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.
Photograph by A. L. Parlow
Published November 18, 2010
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.
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