Brazil's ethanol and its lessons for biodiesel roduction

April 10, 2006

http://www.nytimes.com/2006/04/10/world/americas/10brazil.html?pagewanted=2&_r=1&th&emc=th
With Big Boost From Sugar Cane, Brazil Is Satisfying Its Fuel Needs
By LARRY ROHTER

PIRACICABA, Brazil — At the dawn of the automobile age, Henry Ford predicted that "ethyl alcohol is the fuel of the future." With petroleum about $65 a barrel, President Bush has now embraced that view, too. But Brazil is already there.

This country expects to become energy self-sufficient this year, meeting its growing demand for fuel by increasing production from petroleum and ethanol. Already the use of ethanol, derived in Brazil from sugar cane, is so widespread that some gas stations have two sets of pumps, marked A for alcohol and G for gas.

In his State of the Union address in January, Mr. Bush backed financing for "cutting-edge methods of producing ethanol, not just from corn but wood chips and stalks or switch grass" with the goal of making ethanol competitive in six years.

But Brazil's path has taken 30 years of effort, required several billion dollars in incentives and involved many missteps. While not always easy, it provides clues to the real challenges facing the United States' ambitions.

Brazilian officials and scientists say that, in their country at least, the main barriers to the broader use of ethanol today come from outside. Brazil's ethanol yields nearly eight times as much energy as corn-based options, according to scientific data. Yet heavy import duties on the Brazilian product have limited its entry into the United States and Europe.

Brazilian officials and scientists say sugar cane yields are likely to increase because of recent research.

"Renewable fuel has been a fantastic solution for us," Brazil's minister of agriculture, Roberto Rodrigues, said in a recent interview in São Paulo, the capital of São Paulo State, which accounts for 60 percent of sugar production in Brazil. "And it offers a way out of the fossil fuel trap for others as well."

Here, where Brazil has cultivated sugar cane since the 16th century, green fields of cane, stalks rippling gently in the tropical breeze, stretch to the horizon, producing a crop that is destined to be consumed not just as candy and soft drinks but also in the tanks of millions of cars.

The use of ethanol in Brazil was greatly accelerated in the last three years with the introduction of "flex fuel" engines, designed to run on ethanol, gasoline or any mixture of the two. (The gasoline sold in Brazil contains about 25 percent alcohol, a practice that has accelerated Brazil's shift from imported oil.)

But Brazilian officials and business executives say the ethanol industry would develop even faster if the United States did not levy a tax of 54 cents a gallon on all imports of Brazilian cane-based ethanol.

With demand for ethanol soaring in Brazil, sugar producers recognize that it is unrealistic to think of exports to the United States now. But Brazilian leaders complain that Washington's restrictions have inhibited foreign investment, particularly by Americans.

As a result, ethanol development has been led by Brazilian companies with limited capital. But with oil prices soaring, the four international giants that control much of the world's agribusiness — Archer Daniels Midland, Bunge and Born, Cargill and Louis Dreyfuss — have recently begun showing interest.

Brazil says those and other outsiders are welcome. Aware that the United States and other industrialized countries are reluctant to trade their longstanding dependence on oil for a new dependence on renewable fuels, government and industry officials say they are willing to share technology with those interested in following Brazil's example.

"We are not interested in becoming the Saudi Arabia of ethanol," said Eduardo Carvalho, director of the National Sugarcane Agro-Industry Union, a producer's group. "It's not our strategy because it doesn't produce results. As a large producer and user, I need to have other big buyers and sellers in the international market if ethanol is to become a commodity, which is our real goal."

The ethanol boom in Brazil, which took off at the start of the decade after a long slump, is not the first. The government introduced its original "Pro-Alcohol" program in 1975, after the first global energy crisis, and by the mid-1980's, more than three quarters of the 800,000 cars made in Brazil each year could run on cane-based ethanol.

But when sugar prices rose sharply in 1989, mill owners stopped making cane available for processing into alcohol, preferring to profit from the hard currency that premium international markets were paying.

Brazilian motorists were left in the lurch, as were the automakers who had retooled their production lines to make alcohol-powered cars. Ethanol fell into discredit, for economic rather than technical reasons.

Consumers' suspicions remained high through the 1990's and were overcome only in 2003, when automakers, beginning with Volkswagen, introduced the "flex fuel" motor in Brazil. Those engines gave consumers the autonomy to buy the cheapest fuel, freeing them from any potential shortages in ethanol's supply. Also, ethanol-only engines can be slower to start when cold, a problem the flex fuel owners can bypass.

"Motorists liked the flex-fuel system from the start because it permits them free choice and puts them in control," said Vicente Lourenço, technical director at General Motors do Brasil.

Today, less than three years after the technology was introduced, more than 70 percent of the automobiles sold in Brazil, expected to reach 1.1 million this year, have flex fuel engines, which have entered the market generally without price increases.

"The rate at which this technology has been adopted is remarkable, the fastest I have ever seen in the motor sector, faster even than the airbag, automatic transmission or electric windows," said Barry Engle, president of Ford do Brasil. "From the consumer standpoint, it's wonderful, because you get flexibility and you don't have to pay for it."

Yet the ethanol boom has also brought the prospect of distortions that may not be as easy to resolve. The expansion of sugar production, for example, has come largely at the expense of pasture land, leading to worries that the grazing of cattle, another booming export product, could be shifted to the Amazon, encouraging greater deforestation.

Industry and government officials say such concerns are unwarranted. Sugar cane's expanding frontier is, they argue, an environmental plus, because it is putting largely abandoned or degraded pasture land back into production. And of course, ethanol burns far cleaner that fossil fuels.

Human rights and worker advocacy groups also complain that the boom has led to more hardships for the peasants who cut sugar cane.

"You used to have to cut 4 tons a day, but now they want 8 or 10, and if you can't make the quota, you'll be fired," said Silvio Donizetti Palvequeres, president of the farmworkers union in Ribeirão Preto, an important cane area north of here. "We have to work a lot harder than we did 10 years ago, and the working conditions continue to be tough."

Producers say that problem will be eliminated in the next decade by greater mechanization. A much more serious long-term worry, they say, is Brazil's lack of infrastructure, particularly its limited and poorly maintained highways.

Ethanol can be made through the fermentation of many natural substances, but sugar cane offers advantages over others, like corn. For each unit of energy expended to turn cane into ethanol, 8.3 times as much energy is created, compared with a maximum of 1.3 times for corn, according to scientists at the Center for Sugarcane Technology here and other Brazilian research institutes.

"There's no reason why we shouldn't be able to improve that ratio to 10 to 1," said Suani Teixeira Coelho, director of the National Center for Biomass at the University of São Paulo. "It's no miracle. Our energy balance is so favorable not just because we have high yields, but also because we don't use any fossil fuels to process the cane, which is not the case with corn."

Brazilian producers estimate that they have an edge over gasoline as long as oil prices do not drop below $30 a barrel. But they have already embarked on technical improvements that promise to lift yields and cut costs even more.

In the past, the residue left when cane stalks are compressed to squeeze out juice was discarded. Today, Brazilian sugar mills use that residue to generate the electricity to process cane into ethanol, and use other byproducts to fertilize the fields where cane is planted.

Some mills are now producing so much electricity that they sell their excess to the national grid. In addition, Brazilian scientists, with money from São Paulo State, have mapped the sugar cane genome. That opens the prospect of planting genetically modified sugar, if the government allows, that could be made into ethanol even more efficiently.

"There is so much biological potential yet to be developed, including varieties of cane that are resistant to pesticides and pests and even drought," said Tadeu Andrade, director of the Center for Sugarcane Technology. "We've already had several qualitative leaps without that, and we are convinced there is no ceiling on productivity, at least theoretically."

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http://www.statesman.com/business/content/business/stories/other/04/16BRAZILETH.html
ALTERNATIVE FUELS
How Brazil learned to love ethanol

In three decades, against heavy odds, country developed gasoline alternative

By Michael Deibert
COX NEWS SERVICE
Sunday, April 16, 2006

RIO DE JANEIRO, Brazil — When President Bush visited the National Renewable Energy Laboratory in Colorado last month, he stressed the need for the United States "to end our addiction on oil" and explore alternative fuels.
The U.S. doesn't have to look far to find an example of a major nation that has done just that. Brazil, which has South America's largest economy, launched an ethanol fuel program in 1975 and, against heavy odds, has developed a cost-efficient alternative to gasoline.

It appears that Brazil's sugar industry, once viewed as a remnant of its colonial past, may have a prominent place in the world's energy future.
About half of the country's 21,000 square miles of sugar cane under cultivation is used to make ethanol that, according to the World Bank, is being produced for $1 per gallon compared to $1.50 for gasoline.

Getting to that point required decades of pressure from Brazil's government, in ways that would be hard to duplicate in the United States.
In the 1970s, with Brazil hit hard by Mideast oil shocks, the ruling military dictatorship launched a national program to reduce dependence on foreign oil.

It encouraged the construction of ethanol plants by doling out low-interest loans to sugar companies, financed a national distribution network and granted subsidies to keep the price of the fuel low.

By the mid-1980s, most new cars sold in Brazil ran exclusively on ethanol. The share of Brazil's energy needs filled by imported crude fell from about 80 percent in the late 1970s to about 45 percent in 1990.
When gasoline prices fell again in the late 1980s, demand for ethanol
stalled.

In the late 1990s, the government ended subsidies for Brazil's sugar industry, spurring the sector to new competition and innovation. The government also switched its emphasis to flexible fuel vehicles, mandating that all gasoline must be mixed with at least 25 percent ethanol. Now vehicles that can run on ethanol, gasoline or a mixture of the two account for 70 percent of all cars made here.

That has made drivers happy, because they can shift to whichever fuel is cheaper.

With at least 300 sugar mills in Brazil each employing an average of 2,000 people, politicians have also seen the advantages of investing in innovation.
"For the government, each mill creates a lot of employment," said Frederico Humberg, executive director of Brazilian agribusiness company Bunge Ltd.
However, the conversion has not been without hitches.

In January, Agriculture Minister Roberto Rodrigues announced that the country's sugar cane industry would need $10 billion worth of investment by 2012 to meet rising demand. That reflected the need to build 73 new mills to convert raw sugar into ethanol, and to plant 10,000 square miles of cane, nearly a 50 percent increase.

Also, the percentage of ethanol required in auto fuel was temporarily lowered to 20 percent because of limited supply.
Still, Brazil plans to raise its profile as an ethanol exporter. The country exported $600 million worth of ethanol last year; that is expected to more than double by 2010.

Customers such as Japan and Sweden hope that using cleaner-burning ethanol will help them meet their obligations under the Kyoto Protocol to cut emissions.

"Over time, we are trying to reduce our . . . emissions" of climate-changing greenhouse gas, said Guido Mantega, president of the Brazilian Development Bank, and "the demand for ethanol will increase as countries attempt to adhere to Kyoto."

The U.S. government's interest in ethanol is embodied in the energy bill Bush signed last year. It mandates doubling the amount added to gasoline to 8 billion gallons by 2012 — still just a fraction of the 146 billion gallons of gas the country consumes each year.

And there's little prospect that the United States is ready to follow in Brazil's footsteps toward energy independence.

U.S. ethanol is made almost entirely from corn, whose starch must be converted into sugar before creating a usable alcohol fuel, adding cost. The motor fuel industry would face a huge investment to distribute ethanol nationwide.

The political clout of agriculture and the auto industry make it unlikely the United States will remove constraints on its ethanol market.
There's little chance of reducing the tariffs that keep much of Brazil's lower-priced ethanol out of the country.

Politicians, meanwhile, are wary of hiking gas taxes, which make gasoline a bargain at U.S. pumps.

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