land, capital charges, and other fixed and variable costs). After including all the costs (capital, commercial, labour, and social taxes) associated with processing the cane into ethanol, direct labour and social taxes account for 20 to 25 per cent of the cost of producing ethanol (both growing and processing it). Agricultural labour and social taxes account for more than 60 per cent of total labour costs.5
Wage and training levels in the sugar cane processing industry are equivalent to those in other medium to large food industries. As in agriculture, the number of jobs and their quality are strongly influenced by the technology level (regional differences in Brazil can be very large). The distribution systems for ethanol are identical to oil-based fuel distribution; they contribute to job creation in proportion to the amount of fuel utilized. (In recent years, approximately 50 per cent of the fuel utilized by light vehicles, including automobiles, is ethanol, 50 per cent gasoline.)
Thus, in terms of job creation and the quality of jobs created, large-scale ethanol production from sugar cane acts like a large number of small to large agribusiness units. The result is a much larger number of jobs per unit of energy produced than in conventional oil-based fuel production systems; these jobs are also more diversified and decentralized than jobs in the oil sector.
The Labour Market in Brazil
An assessment of employment in the ethanol sector in Brazil must consider the context (labour conditions in the agricultural sector, and in the food industry). Wages, family income, seasonality, and other factors must be examined in relation to comparable activities.
Official unemployment rates in Brazil have been low. The average for the 1980s was 5 per cent (with a low of 3 per cent in 1989, and a high of 8 per cent in 1981).6 However, the disguised unemployment rate during the same period was high: in 1988, 44 per cent of workers in agriculture, 6 per cent in industry, and 15 per cent in services received less than the official (reference) minimum wage (at that time, US$53 per month). Only 20 per cent of workers in industry and services, and 5 per cent of agricultural workers, received more than US$265 per month.
There are significant regional differences; among the main sugar cane producing areas, Sao Paulo, which produces approximately 60 per cent of Brazil's sugar cane, has the highest salaries. Although both the official minimum wage and the actual wages received are higher today than in 1988, this analysis uses the 1988 data when analyzing jobs in the ethanol industry during the same period.
In 1988, 36.1 per cent of the population in Brazil had a family income of less than US$106 per month; 67.3 per cent had less than US$265 per month; and 94.3 per cent less than US$1,060 per month.
Sugar and ethanol production have in common the costs of sugar cane production, delivery to the mill, cane preparation, milling, and utilities. Although the figures used here are for the sugar cane industry as a whole, they serve as an adequate proxy for the costs of ethanol production. As mentioned before, more than 60 per cent of the sugar cane produced today is for ethanol.
The state of Sao Paulo has the highest technology level and produces 60 per cent of Brazil's sugar cane.7 Estimates indicate that every 1 million tonnes of sugar cane processed per year generates 2,200 direct jobs (1,600 in agriculture, and 600 in industry). Agricultural supervisors and skilled industrial workers account for 30 per cent; medium-skill workers (e.g., truck and tractor drivers) account for 10 per cent; and unskilled labourers (doing planting, cultivating, and harvesting, and low-level industrial work) account for the remaining 60 per cent.
Another 660 indirect jobs (equipment manufacture, engineering, repair and maintenance in external shops, and chemical supplies manufacture) are created for every 1 million tonnes of sugar cane processed. In Sao Paulo, where 140 million tonnes of sugar cane are processed every year, this leads to the creation of a total of 380,000 jobs.8
For Brazil as a whole, estimates of the number of jobs created are higher, because in the Northeast and some other regions, the amount of labour per unit of cane processed is much higher. Lower land productivity and differences in worker efficiency and technology levels mean up to three times as many jobs per unit of cane processed may be created. One estimate suggests that sugar cane agribusiness in Brazil as a whole created 800,000 direct jobs and 250,000 indirect jobs in 1990; two thirds - or 700,000 - of these jobs can be attributed to ethanol production.9
These figures are impressive in themselves, but their impact is even greater because the jobs are dispersed in a large number of places. In 1991, an average of 15.6 per cent of the new jobs in the 357 towns with ethanol distillery projects (8 per cent of the municipalities in Brazil) were associated with ethanol production; in the Midwest region, today's expanding agricultural frontier, up to 28 per cent of new jobs are associated with ethanol production.10
Regional differences in the labour market, particularly in technology, account for differences in the number of jobs created per unit of energy produced, differences in wages, and in the overall quality of the jobs created. For example, the competition for manpower among various sectors of the economy in Sao Paulo led to higher wages and better working conditions for the cane cutters; however, the number of jobs per tonne of sugar cane is much smaller than in the Northeast because of greater efficiency (training, equipment) and mechanization. Similarly, gradual automation, higher rates of productivity, and conversion efficiencies lead to fewer industrial jobs in producing and processing cane.
In the mid-1980s, a study by the University of Sao Paulo examined the effect of ethanol production on fifteen towns located in the three main ethanol producing regions. In all cases, job creation induced population growth, in most cases reversing migration to large urban areas. Only two places showed land ownership concentration. Also, in only two places was sugar cane substituted for food production. Overall, the impact on population was considered highly positive (more jobs, taxes leading to better infrastructure) in the central and southern parts of Brazil, but smaller in other regions.11
The Quality of the Jobs Created
Job quality must be assessed in the context of other employment sectors. In Sao Paulo, the job responsible for the largest proportion of unskilled labour (cane cutting) generated an average income of US$140 per month. This is higher than the average salary of 86 per cent of agricultural workers, 49 per cent of industrial workers, and 56 per cent of workers in the service sector in Brazil as a whole.
Borges estimates that the family income of cane cutters is $220 per month.12 This is 50 per cent higher than the average family wage in Brazil. But the seasonal nature of the jobs means that during the harvesting season average family wage is $280 per month; during the off season, it is only $160 per month. Special legislation has mandated that 1 per cent of the net sugar cane price and 2 per cent of the net ethanol price be used for assistance in improving services for sugar cane workers (e.g., medical, dental, pharmaceutical, better sanitary conditions).
The seasonal nature of agricultural jobs makes systematic training and career development difficult. The seasonality coefficient for agricultural workers in sugar cane, defined as the ratio between manpower in the harvesting season and in the off season period, was estimated at 2.2 at the end of the 1970s in Sao Paulo.13 At that time, coffee was the only major crop in Sao Paulo with a lower seasonality index (2.0).
Many factors contributed to lowering the seasonality coefficient of Sao Paulo's sugar cane workers throughout the 1980s. Three are particularly noteworthy. First, more labour was required during the off-season to grow food crops in alternative rotation. Second, harvesting workers were increasingly used for off-season jobs in maintenance and conservation. Third, a smaller number of workers was required during the harvesting season, both because the yield from manual cutting was increasing (from 4.5 tonnes to 7 tonnes per person per day) and because of increased mechanized harvesting (in 1992, 15 per cent of the total area harvested in Sao Paulo). By the end of the 1980s, the seasonality coefficient was estimated to be 1.8.14 More recently, the average seasonality coefficient for eight sugar mills in Sao Paulo was estimated to be only 1.3.15
The trend is quite clear. With increased mechanization of harvesting and increasing yields for manual cutting, it seems possible that eventually most agricultural jobs will be permanent. This will promote training and career planning, and lead to much higher wages (but fewer jobs). This trend is not as evident in some other regions. In the Northeast, for example, labour costs are lower and technical issues make mechanization more difficult.
In Sao Paulo, 23 per cent of the cane cutters, which comprises the largest category of unskilled workers, are women.16 In the Northeast, the proportion is similar and comparable to that in other unskilled job categories.
The balance between mechanization and the number and quality of new jobs created by the ethanol industry is likely to be a key issue for the coming years.17 A law requiring the cutting of unburnt sugar cane could accelerate mechanical harvesting, as could increasing labour costs. Already, in the state of Sao Paulo, the labour market cannot supply the required amount of unskilled workers.
Seasonality has a smaller impact on industrial workers, who make up less than 30 per cent of the total number of workers associated with ethanol production. Industrial workers are used in-house during the off season for repair and maintenance jobs.
Investing in Job Creation
Estimates of the amount of investment needed for job creation in the ethanol industry reflect regional differences in wages, employee productivity, and technology. Values as low as US$11,000 per job have been reported.18 These are probably appropriate for the Northeast region. However, for Sao Paulo, analyses indicate that investments of $23,000 per job are needed (not including the investment in land) up to $45,000 per job (including the investment in land and achieving full employment).19
In comparison, the average investment needed for job creation in the 35 main sectors of the Brazilian economy in 1991 varied from $10,000 to $125,000 per job, thus, averaging $41,000.20 Even including land costs, only 14 sectors would provide jobs with lower investment than the ethanol industry. When the less developed areas are considered, the investment cost per job in the ethanol industry becomes much lower than the Brazilian average.
Biomass Energy Generation in the Future
In the sugar-cane-to-ethanol industry, a large portion of the potential jobs are in the growing of sugar cane. Cane harvesting can be handled by a number of processes, varying from manual cutting of burnt cane (by far, the most used in the world) to almost entirely mechanized harvesting. The cost of labour is the key to determining the balance between manual and mechanized harvesting, with mechanization resulting in fewer, but higher quality, jobs. This is the trend in the Sao Paulo region.
A number of developments, however, could change the picture considerably. The worldwide practice of burning sugar cane fields prior to harvesting in order to improve productivity has been severely questioned for environmental reasons. Although there seems to be no real reason for concern (carbon dioxide from burning is entirely recycled, and local environmental problems consist only of the nuisance created by carbon particles), another argument must be considered: the renewable energy lost in burning could be used if suitable harvesting and transportation systems could be designed to handle the green cane and trash economically. Such a more efficient use of biomass for power generation could impact larger areas besides Brazil and would have important consequences for job creation and quality in many places.
The subject has been extensively analyzed.21 Technologies for converting trash to energy could include conventional high pressure steam cycles, working year-round with stored trash (or bagasse). In the short term, ethanol production from the ligno-cellulosic material or even power generation with advanced gasification/gas turbine cycles has been considered. It has been demonstrated that it is possible to design sufficiently low cost (US$1 per GJ) trash recovery systems to make power production from trash economically feasible in Brazil.22 Such systems could greatly improve the economics of producing energy from sugar cane.23
The implications for the labour market are the following: First, harvesting would be mechanized; much higher (unskilled) manpower would be needed for the manual cutting of unburnt cane than is available in Sao Paulo today. In some countries, it may be possible to keep manual cutting; however, the increased seasonality index (and necessarily low wages) would result in low-quality jobs.
Second, mechanization would not be as simple as the use of today's green cane harvesters; it would include trash recovery, transportation, and conditioning.
Third, the power generation sector of the cane processing units would operate for at least eleven months out of the year (the accepted standard for this industry). Seasonality would be reduced; jobs would be created for bagasse/trash handling, storing, and power station operation.
Studies on the potential reduction of jobs due to mechanized harvesting in Brazil are not conclusive, except for some specific regions. They usually consider only the loss in unskilled jobs (cane cutting); this is a realistic approach if trash is left in the field without further utilization. However, the use of trash for energy would create a new industry consisting of fewer, higher quality jobs.
One recent analysis of job losses due to mechanical harvesting concluded that if mechanization increases from its current level of 15 per cent to 46 per cent in Sao Paulo, it would result in a 15 per cent loss of jobs. One specific region (Ribeirao Preto), already 30 per cent mechanized, would lose 31 per cent of the jobs if mechanization reaches 60 per cent of the total. Again, no consideration is given to higher quality job creation.24
In 1991, Borges estimated that if 85 per cent of the total sugar cane area in Sao Paulo is mechanized, the number of jobs will drop 25 to 30 per cent. He assumed that an unburnt cane harvester could replace 50 workers (with 1990 technology and an average productivity of 7 tonnes per person per day in Sao Paulo). He estimated that the number of truck drivers and other equipment operators would increase by 25 to 80 per cent, depending on the technology used (trash bailing and independent transportation, or cane with trash transportation). Not included were the permanent higher quality jobs created in the power generator sector or the indirect jobs for equipment production and maintenance. Although these figures are preliminary and based on hypotheses that are changing with new technology inputs, they provide a useful first estimate.25
The ethanol programme in Brazil shows that large-scale biomass systems can have strong positive impacts on job creation and quality. Adjustments in the relationship between job quality and the number of agricultural jobs can be made to fit the local labour market; new technologies make it possible to use more skilled workers, reducing the number of workers for the same job. The trend in Brazil is irreversibly toward better technology and higher quality, but fewer jobs.
The ethanol programme has helped reverse migration to large urban areas and increase the overall quality of life in many small towns. During its nearly twenty years, the programme has been extensively analyzed, criticized, and improved in many aspects (legal, tributary, technological).
In designing large-scale decentralized programmes to convert biomass to energy (such as the proposed biomass gasification - gas turbine power generation systems), other countries should examine Brazil's experience in order to gain maximum benefit.
1 Isaias de Carvalho Macedo is Technology Manager at Centro de Tecnologia Copersucar, SPaulo.
2 T.B. Johansson, H. Kelly, A.K.N. Reddy, and R.H. Williams, "Renewable Fuels and Electricity for A Growing World Economy," in Renewable Energy Sources for Fuels and Electricity (Washington, D.C: Island Press, 1993).
3 For a detailed description of the ethanol programme's social and political dynamics, including its purpose; the incentive structure; the relative positions of government, the automotive industry, the oil industry, and ethanol producers; legislation; market forces; and current trends and evolution, see J. Goldemberg, L. Monaco, and I. Macedo, "The Brazilian Fuel-Alcohol Programme, in Renewable Energy Sources for Fuels and Electricity (Washington: Island Press, 1993).
4 J.M. Borges, "The Brazilian Energy Programme: Foundations, Results, Perspectives," Energy Sources, 12: 451-461.
5 Funda GetVargas, Sistema Custo/Pre- cool Hidratado (SPaulo: Autas, 1994).
6 J.M. Borges, "Gera de Empregos na Agro-Inda Canavieira," in Desenvolvimento em Harmonia com o Meio Ambiente (Rio de Janeiro: Funda Brasileira Para a Conserva de Natureza, 1992).
7 J.M. Borges, "The Effect on Labour and Social Issues of Electricity Sales in the Brazilian Sugarcane Industry," Proceedings of the International Conference on Energy from Sugarcane (Hawaii: Winrock International, 1991).
8 Borges, "The Effect on Labour and Social Issues."
9 J. Magalhaes, R. Machado, N. Kuperman, Polcas Econas, Empr e Distribui de Renda na Amca Latina (Rio de Janeiro: Editora Vozes, 1991).
10 J. Magalhaes, R. Machado, N. Kuperman, Polcas Econas.
11 B. Johnson, T. Wright. Impactos Comunitos do Pro-cool, Report to Secretaria de Tecnologia Industrial - Ministo de Industria e Com- Faculdade de Economia Administra, Universidade de SPaulo (SPaulo, 1983).
12 J.M. Borges, "The Effect on Labour and Social Issues."
13 Assoc. Indas de Aar e cool (AIAA), Aar e cool: Energia para um Crescimento Econo Auto-Sustentado (SPaulo: Datagro, 1991).
14 J.M. Borges, "The Effect on Labour and Social Issues."
15 J.C. Marques, Copersucar Economic Advisory, SPaulo (personal communication, 1995).
16 J.C. Marques (personal communication).
17 J.M. Borges, "The Brazilian Alcohol Programme"; A Veiga, Z. Santos, M. Otani, and R. Yoshii, "Anse da Mecaniza do Cone da Cana de Aar no Estado de SPaulo," Informas Econas, 24:10 (SPaulo, 1991).
18 AIAA, Aar e cool.
19 J.M. Borges, Gera de Empregos.
20 J.M. Borges, "The Effect on Labour and Social Issues."
21 Centro de Tecnologia Copersucar, Relat Tico Interno: Convo EletrobrCopersucar: Alternativas de Co-gera (SPaulo: Piracicaba, 1991).
22 Centro de Tecnologia Copersucar, Brazilian Biomass Power Generation: Sugar Cane Bagasse Extension, Report to the GEF/UNDP (SPaulo: Piracicaba, 1993).
23 J. Ogden and M. Fulmer, Assessment of New Technologies for Co-Production of Alcohol, Sugar and Electricity from Sugar Cane, PU/CEES Report No. 250 (Princeton: Princeton University, 1990).
24 A Veiga, Z. Santos, M. Otani, R. Yoshii, Anse da Mecaniza do Corte da Cana de Aar.
25 J.M. Borges, "The Effect on Labour and Social Issues."