- An agribusiness magnate from the U.S., who is already the biggest producer of corn-based ethanol in Brazil, plans to leverage “green” investments from governments and banks to meet negative carbon emissions using an unproven method.
- His company is trying to implement in the Brazilian state of Mato Grosso a copy of his Midwest Carbon project, an initiative that plans to capture 12 million tons of carbon in ethanol plants and store them in North Dakota, below ground.
- Even though the company alleges that it is rigorously controlling the environmental practices of its corn suppliers in Brazil, an investigation found that the local executives are themselves connected to illegal deforestation in Mato Grosso.
The American agribusiness magnate Bruce Rastetter, who is already the biggest producer of corn-based ethanol in Brazil, has plans to triple processing at his plants by relying on the generosity of governments and banks with green credits and incentives destined to combat climate change.
In 2021 and 2022, Rastetter’s businesses received more than 2.2 billion reais ($459 billion) in offsets and credits from compliance with environmental targets through FS Agrisolutions. All this money went to Rastetter’s ethanol plants in Mato Grosso, as well as resources from the National Economic and Social Development Bank (BNDES).
Now, the company plans to further leverage its businesses by selling itself as a negative carbon producer. Its promise is to implement a system for capturing carbon from plants and storing the gas below ground.
The system is called CCS (carbon capture and storage), and it was considered by the Intergovernmental Panel on Climate Change (IPCC) to be an option for the mitigation of climate change. Nevertheless, over the years, the system still hasn’t proven to be effective on a large scale. In more recent bulletins, the IPCC warned that the capture of carbon is facing various restrictions in terms of viability, including high implementation costs, as well as demonstrating adverse impacts on human rights and ecosystems.
What Rastetter is trying to implement in Brazil is practically a copy of the Midwest Carbon project that he is spearheading in the United States with a promise to capture 12 million tons of carbon in ethanol plants. The gas will be captured in five states and transported through pipelines over more than 3,000 kilometers (1,860 miles) to North Dakota, where it will be injected into geological structures.
In Lucas do Rio Verde, Mato Grosso, FS obtained a license to drill in order to “evaluate the potential for injectivity,” according to the company. This region is located where the Pantanal, the Amazon and the Cerrado biomes meet, all of which are endangered biomes and locations where Rastetter has plants.
In the Amazon and the Pantanal, the cultivation of sugar cane has been banned to prevent the production of ethanol from encouraging deforestation and encroachment on protected areas. With the prohibition of cane, corn entered into the picture, especially in Mato Grosso. The production of the grain quadrupled in a little more than one decade, from 9.58 million tons in 2011-12, to the more than 46 million tons expected for the 2022-23 season.
Part of this production fuels 11 plants in the state, accounting for 80% of corn-based ethanol in Brazil.
“Corn appears as a substitute for biofuels because sugar cane is prohibited in the Amazon and the Pantanal. The plantations of corn, sugar cane, and palm in rainforest areas aren’t clean as promised, they cause deforestation and don’t fix carbon. They can’t be sold as environmental solutions,” states Lucas Ferrante, a PhD in ecology from the National Institute for Amazon Research (INPA).
In five years, the national market for corn-based ethanol has grown 800%. FS became a leader in the segment and is the fourth largest producer of biofuel in the country, competing with giants in the sugar-alcohol sector such as Raízen and BP Bunge.
With a third plant recently inaugurated in Primavera do Leste, also in Mato Grosso state, and with new units forecast in coming years, FS doesn’t intend to slow its demand for more and more corn plantations and planted forests — which are used for fueling the boilers, which in addition to ethanol produce energy and material for animal feed.
The company projects that it will triple its current production of 1.4 billion liters (370 million gallons) of ethanol per year and hit 5 billion liters (1.32 billion gallons) in 2026. For the country, the Energy Research Company (EPE) is forecasting that it will reach 9.1 billion (2.4 billion gallons) in 2032.
One of the arguments FS uses to justify its green certificates is that a good part of the processed corn in its plants is interim harvest, which shares the same plots as the soybeans from the first harvest, having less influence in farming than a change in the use of soil.
Currently, temporary plantations — which include the cultivation of soybeans and corn — occupy an area of 12 million hectares (29.6 million acres) in Mato Grosso, which is greater than the entire state of Amapá. Half of these plantations, 6 million ha (14.8 million acres), were opened up in deforested areas over the last 20 years, according to data from MapBiomas.
Traces of deforestation due to green ethanol
Even though FS alleges that it is rigorously controlling the environmental practices of its corn and eucalyptus suppliers, O Joio e O Trigo discovered that the executives of the company in Brazil are themselves connected to illegal deforestation in Mato Grosso and Amapá, states in which the company does business.
In addition, deforestation in areas surrounding the plants FS has in Mato Grosso, within a range of 150 kilometers (93 miles), has destroyed 486,000 ha (1.2 million acres) of rainforests over the last five years, according to data from the National Institute for Space Research (INPE). Located within these perimeters, which are the areas where the company says it has a demand for production inputs, are Indigenous Lands and Conservation Units.
The same arguments that justified the prohibition of cultivation of cane for the production of biofuels in the Brazilian Amazon, according to Ferrante, are valid for corn. “Principally because these plantations threaten biodiversity and their effects extend beyond the areas that are cultivated, even to the rainforests,” states the researcher.
In articles published in the scientific journals Science and Nature, Ferrante points out that the expansion of biofuels into areas of native forests aggravates climate change and results in new cycles of deforestation, increasing the emission of carbon in these chains.
“Corn has provoked deforestation, both in rainforests as well as in plantations. It is a kind of farming that raises a lot of problems. Energy transition must be thought of in a way that it doesn’t overtax the production of biofuels in areas like the Pantanal and the Amazon,” adds the researcher.
In 2019, then-President Jair Bolsonaro struck down the prohibition against the cultivation of sugar cane in the Amazon and the Pantanal by decree. The studies that pointed out the unfeasibility of the bioenergy projects in the Brazilian Amazon, published by Ferrante, served as the foundation of a civil public lawsuit, and the moratorium was maintained.
“Currently, fossil fuel is used more than any other source to produce corn. One of the main problems with the generation of biofuels is that the main plans include expansion into areas in the Amazon, involving more deforestation of the western part of the rainforest, which is crucial to the rain cycle for the entire continent,” explains professor Philip Fearnside, also of INPE.
In 2007, as a research member of the UN Climate Panel, Fearnside was awarded the Nobel Peace Prize for the warnings his group issued on risks from global warming.
“Brazil’s priority is to reduce emissions and to stop deforestation immediately. Brazil has great potential for developing renewable forms of energy, such as wind and solar. This potential needs to be used to substitute for projects that don’t contribute to the reduction of emissions,” Fearnside reasons.
In March of this year, FS was authorized under the new format of the RenovaBio program, of BNDES, which supplies credit at discounted interest rates for clients who document improvements in environmental indicators. Moreover, since 2020, FS has already issued 558,000 CBIOs, which are RenovaBio certificates of carbon emissions avoided, with each of these being the equivalent of 1 ton of CO2 avoided.
The group also receives resources from the largest manager of agro-investment funds in the country. XP Investments acquired 216.43 million reais ($45 million) of the company’s Agribusiness Receivables Certificates (CRA), offered by the bank as a fixed-income security. This injection of funds into FS Bioenergia is the largest asset in the XPAG11 portfolio, an XP agribusiness fund. In their report to investors, the corporation highlights that the plant has “one of the lowest production costs in the country.”
Sympathy for politicians
FS Bioenergia is the fruit of the union between Rastetter and influential Brazilian agribusiness entrepreneurs, among whom are some of the largest landholders in the Amazon, like the mayor of Lucas do Rio Verde city, Miguel Vaz Ribeiro, and the ex-mayor of the same city, Marino Franz.
The partnership relationship between the Summit group, which controls corn-based ethanol plants in the U.S., and Tapajós Participações S.A., which belongs to Brazilian businessmen, is complex and involves more than a dozen legal entities in Brazil and abroad.
Rastetter doesn’t hide his sympathy for politicians. In 2016, he bestowed part of his fortune on the Republican party and Donald Trump. During the same period, he acted as an agribusiness adviser to the ex-president of the U.S. and attempted to exert his influence on local politics in Iowa.
In Brazil, Rastetter inaugurated the first 100% corn-based ethanol plant in the country, in 2017, in Lucas do Rio Verde, at a ceremony that included the presence of then-President Michel Temer; Blairo Maggi, the minister of agriculture at the time; and the governors of Mato Grosso, Rondônia, Amazonas and Amapá.
In March 2022, accompanied by the current mayor of Lucas do Rio Verde, who is also a partner in his businesses, the American was honored with the inauguration of a new children’s wing of the São Lucas Philanthropic Hospital, which is now known as Centro Materno-Infantil Bruce Rastetter. Rastetter donated 5 million reais (about $1 million) for the construction of the new wing, saying that it was part of American culture to contribute to the community where one prospers. Franz, the ex-mayor and the president of the foundation that administers the hospital and honored Rastetter, is also his business partner.
Days earlier, Rastetter had already received the state’s greatest honor from the vice-governor, Otaviano Pivetta, who was the mayor of Lucas do Rio Verde three times. “He freed the corn producers in Mato Grosso,” the governor declared.
The CEO of FS, Rafael Abud, has also invested in politicians. During the 2022 campaign, the businessman distributed 250,000 reais ($52,000) in donations. Among the candidates he supported are the congressman Arnaldo Jardim, responsible for the legislative proposal that resulted in the agribusiness investment funds and who will preside over the Commission for Energy Transition in the chamber; Alceu Moreira, who is lobbying for more space for biofuels in the country’s economy; and the current leader of the Agricultural Parliamentary Front, Pedro Lupion.
Marino Franz has donated to the Mato Grosso State Board of União Brasil and the Progressistas parties, and Paulo José Franz, also a partner in the company, donated 35,000 reais ($ 7,000) to the reelection campaign of Bolsonaro and another 25,000 reais ($5,000) to the Republicanos party.
Rap sheet
The ex-mayor of Lucas do Rio Verde from 2005-12, and the principal business partner of Rustetter in the production of ethanol in Brazil, Marino Franz was fined 793,000 reais ($165,000) for illegal deforestation in Mato Grosso in 2015. Born in Santa Catarina, Franz began his businesses as a distributor of fertilizers and pesticides and expanded his activities into the corn-based ethanol and soybean markets.
In addition to his participation in FS, Franz holds the concession for the port of Miritituba, a strategic point for the transportation of grains from the central-west, and a private port in Santana, in Amapá. Granted in 2014, the concessions received support from the then Minister of Agriculture, Neri Geller. Franz also directs transportation companies and holdings linked to agribusiness.
In 2014, the politician and businessman was arrested in Operation Terra Prometida, under suspicion of being the leader of a 1 billion reais ($200,000) scheme that involved the purchase of areas belonging to the federal government that were destined for land reform. The operation investigated environmental crimes in the Itanhangá/Tapurah Settlement, in the city de Itanhangá, and alleged that the group of ranchers practiced larceny, document fraud, criminal association, threatening coercion and active and passive corruption. In 2019, Franz was able to seal the complaints against him in the courts. Two of Geller’s brothers were arrested in the same Federal Police operation.
Rafael Davidsohn Abud, the president of the Consulting Board, Henrique Herbert Ubrig, and the mayor of Lucas do Rio Verde, Miguel Vaz Ribeiro, are also connected to environmental crimes through the companies São Manoel Agrícola and Agrocerrado, both in Amapá, where FS does business.
According to the charges lodged by the Federal Prosecutor’s Office, illegal deforestation was identified in Tartarugalzinho and the capital of Amapá, Macapá, in line with the company’s interests in the implementation of plantations of soybeans and corn. The fines amounted to almost 20 million reais ($4 million).
In 2015, Rastetter was in Amapá, in the extreme north of the country, and hailed the state’s geographic location for business due to the ease of transporting products to the United States, Europe and Asia.
Government money funneled to carbon businesses
The rush to build pipelines for projects involving the capture of carbon has been accompanied by a premium that is associated with the millions that these companies can raise.
The Summit Agricultural Group’s project for capturing and storing carbon in the United States is budgeted at $4.5 billion and has received large investments and public subsidies. Nevertheless, the initiative has united Indigenous groups, environmentalists, landowners and farmers throughout the region who are fiercely opposed to the project.
In December 2022, there were 30 active carbon capture projects in the world, according to the Global CCS Institute. Another 10 projects are under construction and more than 150 are being developed in more than 20 countries.
Of these, only eight projects used renewable sources in the production of ethanol and energy. One of these is the pilot project for burning wood in the United Kingdom, led by the Drax company, which depends on substantial investments from the government.
In the United States, the federal government offers large subsidies for carbon capture projects like Rustetter’s: $85 per ton of CO2 permanently stored and $60 per ton used for advanced recovery of petroleum, provided the reductions can be demonstrated.
Summit may bring in $600 million annually in federal fiscal credits if their projections for the storage of carbon are confirmed. The $7.2 billion in fiscal credits that the project may earn in 12 years more than covers the $4.5 billion price of the pipeline.
In Brazil, the government forecasts an additional bonus of 20% in credits generated by RenovaBio for whomever can prove negative emissions. But the businessmen hope to attract greater amounts with the regulation of the sector.
Greenwashing at Midwest Carbon
Part of the lack of faith in the Midwest Carbon project is motivated by the past history of Rastetter and his businesses with sustainability. Heartland Pork Enterprises, his first meat-producing company, is accused of expelling family farmers from the market in Iowa — a market that he came to lead, introducing confinement of swine on a large scale.
Today, his soybean and corn plantations and his cattle businesses operate based on fossil fuels for industrial agriculture.
What is more, when he occupied a position on the Board of Regents in Iowa (2011-17), Rastetter involved university professors in the largest land deals in Tanzania – three “refugee camps,” according to information released by the Oakland Institute, that would dislocate more than 100,000 refugees from Burundi.
Local leaders in Iowa contend that Rastetter’s promises of “slippery concepts about zero carbon, adding money as an incentive for reducing emissions,” will actually just bring him more profits, and they accuse the businessman of practicing greenwashing.
Rastetter is trying to reach an agreement with landowners to construct a pipeline network crossing their lands, but, due to resistance, he is requesting government authorization to cross lands where the owners don’t want to sign permission waivers.
Climate efficiency contested
In the field of science, meanwhile, the storage and stockpiling of CO² splits opinions. The first divergence is related to the efficiency of these projects, which, to be viable, must involve large operations and a range of polluting elements.
“It’s true that with the gravity of the problem of global warming we are going to have to use all options that are available, and stockpiling carbon has some arguments in its favor. However, there are very high costs involved with this operation and it can consume resources that could be used to finance other alternatives,” says Fearnside.
Currently, the oil industry is already using the technique of capturing carbon injected into wells for the extraction of more hydrocarbons. Nevertheless, this sector is also interested in the use of CCS as an environmental measure, and it is one of the principal financers of carbon capture and storage projects worldwide.
“These initiatives may also end up justifying the use of fossil fuels, because, in theory, all of the emissions may be captured and stored, when, actually, what we need to do is to reduce emissions from these sources,” adds Fearnside.
In an article published in Nature Communications, Anna Harper, a researcher and climate science professor from the University of Exeter, in England, analyzed the storage of carbon with raw material originating from areas planted over forests — which is what the people involved with ethanol plants intend to do — and concluded that it will not be capable of attaining the same climatic efficiency.
Studies point out that in some scenarios, primarily in upper latitudes, the return of carbon losses in the substitution of rainforests with planted biomasses may take more than 100 years.
Another study, commissioned by the Natural Resources Defense Council, used an “emissions simulator” to demonstrate that the use of biomass for the generation of energy, based on current supply chains, will not produce negative emissions.
Petroleum lobby
Even without regulations in place here, FS is trying to license its project for carbon capture and storage, and already has a license for drilling a test well at its plant in Lucas do Rio Verde. The license has been granted by the environment secretary of Mato Grosso.
In 2022, a proposed law for regulating the sector was presented by Senator Jean Paul Prates, the current president of Petrobrás, in a joining of interests that involve the ethanol and petroleum markets.
The project was formed in the ProBioCCS subcommittee, which relied on a consultant hired by the ethanol sector. No environmentalists or climate specialists were involved in the project, which is being deliberated in the Senate.
And despite the fact that, at this point, there is only a licensing request for carbon capture in one plant, it is quite possible that Rastetter’s plan for a negative carbon project in Brazil will follow in the footsteps of Midwest Carbon and include the rest of the plants in the region, which may mean the construction of pipelines that crisscross vast areas of the central-west.
Currently, the 18 corn-based ethanol plants in Brazil are all concentrated in the same region.
In an interview with Valor Econômico newspaper, in March of this year, the CEO of FS, Rafael Abud, gave some signs regarding the company’s intentions, saying that the implementation of carbon capture throughout the entire Brazilian ethanol sector, in his calculations, would be able to remove 34 million tons of carbon by 2030.
In the meantime, Rastetter has pocketed a lot of money embracing the so-called “green change,” while his plants continue generating greenhouse gases and demanding increasing production of biomasses for their boilers from corn and wood.
When contacted, FS responded that it does not comment on environmental fines incurred by its partners because they pertain to other companies. The company also added that “it has a policy of socio-environmental responsibility that is published in its website that addresses all of the company’s guidelines for the purchase of grains,” pointing out that the company does not acquire grains from areas of deforestation or that are located in Units of Conservation or Indigenous Lands. Nevertheless, the company did not reveal who its suppliers are or where these planted areas are located.
As its topsoil washes away, the Corn Belt is losing yields — and carbon
Banner image of a corn-based ethanol plant in Lucas do Rio Verde. Image courtesy of FS
This story was first published in Portuguese on O Joio e o Trigo.