Bob Tippee
Editor
While much can be said about the energy achievements of Brazil, Latin America's economic dynamo does not, with one exception, represent a model for energy policy-making in the US.
At least twice in recent speeches, however, US President Barack Obama has purred approvingly about the dimension of Brazil's energy program least applicable to the US.
"If anyone doubts the potential of these [bio]fuels, consider Brazil," the president said in an energy-policy talk Mar. 30 at Georgetown University. "…Half of Brazil's vehicles can run on biofuels—half of their fleet of automobiles can run on biofuels instead of petroleum."
In a fiscal-policy speech Apr. 13 at George Washington University, Obama said, "Brazil is investing billions in new infrastructure and can run half their cars not on high-priced gasoline but on biofuels."
Brazil's progress
In energy, Brazil indeed has come a long way. At the time of the Arab oil boycott of 1973-74, the country relied on imports for 80% of its oil supply. Now its domestic supply of oil and other liquids slightly exceeds consumption.
Especially in a country where oil use has grown by 1.4 million b/d over the past 30 years, that's no minor success. It happened largely because Brazilian production of crude oil over the same period grew by 1.8 million b/d.
But Obama focuses on Brazilian ethanol, of which the country produces about 460,000 b/d. The supplemental fuel supply surely helped Brazil become self-sufficient in oil but can't be said to have been the main factor.
Brazil does not work as a model for US action on ethanol.
Brazilian ethanol occupies an economic and political world altogether different from that of its US counterpart. In Brazil, ethanol comes from cane sugar, a feedstock that can be fermented directly into alcohol. US ethanol comes from corn, the starch from which must be converted to sugar in a process that about doubles the energy requirement in comparison with direct distillation of sugar and thus increases cost.
Yes, the US produces sugar that might be used for ethanol production. But import limits support the price of US sugar and keep the substance unattractive as an ethanol feedstock most of the time.
Besides, US ethanol policy derives mainly from political pressure to expand markets for corn farmers and distillers. The US ethanol industry therefore will continue to differ greatly from its lower-cost counterpart in Brazil on the basis of feedstock.
What's more, the Brazilian ethanol industry developed, at least figuratively speaking, at the point of a gun.
It began in 1975 as a response to the Arab embargo by an economically beleaguered government then run by military officers. Command governments can impose production mandates, make cheap loans for plants and distribution systems, and manipulate prices without having to listen to doubts about the economic soundness of it all. By the mid-1980s, half of Brazil's fuel supply was ethanol.
Economic distortions
At the same time, however, the country reeled from inflation, brought on partly by distortions in the managed economy of which the ethanol program was a major part. After the oil market collapsed in 1986, ethanol's price advantage to gasoline became difficult to maintain. By the time popular elections resumed after 29 years of military rule in 1989, ethanol and ethanol-fueled vehicles had lost popularity. Through the 1990s, the main feature of the Brazilian ethanol program was continuation of the requirement that gasoline contain 20 vol % ethanol.
The sugar-based fuel regained allure after 2000, thanks to the introduction of flex-fuel vehicles, some of which can run on neat ethanol, and sales-tax breaks on their purchase, combined with generally rising gasoline prices.
So now Brazil has a well-developed ethanol program. Good for Brazil. But the route it took to that objective is not one the US ever would follow—or ever should hope to.
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