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Ethanol in Brazil: The World's First Sustainable Biofuels Economy

with Mario R. Duran

By

Brazil Flex-fuel badges

Clear external badging is used in all Brazilian flexible-fuel vehicles. Shown here is a sample of flex badging from several Brazilian automakers.

© Mario R. Duran

Ethanol. Fuel. Food. How come Brazil is meeting the challenge of using ethanol as fuel in ways that America seems to be missing? We recently had the opportunity to learn more about this entire issue from Mario R. Duran, transportation planner currently working in Brazil, with a M.Sc. from U.C. Berkeley and M.P.A. from Harvard University. Mario graciously and generously agreed to answer some of our questions regarding the use of ethanol as a fuel in Brazil vs. America. Here is the first of our four questions and Mario’s article-answers.

Scott & Christine: Here in America there's a big debate about using food crops (mainly corn) for ethanol production. Are there any such concerns in Brazil? Is sugarcane the main feedstock?

Mario: A crash-course on the Brazilian ethanol industry’s history is required to provide the context to answer this question.

Brazil has been using sugarcane as feedstock for commercial production of ethanol fuel for more than thirty years, as the initial boost to this industry was the result of the government’s reaction to the two oil crises of the seventies. In 1975 the Pro-Alcohol Program was created, and several billion dollars out of the federal budget were used to provide low-interest rate loans to the sugar/ethanol sector; ethanol purchases were guaranteed by the state-owned oil company Petrobras; and fixed gasoline and ethanol prices were set, with heavily subsidized ethanol price to consumers. Since then, the blend of ethanol with gasoline was made mandatory, and by the late seventies Brazilian carmakers developed and launched in the market the first ethanol-only vehicles, adapting gasoline engines to run on 100% hydrous ethanol (E100 with less than 4.5% water content). From 1979 to 2005 more than 5.6 million ethanol-only automobiles and light trucks were manufactured. The success of this first ethanol push was halted in the late 80s and early 90s, when sugar prices increased sharply in the international market, causing a reduction on local ethanol production which resulted in a severe shortage of ethanol supply in the country, forcing the government to import ethanol. As consumers queued at service stations, they lost confidence in the ethanol vehicles, and carmakers cut their production, thus the industry declined.

Confidence was restored only until March 2003, when Volkswagen of Brazil launched into the market the first flexible-fuel vehicle, the Gol 1.6L Total Flex, designed to run on any mixture of gasoline and hydrous ethanol (E100). Soon after, flex fuel models were manufactured by all the main local carmakers, and so, FFVs became a commercial success overnight. The flex cars, as they are popularly known in Brazil, reached 87.4% of new car sales as of September 2008, with gasoline light vehicles representing only 8% of sales. The remaining sales are diesel-powered light vehicles, and production of ethanol-only vehicles is almost nil. The rapid adoption of flex cars was greatly facilitated by the fact that the country already had more than 30 thousand fueling stations throughout its territory with at least one ethanol pump, a heritage of the Pro-Alcohol Program.

Today Brazil has reached a mature ethanol industry, considered by many international sources as the world's first sustainable biofuels economy. As of September 2008, there were 6.4 million flex-fuel light vehicles running on Brazilian roads, together with an estimated 3 million remaining ethanol-only vehicles, and around 1.5 million adapted bi-fuel vehicles running on CNG. This means that almost one-third of the country’s light vehicle fleet is running on an alternative fuel, plus the remaining gasoline vehicles run on the mandatory blend of E25 gasohol. Not surprisingly, by February 2008 the combined consumption of anhydrous and hydrous ethanol fuel, used in E25 and E100 respectively, reached a historical 50% market share of the gasoline-powered fuel market, a landmark not achieved since the late 80s, during the peak of the Pro-Alcohol Program.

Within this context, the food vs. fuel controversy really upset Brazilians, from government officials through sugarcane growers and ethanol producers, since not even local environmentalist groups had raised any concerns about any possibly effects of sugarcane based ethanol on food prices, as Brazilian ethanol has always been considered quite environmentally friendly and a model of sustainability. When compared to corn based ethanol, Brazilian yields of ethanol per acre almost doubles US corn based ethanol productivity; sugarcane based ethanol reduces greenhouse gas emissions by 90% while corn base ethanol only 30%; the energy balance of sugarcane ethanol production is 8 to 10 times the energy used in production, as compared to 1.3 to 1.6 times the energy used in corn based ethanol. Besides, Brazilians have never considered sugar a basic food staple, such as rice, wheat or corn, but rather just a food sweetener, so it does not play a key role to combat world hunger. The government, the private sector and the Brazilian press joint position defend sugarcane-based ethanol, claiming their ethanol was not the villain of the story. After the peak of the food vs. fuels debate last April to May, reports (links go directly to PDF reports) from the World Bank, OECD, and even the British NGO Oxfam did not put any blame on sugarcane ethanol for the increase of food prices, or for lack of sustainability. The World Bank report concludes that sugarcane based ethanol has not raised sugar prices significantly, as almost half the sugar cane harvested goes to sugar production and the other half to ethanol, not affecting world supply, as Brazil is the first sugar producer in the world. Oxfam called Brazilian ethanol “far from perfect" but considered it the most favorable biofuel in the world in terms of cost and GHG balance. The OECD report also agreed with these findings.

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