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A sugarcane harvester clears a field in Brazil in 2008.

A harvester clears a sugarcane field in Brazil--a crop that will be converted into ethanol in a process that is more efficient than making the biofuel from corn.

Photograph by A. L. Parlow

Marianne Lavelle with J. Okray

For National Geographic News

Published November 18, 2010

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

Brazil, which has done more than any other nation to displace oil with ethanol, is poised as never before to ramp up production of its sugarcane-based fuel and, it hopes, to market its “sweeter alternative” around the world.

Brightening Brazil’s prospects to solidify its position as world biofuel powerhouse are billions of dollars of new foreign investment and the possible fall of a long-standing trade barrier in the United States, a huge potential market.

Brazil Mines and Energy Minister Marcio Zimmerman said in recent weeks that South America’s largest country plans to more than double its ethanol production, from 7 billion gallons (26 billion liters) annually to 17 billion gallons (64 billion liters), by 2019. The plan may sound especially ambitious in light of the depressed ethanol production of the past two years. But it was the global economic downturn—and resulting low prices—that set the stage for a wave of mergers and outside investment in Brazilian companies that were in need of cash.

In August, Shell* signed a $12 billion joint venture with Brazil sugar and ethanol maker Cosan, S.A. Earlier in the year, BP, which already has a two-year-old stake in Brazilian ethanol, announced plans to expand its investments by $5 billion to $6 billion in the next decade, and media reports in São Paulo this month were buzzing with rumors of a pending deal. The U.S. agricultural company, Bunge Ltd., and France's Louis Dreyfus Commodities both expanded their presence in the Brazil with acquisitions of ethanol companies last year. The dizzying succession of deals helps fortify Brazil’s ethanol industry to invest in needed infrastructure, especially a long-discussed pipeline from the producing regions in the interior of the country to the population centers of Rio de Janeiro and São Paulo.

Also, Brazil now has money and access to worldwide distribution networks that would allow it to increase exports. Certainly, most of Brazil’s ethanol still will be consumed domestically—half of the nation’s car and light truck transport is now fueled by ethanol, and that level is bound to increase, because most cars sold in the country are flex-fuel vehicles that can run on 100 percent ethanol.

Ethanol sales in Brazil are very sensitive to prices, however, due both to the flexibility of the vehicles and the fact that Brazilian consumers have a choice at the pump—pure ethanol or a blend that is 80 percent gasoline. If the price of gasoline is low relative to the price of ethanol, consumers will choose the “gasohol” blend, said Carla Silva Cohen, a Latin American specialist with the energy consulting group IHS CERA. In fact, Silva said, because ethanol delivers less mileage per gallon, ethanol has to be selling for 25 percent less than gasoline for Brazilian consumers to choose to put the alternative fuel in their tanks. “It’s important for producers to have an alternative to the domestic market, because the price domestically will be capped naturally by the price of gasoline,” she said.

In the United States, where the vast majority of ethanol sold is in a 10 percent blend with gasoline, and consumers have little choice of a higher blend in most locations, Brazil producers can sell their ethanol at a higher price when gas prices are low.

Looking to Overseas

Certainly, Brazil already is an exporter—sending about 18 percent of its production overseas, mostly to the United States, Japan, and Europe, according to the most recent data from the U.S. Energy Information Administration. But trade barriers have limited those sales.

For years, a 54-cent-per-gallon tariff has discouraged imports of ethanol at U.S. borders, even though fuel alcohol from Brazilian sugarcane is generally cheaper than the U.S. alternative grown from corn. Zeal to protect the heartland corn industry, source of most of the ethanol sold in the United States, still runs high in Washington, D.C. But tax- and energy-policy gridlock on Capitol Hill may well work to Brazil’s advantage. The ethanol import tariff is one of 65 provisions in the U.S. tax code that are set to expire on the last day of the year.

(Related: “Ethanol Future Still Looking for Fuel”)

And until the U.S. Congress decides what to do about the most controversial of those measures—the federal income tax breaks enacted early in the Bush administration—observers think it unlikely that lawmakers will tackle the lower-profile battles over the tariff or another key ethanol provision, the 45-cent-per-gallon tax credit paid to refiners for blending ethanol into the U.S. fuel mix. The blenders’ credit, paid directly to oil refiners, is expected to cost taxpayers $7.6 billion this year.

The enthusiasm for these developments in the United States is clear on Sweeteralternative.com, the website of the Brazilian Sugarcane Industry Association (UNICA) export campaign, where a calendar is counting down the days to “cleaner, more affordable energy” beginning on January 1. UNICA’s chief representative in North America, Joel Velasco, a dual national of Brazil and the United States and former personal aide to Vice President Al Gore, has spent much of the year taking on the U.S. corn ethanol industry lobby with vigor and wit.

“The subsidies [that favor domestic producers] were created to build an ethanol industry,” Velasco says. “The baby now can walk and talk and has a job. But they [corn growers] are saying ‘Let’s keep the training wheels on this.’ ”

Velasco says that without import tariffs, the average American could save about a nickel per gallon using gasoline blended with sugarcane ethanol.

The U.S. ethanol industry lobbying group, the Renewable Fuels Association, has warned that ending government support for what has been the nation’s most important alternative transportation fuel will result in the loss of 112,000 jobs, a 38 percent decline in domestic ethanol production, and a $6.6 billion drop in spending by the U.S. ethanol industry.

But UNICA has battled back, funding a study by Iowa State University indicating that hundreds of jobs would be lost, not tens of thousands of jobs. “A change in ethanol policy would not have major implications for the U.S. employment picture,” the report said, though it did note that the study did not factor in indirect job losses associated with a possible decline in ethanol production.

Brazil’s ethanol industry also is looking at a possibly expanding market for its product across the Atlantic Ocean. Although Europe has had an even higher ethanol tariff than the United States—about 19 Euro cents per liter (about 72 Euro cents per gallon)—the European Union member states are moving to increase their use of ethanol. The EU has adopted a renewables directive requiring its member nations to increase the renewable fuel content in their energy use to 20 percent by 2020.

Environmental Impact

Much of the debate in both Europe and the United States over sugarcane ethanol has turned on the question of whether it is, as Brazil argues, an environmentally friendly alternative, or whether its true impact on land use and the planet’s greenhouse gas burden is far worse than previously understood.

(Related: “Green Dreams: Making fuel from crops could be good for the
planet—after a breakthrough or two
.”)

Earlier this year, Brazil got a boost when the U.S. Environmental Protection Agency determined that sugarcane ethanol was a so-called “advanced” biofuel, with life-cycle greenhouse gas emissions 61 percent lower than fossil fuels. Corn ethanol, in contrast, has life-cycle greenhouse gas emissions just 23 percent less than oil, according to EPA calculations.

That determination is key, because under the energy policy reform that Congress passed in 2007, advanced biofuel is favored in the mandates that seek to increase the amount of ethanol used in the United States from about 10 billion gallons in 2009 to 36 billion gallons by 2020. “Sugarcane ethanol is a first-generation biofuel, but with generation two efficiency,” says Velasco.

But not everyone agrees. Kate McMahon, biofuels campaign coordinator for Friends of the Earth in Washington, D.C., said the group is concerned about the Brazilian sugarcane industry, particularly about land use and food crop replacement, and the industry’s impact on the Amazonian rain forest. Estimates are that rain-forest destruction is responsible for at least one-quarter of the atmosphere’s carbon overload. Even though sugarcane is not directly planted onto rain-forest land, critics are concerned that it will displace other crops—especially soybeans—that will then take over important ecosystems in a domino effect.

(Related: “Ethanol Production Could Be Eco-Disaster, Brazil's Critics Say”)

“Historically it is always natural ecosystems that pay for rising demands,” McMahon said. “We have insatiable energy demands and ultimately what we need to be doing is reducing that demand, not just using up Brazil’s land to meet the energy demand of the United States.”

But Izabella Teixeira, Brazil’s environment minister, said her country could produce more sugarcane ethanol without hurting the delicate ecosystems. This year, she said, the amount of deforestation in Brazil will likely be 1,540 square miles (4,000 square kilometers), down dramatically from the peak of 9,270 square miles (24,000 square kilometers) in 2004. “Brazil is doing more to reduce its carbon footprint than any other country,” she said.

(Related: “Brazil to Crack Down on Amazon Clearing” and “Brazil grasps the nettle of climate mitigation”)

“The soy land has stopped taking the rainforest. The domino hypothesis is thwarted,” Velasco said.

Perhaps. But due to the indirect land use question, the European Union is considering environmental criteria for ethanol imports that could restrict Brazil’s access to the market. Further analysis on indirect land use also is under way at the U.S. EPA. As a result, earlier this month, UNICA President Marcos Jank said the industry might go to the World Trade Organization to protest such calculations as a nontariff trade barrier. Before the “sweeter alternative” makes its way to more markets, there could be a bitter battle ahead.

* This report is produced as part of National Geographic’s Great Energy Challenge initiative, sponsored by Shell. National Geographic maintains autonomy over content.

J. Okray is a reporter for Medill News Service in Washington, D.C.

(Related: Brazil Photos from National Geographic Travel)

1 comments
schultzy beckett
schultzy beckett

Ethanol  is  being  used  as fuel  at many  places .the efficiency depends  upon  the The  quality  of  it .IN  Brazil  its  quality  is  much  superior  than  the  one  that  is  available  at  other  places so  that's   the  reason  for  its  success  there.

schultzy  http://www.greatbasinindustrial.com/safety-quality/

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