Econophysics applications to the Brazilian ethanol-sugar sector\'s prices

This thesis consists of an introductory chapter followed by two independent but related articles. The articles are situated under the same broader theme, namely, on the price relations of Brazilian hydrated ethanol, both from the point of view of relations with international prices and internal relations. The aim of Chapter 2 is to study whether Brazilian hydrous ethanol prices are correlated with carbon emission futures prices, compared to other potentially correlated international futures prices: oil and natural gas (the main commodities in the energy sector), as well as sugar (also produced from sugarcane by Brazilian mills). The Detrended Cross-Correlation Analysis (DCCA) method was used with sliding windows, in order to capture the correlations dynamically. The analysis comprised the period from January 2010 to July 2020. The results suggest that there is a significant correlation between ethanol and sugar and a moderate association with oil in the short term, but a weak and short-term relationship with carbon emission prices. Furthermore, in the dynamic analysis of sliding windows, the strength of the correlation between ethanol and emission prices ranges from weak to not significant. Chapter 3, in its turn, aims to analyze the degree of persistence of the relative prices of hydrated ethanol – gasoline C, considering 15 Brazilian capitals located in the 5 major regions of the country. It also analyzes the degree of correlation of relative prices between São Paulo, capital of the main producer and consumer state of hydrated ethanol, compared to other capitals. The analyzed period is between May 2004 and December 2020. The DFA (Detrended Fluctuation Analysis) and DCCA methods are used to investigate the degree of persistence and correlation, respectively, using sliding windows. It was found that the degree of persistence varies according to the location of the analyzed capital, which suggests specific local dynamics of relative prices. As for the correlations, these also suggest that the estimates are dependent on the location of the capitals, so that regions that are more geographically distant from São Paulo exhibit a lower correlation degree of relative prices. This suggests a regionalized vis-à-vis unified character of convergence of national relative prices. Abstract Brazil is one of the largest global producers and exporters of ethanol and in 2017 launched RenovaBio, a programme aiming to mitigate greenhouse gas emissions. In parallel to this domestic scenario, there is rapid growth in the world market of carbon production, as well as complex price relations between fossil and renewable energies becoming increasingly important in recent years. The present work aims to contribute to filling a gap in knowledge about the relationship between Brazilian ethanol and other relevant energy-related commodities. We use a recent methodology (Detrended Cross-Correlation Approach— DCCA—with sliding windows) to analyze dynamically the cross-correlation levels between Brazilian ethanol prices and carbon emissions, as well as other possible-related prices, namely: sugar, Brent oil, and natural gas prices, with a sample of daily prices between January 2010 and July 2020. Our results indicate that (i) in the whole period, Brazilian ethanol has significant correlations with sugar, moderate correlation with oil in the short term, and only a weak, short-term correlation with carbon emission prices; (ii) with a sliding windows approach, the strength of the correlation between ethanol and carbon emissions varies between weak and non-significant in the short term. Abstract The use of biomass as an energy source has advanced in recent decades, given scientific evidence that it is a solution to the environmental problems faced globally. In this context, biofuels derived from biomass have a prominent role. Among the countries where this alternative is most promising, Brazil stands out, just behind the USA. It is therefore necessary to assess whether such replacement is economically viable. For such an assessment, the behavior of the relative price of bioethanol/gasoline is crucial. In the present work, the degree of temporal persistence of relative prices, considering the existence of shocks to which they are exposed is evaluated, considering 15 important Brazilian capitals, via Detrended Fluctuation Analysis (DFA). The degree of correlation is also evaluated through the Detrended Cross-Correlation Analysis (DCCA) between fuel prices in São Paulo, the capital of the most populous state and main producer of bioethanol, with the capitals of the 14 states selected for the analysis. The period of analysis takes place between 2004 and 2020. We found that the degree of persistence varies significantly depending on the capitals analyzed, which means that price variations are localized and demand regional stimulus policies. Furthermore, it was found that the correlation with São Paulo is less intense in the most geographically distant capitals. Such evidence is important and complementary to infer how integrated the national bioethanol market is, in order to support public policies aimed at its consolidation.