Brazil's Biofuel Strategy Pays Off as Gas Prices Soar
Saturday, June 18, 2005
PRADOPOLIS, Brazil -- Outside the cavernous Sao Martinho refinery, the air smells of molasses as a quarter-mile-long caravan of trucks piled high with sugar cane waits to unload cargo, signs that the world's largest sugar harvest is moving into high gear.
Such bumper sugar crops have often meant worldwide gluts, low prices and headaches for politicians in the more than 100 countries where sugar cane is grown, but not this year in Brazil. About half the cane brought here will be made into ethanol as part of a 30-year gamble to substitute fuels made from crops for imported oil.
As international oil prices soar, that bet has put Brazil at the forefront of a "biofuels" movement in which many countries view sugar cane, corn, soybeans, beets, cornstalks and native grasses as cleaner, money-saving substitutes for oil produced in politically unstable countries. Ethanol is higher in power-producing octane than most gasoline and can reduce tailpipe emissions of carbon monoxide and harmful particulates.
The trend in Brazil has far-reaching implications for environmental policy, trade and economic development in poor countries that may have a bright future producing crops that can be easily turned into fuels. Biofuels also could be alternatives for U.S. farmers facing cuts in large federal farm subsidies on traditional crops, according to some agricultural economists.
Congress, the Bush administration and U.S. industry are aware of ethanol's potential. During Senate floor debate Thursday on major energy legislation, Sen. Maria Cantwell (D-Wash.) said Brazil's example showed that biofuels were one way to break the "addiction" to imported oil.
Efforts to gain wide acceptance in the United States have faced political, economic, and technical obstacles not present in Brazil.
President Luiz Inácio Lula da Silva has vowed that his country will become the world's leader in renewable energy. It is already the largest producer and exporter of ethanol, sending half a billion gallons a year to a dozen countries, including the United States.
"We don't want to sell liters of ethanol, we want to sell rivers," Agriculture Minister Roberto Rodrigues told Japanese Prime Minister Junichiro Koizumi last year.
About a third of the fuel Brazilians use in their vehicles is ethanol, known in Brazil as "alcohol." That compares with 3 percent in the United States. All gasoline sold in Brazil contains at least 26 percent ethanol, but motorists driving flexible-fuel cars have the option of filling up with pure ethanol, or E100, which currently is selling for about half the price of the blend.
Use of pure ethanol will rise sharply as carmakers in Brazil such as General Motors and Volkswagen make more flexible-fuel cars. Half the new vehicles sold this year will be able to use either pure ethanol or the blend, according to the Sao Paulo Sugar Cane Industry Union.
In the United States, the sugar-cane industry has had little incentive to diversify into ethanol production because import quotas support U.S. sugar prices far above world levels. Expansion of sugar cane acreage beyond Hawaii, Florida and the Gulf Coast is limited by the need for a long, frost-free growing season. The House-passed energy bill would authorize a three-year demonstration program for producing ethanol from sugar cane.
Most U.S.-produced ethanol is now made from ground corn in a process that has been faulted as inefficient. Corn yields less sugar per acre than sugar cane, and the refining uses substantial amounts of energy. To keep ethanol competitive with gasoline, major refiners such as Archer Daniels Midland Co. have relied since the 1970s on a tax subsidy, now 51 cents a gallon.