Ethanol from sugar - Brazil's sweet ride

By Chris Cermak and Emilio Rappold Jun 26, 2006, 3:41 GMT

Rio de Janeiro/Washington - As the world searches for clean a viable energy solutions, Brazil is one of the few countries well on its way to providing that answer: ethanol, made from sugar cane.

Using ethanol to run cars has always been technically possible - most of the first cars ever produced ran on this vastly cleaner alternative to petrol.

But ethanol lost out to oil as the world's cheapest fuel during the 20th century - only to recapture the world's interest with the Brazilian 'miracle.'

'They have figured out how to make ethanol from sugar cane and be very competitive with it,' says Eric Larson, a research engineer at Princeton University's environmental institute in the US.

Brazil is the world's largest sugar cane harvester and producer of ethanol, with 16.5 billion litres in 2005. More than 90 per cent of gas stations sell ethanol alongside conventional fuel - and even the latter is a mix of one-quarter ethanol and three-quarters petrol, the world's highest percentage.

Brazil now gleans more than 40 per cent of its transportation fuel from renewable sources, enabling the South American nation to declare itself independent of foreign energy sources.

But success has not come easily. Brazil's innovation is the result of heavy government intervention since the petroleum crisis of the 1970s.

By the 1980s, almost 90 per cent of Brazilian cars ran on ethanol, but the rising success was brought crashing down by spiraling world sugar prices, and many Brazilian drivers switched to cheaper oil products during the 1990s.

Several developments fostered a comeback early in the new millennium, prompting the government to set a goal to triple its sugar cane production to 670 million tons within 10 years, Brazil's Agriculture Minister Roberto Rodrigues told Deutsche Presse-Agentur dpa.

First, flexible-fuel tanks made their debut 2003, allowing drivers for the first time to fill their tanks with whichever fuel is cheaper.

The idea caught on like wildfire, and currently more than 70 per cent of all new cars sold in Brazil have flex-fuel tanks, according to Bruno Adilha, an expert at Brazil's Unibanco.

Secondly, oil prices shot up to 70 dollars a barrel, making ethanol more attractive despite renewed upward pressure on international sugar prices.

Brazilian officials believe ethanol can remain competitive as long as oil remains above 35 dollars per barrel. Ethanol in fact sold for 40 per cent less than petrol in 2005.

'People used to say that our only chance to sell more ethanol was abroad. That has changed overnight, thanks to the huge demand for flex-fuel cars,' says Eduardo Pereira de Carvalho, president of Brazil's largest sugar and ethanol union, Unica.

Brazil has made tremendous strides in organizing efficient production, by developing mills that produce both sugar and ethanol from one location.

While government subsidies once played a major role in encouraging ethanol production, the market now determines what proportion of the crop goes into each product, economists say.

That means the decision about production is out of the hands of the growers, who can no longer pit sugar and ethanol producers against one another - unlike other countries like Thailand, where such opposing market forces tend to make ethanol more expensive.

'It is very rare to have a situation where sugar prices are too high and ethanol prices are too low,' says Leonardo Bichara Rocha, an economist from the International Sugar Organization in London, who said Thailand's problems were ones of organization and efficiency lagging behind those in Brazil.

For environmentalists, ethanol offers the prospect of a fuel up to 90 per cent cleaner than petrol - a lip-smacking figure given that one-quarter of all greenhouse gases are blamed on transportation.

While ethanol can be produced from other plants - including corn, native US switchgrass, sugar beets and tapioca - sugar cane offers the highest energy balance of any ethanol option.

About one unit of energy input is required for every eight units produced, compared with 1.5 units of ethanol from corn, which is widely used in US biofuel, and 0.8 units of traditional gasoline from crude oil.

'For countries where you can grow sugar cane well, it's clearly the best option today,' says Larson. Sugar tends to grow best in tropical climates, but other countries including India and China are catching on, and US farmers are trying to grow it at more northerly latitudes.

The prospect of producing energy from agricultural produce is also a cheery one for many poorer nations, which have struggled to build their economies on food exports alone.

That potential benefit has caught the eye of the World Bank, which is eager to promote sugar cane and ethanol mills in African and Caribbean countries, where the climate is ideal.

Brazil itself is also eager to export its technological know-how and its ethanol, but has run into problems from countries who have imposed high tariffs on sugar and ethanol imports out of fear of losing their own producers' market.

Brazil is currently battling in the World Trade Organization for new markets, including the US, to open up.

'Brazil cannot pass up this historic chance to become the world's most important provider of renewable energy,' Agriculture Minister Rodrigues said.

However, he added that the 'internationalization of the sector is indispensable' to encourage investment from home and abroad.

Rodrigues called for the building of another 73 plants and investments of 10 billion dollars to develop the Brazilian industry further.

But while Brazil has always been among the biggest exporters of sugar despite international tariffs, Paulo Morceli, an expert from Brazilian state agriculture supplier CONAB, believes there is still a huge potential in the expanding ethanol export market.

'If Brazil could make it on the world stage as a large ethanol- provider, the sky is the limit,' he says.