In Brazil, fuel of future has already arrived
By Larry Rohter The New York Times
MONDAY, APRIL 10, 2006
PIRACICABA, Brazil At the dawn of the automobile age, Henry Ford predicted that "ethyl alcohol is the fuel of the future." With petroleum at about $65 a barrel, President George W. Bush of the United States has embraced that view, too. But Brazil is already there.
Brazil expects to become self-sufficient in energy this year, meeting its growing demand for fuel by raising output both from petroleum and ethanol. Already the use of ethanol, derived here from sugar cane, is so widespread that gas stations have two sets of pumps, marked A for alcohol and G for gasoline.
In his State of the Union address in January, 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 and several billion dollars in incentives, and it has involved many missteps.
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, 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, vast green fields of sugar cane 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 here 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 here 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, or about 14 cents a liter, on all imports of Brazilian cane-based ethanol.
With demand for ethanol soaring here, Brazil recognizes 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 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 here, 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-1980s, more than three quarters of the 800,000 cars made here 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 carmakers that 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 1990s and were overcome only in 2003, when auto manufacturers, beginning with Volkswagen, introduced the "flex fuel" motor here. Those engines gave consumers the autonomy to buy the cheapest fuel, freeing them from any potential shortages in ethanol supply. Also, ethanol-only engines can be slower to start when cold, a problem the flex fuel owners can bypass by revving up in gasoline mode.
"Motorists liked the flex fuel system from the start because it permits them free choice and puts them in control," said Vicente Lourenco, technical director at General Motors do Brasil.
Today, less than three years after the technology was introduced, more than 70 percent of the cars sold in Brazil, a number expected to reach 1.1 million this year, have flex fuel engines, which have entered the market generally without increases in automobile prices.
"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 be less easy to resolve. Expansion of sugar output, 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, they argue, is good for the environment, because it is putting largely abandoned or degraded pasture land back into production. And of course, ethanol burns far cleaner than 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- growing area north of here.
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