This paper examines Brazil's position as the world's leading biofuel producer, tracing the country's legislative and industrial history from the 1930s ethanol mandates through the 1975 National Alcohol Program and into the modern biodiesel era. It explores how sugarcane-based ethanol transformed Brazil's energy independence, the economic and cultural consequences of shifting agricultural land to fuel crops, and the environmental trade-offs associated with deforestation and monoculture. The paper also considers Brazil's growing biodiesel sector, the comparative advantages of sugar ethanol over corn ethanol, developments in Brazilian automotive technology, and the country's expanding role in the global biofuel export market.
This paper discusses biofuel developments in Brazil and the many issues surrounding them. It serves as an introduction to biofuel efficacy and provides a sense of the current epicenter of biofuel use and production. The discussion covers the history of biofuel use in Brazil, the effects it has had on culture and economy, the pros and cons of biofuel, import and export market effects, cost differentiation, sugar versus corn ethanol, automotive technology in Brazil, and some limited discussion of U.S. and other international responses to Brazil's programs.
Brazil's history in the biofuel business is a long-standing one. The nation implemented some of the first legislative mandates requiring the use of biofuel — in this case, ethanol as an additive to standard petroleum fuel — as early as the 1930s. At that time, the fuel mix was mandated at 5%. Given the international climate, the action was monumental and telling of future responses to crisis; the mandate was a reaction to a sugar industry downturn and an economic recession (Biodiesel in Brazil: Overview, 2005, p. 2). In response to the energy crisis of the 1970s, a rapidly growing Brazil again sought alternative fuels to reduce its dependence on foreign fossil fuels. One of the primary strategies was to introduce biofuel, first at an infrastructural level and then at a consumer level. As a result of this early response to fuel shortages — and an awareness of the global power conferred by fuel self-sufficiency, not to mention potential environmental concerns — Brazil has been the world's most advanced biofuel center for decades. There are currently 300 sugar-ethanol mills operating in Brazil, with more than 60 in various stages of construction (Mae-Won Ho, 2006, December 26).
In addition to its world-leading position on biofuel use, Brazil also dominates in legislation supporting biofuel efforts. In 1975, Brazil created the Brazilian National Alcohol Program, which regulated the use of ethanol and encouraged its production (Biodiesel in Brazil: Overview, 2005, p. 2). "The program guaranteed that all gasoline sold in the country would be blended with 22% anhydrous ethanol and that the pump price would remain competitive with gasoline. Past sugarcane crop problems have slightly altered the percentage of ethanol in Brazilian gasoline; however, mandated levels have usually remained at around 20%. Then, on June 1, 2003, the Brazilian government raised the ethanol mix in gasoline from 20% to 25%" (Biodiesel in Brazil: Overview, 2005, p. 2).
Currently, about half of Brazil's sugarcane crop is converted into bio-ethanol production, with the remainder continuing in the process to be made into sugar. Brazilian drivers can choose, at the pump, to fuel with 100% ethanol — at a cost savings of nearly 50% — at 30,000 stations nationwide, or a petrol blend consisting of between 20 and 25% ethanol. Ethanol accounts for 40% of all non-diesel fuel consumption in the country. "In 2005, for example, Brazil produced 15.9 billion litres of bio-ethanol, more than one-third of the world's supply and second only to the United States. Brazil's bio-ethanol is the only large-scale biofuel program now able to expand without government subsidies. The U.S.'s bio-ethanol from corn, in contrast, is heavily subsidized" (Mae-Won Ho, 2006, December 26).
According to Mae-Won Ho, Brazil is poised to double its bio-ethanol production within the next ten years, and its futures market rose by 62% in 2006 as a result of international demand — including increased demand from the European Union, the United States, China, Japan, India, and other nations. "It is also poised to vastly expand biodiesel production for export, using soya, palm oil, and castor oil. Brazil is emerging as the biggest of the new biofuel republics in the world, and getting bigger all the time" (Mae-Won Ho, 2006, December 26).
Brazil has seen great opportunity in the rising international demand for biofuel and will likely continue to expand not only its sugar-based ethanol production but also attempt to strengthen the economic status of other oil-producing crops. The soybean industry is one such example, as soybeans are now being converted into biodiesel. New plants are currently under construction to convert soybeans into biodiesel, and many of them are facilities that also produce ethanol from sugar (Mae-Won Ho, 2006, December 26).
The government has also introduced additional mandates for biodiesel derived from crops experiencing economic downturns. "In addition, the Lula government recently passed legislation that will mandate a 2% blend of biodiesel from oilseed crops like soybean, sunflower, or castor beans in all commercial sales of petroleum diesel by 2008, rising to 5% by 2013. A few hundred filling stations already offer blends. Brazil has about 10 biodiesel plants in operation and another 40 under construction" (Mae-Won Ho, 2006, December 26). This trend has created a desire to blend production, so that existing fuel-producing companies can also participate in the new biodiesel sector, in addition to the ethanol production from which they have already profited — a trend supported by the government (Mae-Won Ho, 2006, December 26). The full effects of import and export markets for Brazil, particularly with respect to biodiesel, remain to be seen.
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