Ethanol Fuel in Brazil

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Fuel in
          Kevin Ung
 What is Ethanol?
 Ethanol in Brazil
 History
 Prices and Effects
 Comparison with US
 Social Implications
 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
        for gasoline.

       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
        hydrous ethanol.

       The government made it mandatory the blend of ethanol fuel
        with gasoline. Pure gasoline was no longer sold.
    3 Important initial drivers for the
    ethanol industry
    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
        gasoline fuel.
    Flexible-Fuel Vehicles

       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.

       Diesel engines

       Motorcycles
    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
        without subsidies.

       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
    Social Implications

       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
        cane workers.
    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.
    The End

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