What is Ethanol?
Ethanol in Brazil
Prices and Effects
Comparison with US
Food vs. Fuel
What is Ethanol Fuel?
Ethanol is an alcohol found in alcoholic beverages.
It is most often used as motor fuel mainly as biofuel additive
Ethanol, unlike petroleum, is claimed to be a form of
renewable energy that can be produced from agricultural
crops such as sugar cane, potato, and corn.
Ethanol is widely used in Brazil and in the US and together
both countries are responsible for 89 percent of the world’s
ethanol fuel production in 2009.
Annual Fuel Ethanol Production
Top 10 countries (Millions of U.S. gallons per year)
World Country 2009 2008 2007
1 United States 10,750.00 9,000.00 6,498.60
2 Brazil 7,264.73 7,053.39 5,943.87
3 European Union 1,069.52 733.60 570.30
4 China 541.55 501.90 486.00
5 Thailand 435.20 89.80 79.20
6 Canada 290.59 237.70 211.30
7 India 91.67 66.00 52.80
8 Colombia 83.21 79.30 74.90
9 Australia 56.80 26.40 26.40
10 Other 247.27
World Total 20,221.83 17,916.48 14,036.37
Ethanol in Brazil
Largest and most successful bio-fuel programs in the world,
involving production of ethanol fuel from sugarcane,
considered to have the world’s first sustainable biofuel
Sugar cane plantations cover 3.6 million hectares of land with
productivity of 7,500 liters of ethanol per hectare, compared
with U.S. 3,000 liters
History of Ethanol Fuel in Brazil
Dates back from the 1970’s and relates to Brazil’s sugarcane
based ethanol fuel program, which allowed the country to
become the world’s 2nd largest producer of ethanol.
Sugarcane has been cultivated in Brazil since 1532 and was
one of the first commodities exported.
Ethanol is obtained as a by-product of sugar mills producing
sugar and can be processed to produce alcoholic beverages,
ethanol fuel or alcohol for industrial uses.
Sugarcane ethanol as fuel in Brazil dates back late 1920’s and
early 1930’s with the introduction of the automobile.
1973 Oil Crisis
Resulted in gasoline shortages and awareness on the dangers
of oil dependence
Brazilian government began promoting bioethanol as a fuel.
Phase out Gasoline. Blending gasoline with ethanol.
The decision to produce ethanol from sugarcane was based
on the low cost of sugar at the time, the existing idle capacity
for distillery at the sugar plants, and the country’s ample
tradition and experience with this feedstock.
Brazilian carmakers modified gasoline engines to support
The government made it mandatory the blend of ethanol fuel
with gasoline. Pure gasoline was no longer sold.
3 Important initial drivers for the
1. Guaranteed purchases by the state-owned oil company,
2. Low-interest loans for agro-industrial ethanol firms
3. Fixed gasoline and ethanol prices where hydrous ethanol
sold for 59% of the government-set gasoline price at the
These incentives made ethanol production competitive
Ethanol Production and Sale Fall
Gasoline prices fell sharply as a result of lower gasoline
prices, but mainly because of a shortage of ethanol fuel
supply in the local market.
Supply could not keep pace with the increasing demand
required by the now significant ethanol-only cars, the
government began importing ethanol in 1991.
Consumers lost confidence on the reliability of ethanol fuel
supply. Began selling or converting their cars back to
Confidence on ethanol-powered vehicles was restored only
with the introduction in the Brazilian market of flexible-fuel
vehicles in 2003. Commercial success.
Key innovation in the Brazilian flex technology was avoiding
the need for an additional dedicated sensor to monitor
ethanol-gasoline mix which lowered the cost.
Flex vehicles together with mandatory blend of 25% ethanol
with 75% gasoline have increased ethanol consumption.
Prices and Effect on Oil
Due to the lower energy content of ethanol fuel, full flex-fuel
vehicles get fewer miles per gallon.
Ethanol price has to be between 25-30% cheaper per gallon
to reach the break even point.
Since 2005, ethanol prices have been very competitive
Brazilian gasoline taxes are high around 54% while ethanol
fuel taxes are lower and vary between 12% to 30%. This
differential taxation favors ethanol fuel consumption.
Comparison with the United States
Brazil’s sugar cane-based industry is more efficient than the
U.S. corn-based industry. Sugar cane ethanol has an energy
balance seven times greater than ethanol produced from
Brazil is able to produce ethanol for 22 cents per liter while
US is 30 cents per liter.
Sugarcane is one of the most efficient photo synthesizers in
the plant kingdom, able to convert up to 2% of incident solar
energy into biomass.
Ethanol fueling stations in the country of Brazil is 100% while
US is only 1%.
Ethanol Productivity in Brazil
Sugarcane has had an important social contribution to some
of the poorest people in Brazil by providing income usually
above the minimum wage and a formal job with fringe
Ethanol production sector maintains more than 600 schools,
200 nursery centers and 300 day care units.
Legislation requires 1% of the net sugar cane price and 2% of
the net ethanol price must be devoted to medical, dental,
pharmaceutical, sanity, and educational services for sugar
Effect on food prices
Some environmentalists have expressed fears that the market
place will convert crops to fuel for the rich, while the poor
starve and biofuel cause environmental problems.
Food vs. Fuel debate reached global scale in 2008 as a result
of the international community’s concerns regarding the
steep increase in food prices.
Many worry about filling their gas tanks but many others
around the world are struggling to fill their stomachs.