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 Clean burning, renewable energy promises to fuel globalization's potential to propel human development and environmental protection to every corner of the planet. Ethanol as fuel can play a growing role in delivering on this promise, and as a useful tool to reduce greenhouse gas emissions and lessen the human and environmental costs of petroleum dependency.
Brazil's own experience with ethanol demonstrates that this biofuel can be incorporated within a practical sustainable development framework that employs people, helps to clean petro-polluted urban environments, and plays an important role in making the transition toward clean renewable energy.
A chorus of mayors from all corners of the world provided a strong voice for these same goals at this year's United Nations World Environment Day meetings, held in June in San Francisco. It was more than appropriate that the meetings were held in California, the state that leads the nation in legislating strict emissions standards despite President George W. Bush's withdrawal from the Kyoto Protocol.
The World Environment Day's 2005 theme of "Green Cities" appropriately followed the enactment of the Kyoto Protocol earlier this year, and tightened the global focus on cutting greenhouse gas emissions.
Moreover, the gathering served to provide a necessary, although too often overlooked contrast to the U.S. congressional deliberations of an "over compromised" 2005 Energy bill that continues to feed petroleum and coal interests through pork barreled subsidies and protections.
In sharp contrast, mayors of some of the largest cities in the world joined together at the event, to jumpstart a "new global environmental grassroots movement focused on cities." They agreed that meeting Kyoto's targets for reducing fossil fuel emissions in the cities depends upon greater international cooperation to make the market work for "green and clean" fuel alternatives.
The search for renewable and affordable energy to fuel globalization has often been suffocated by the economic reach and political weight of petroleum and coal. Yet, today's surging gasoline prices, the mounting costs of keeping petroleum "king," and the violent political conflict surrounding the Persian Gulf oil exporting states, together cast a limelight on the renewed efforts to replace fossil fuels, making the enactment of Kyoto a new season in the drama of global warming.
Fossil fuels are far from dead, but the plot is increasingly clear. Can Brazil's tried and trusted experience with ethanol help to fuel a sustainable globalization that meets people's needs, cuts emissions and protects the environment?
The Origins of Ethanol as Fuel
Ethanol has occupied a central place in the debate over petroleum substitutes since the first OPEC oil shock in 1973. "Gasohol" as it was termed in the U.S. captured the imagination of those waiting in long lines at the pump, but failed to compete with petroleum over the long run and falling oil prices in the 1980s and 1990s.
Over the course of the last few decades, ethanol played an inconsequential role in U.S. energy policy. Rather than the incorporation of ethanol as a cleaner, renewable alternative to gasoline, successive U.S. governments chose to use ethanol policy as a lever to raise the price on a bushel of corn, the primary biomass used in U.S. production.
Brazil's experiment with ethanol was born from necessity. The country's "miracle" economy was expanding annually by 6 to 10 percent in the 1970s under authoritarian rule. The oil shocks threatened the military government's development strategy and compelled it to borrow "petrodollars" to finance continued growth and the country's dependence on oil imports.
Brazil sought energy independence to guarantee future development. In 1975, the Brazilian National Alcohol Program, Proálcool, was unveiled to take advantage of the country's sugar industry in order to commercialize ethanol as a renewable fuel.
Despite the stabilization of petroleum markets in the 1980s and 1990s, Brazil continued to produce ethanol and took measures to increase its commercialization.
The federal government guaranteed its market viability by mandating that all gasoline be blended with this renewable and relatively clean fuel. Each year the Brazilian authorities regulate the blend ratio in accord with world oil and sugar prices, reaching up to 25 percent at the pump.
In addition, the government provided attractive credits and loans to stimulate the expansion of sugarcane cultivation and processing capacity, even when market conditions did not. Brazil has now eliminated direct subsidies, but the government continues to foster the public/private partnerships required to make ethanol competitive at the pump.
These efforts paid off. According to Brazil's Minister of Economic Development and International Trade, Luiz Fernando Furlan, "an analysis of our balance of payments shows that the increasing replacement of gasoline by ethanol saved some US$ 43.5 billion between 1976 and 2000."
Brazil also created a market for ethanol fueled products by extending tax credits to the subsidiaries of multinational automakers willing to manufacture all ethanol - called E100 at the pump - fueled cars. Initial efforts to roll out the "álcool" cars had a mixed record, but the experiment led to a series of impressive and practical technological developments.
Today, Brazilian automakers are manufacturing a growing fleet of "flex fuel" vehicles capable of running on the ethanol-blended gasoline, sometimes referred to as "gasohol" or E100. U.S. automakers also produce flex fuel vehicles that run on a blend that can include as much as 85% ethanol, called E85 at the pump. Unfortunately, these vehicles are not adequately marketed to consumers, and are largely produced in order to qualify for emission reduction tax credits.
The increasing presence of these flex fuel cars in the marketplace promotes ethanol use, stimulates greater technological innovation for both the ethanol and vehicle manufacturing sectors, and allows consumers to decide at the pump: fossil fuel or renewable energy?
Three decades after Proálcool, Brazil's ethanol experience stands as a well prepared understudy to petroleum, and a marketable mechanism for reducing greenhouse gases and advancing the Green Cities vision of sustainable urban development.
Ethanol and Global Warming
Brazil's ethanol program was sparked by economic nationalism, but is best understood as a model of renewable energy production with global implications. Ethanol burns much cleaner than gasoline, without the dangerous hydrocarbon emissions associated with global warming. Gasoline and coal account for nearly three quarters of the carbon dioxide that threatens our atmosphere.
Fossil fuel emissions include sulfur and nitrogen oxides, carbon monoxide and other particulate matter that contribute to global warming through the greenhouse effect. Ethanol's use as a fuel significantly lowers levels of greenhouse gases. Its expanded use may increase levels of the toxic aldehydes and peroxyacyl nitrates. Yet, these emissions do not threaten air quality or public health to the extent that carbon dioxide does.
In Brazil, the elimination of lead and the introduction of ethanol, as both a gasoline additive and fuel, led to a dramatic fall in carbon emissions, approximately ninety percent by 1995. This experience demonstrates ethanol's potential as a pragmatic and marketable tool for achieving Kyoto's emission limits.
Further research is required to better understand and mitigate ethanol's modest environmental drawbacks, all of which pale in comparison to the extraction and use of fossil fuels. Moreover, these modest costs must be balanced against the proven, substantial benefits of lower levels of greenhouse gas emissions and higher rates of job creation than fossil fuel production.
Ethanol and Employment
The ethanol alternative waits in the wings, ready to create jobs and contribute to sustainable rural development, especially in the poorest of countries. Globalization of economic activities often eliminates employment in the countryside and marginalizes the poor from productive resources.
Ethanol's reliance on the cultivation of bio-mass, such as sugarcane in Brazil, coupled to a decentralized system of processing facilities, provides more human and sustainable development opportunities than the capital intensive and centralized production of petroleum. Moreover, many poor countries import oil, drawing precious resources away from productive, employment generating activities.
In Brazil, ethanol production creates many more jobs than fossil fuel production. For each unit of energy generated, oil creates one job, coal production employs four, and ethanol 152. In terms of investment required for job creation the numbers are equally impressive.
The petrochemical industry spends US$ 220,000 for each job created, while ethanol producers create one for each US$ 15,000 spent. Minister Furlan reports: "there are currently one million jobs directly related to ethanol production, and in the next five years we expect the number to grow by 204,000."
Brazil's recent insertion into the global economy has significantly increased unemployment throughout the nation. Increasing ethanol production promises to partially alleviate this disappointing outcome of neoliberal economic reform.
In the U.S., ethanol production is now responsible for creating more employment in rural areas than any other economic activity. The lower entry costs of sugarcane and other bio-mass cultivation, when compared to fossil fuel or nuclear energy, can create additional opportunities for family farmers and rural workers around the world.
Moreover, governments and multilateral organizations can sponsor the public/private partnerships needed to attract investment and transfer technology to poor countries willing to move forward with ethanol.
Ethanol can play a supporting role in fueling local and national development in many poor countries. Biomass cultivation and local ethanol production can generate employment and decrease expenditures for oil imports.
These conditions are essential for increasing wages and improving working conditions while freeing up resources for deeper investments in health, education, and productive infrastructure.
Ethanol is only part of the solution for job creation, rural development, and urban air quality in the poor countries of Africa, Asia and Latin America, but continued dependence on foreign oil only serves to prolong the poverty and developmental bottlenecks.
Ethanol's Energy Balance
To cut emissions, create jobs and beat petroleum at the pump, ethanol must achieve a positive and profitable "energy balance." This goal requires the elimination of fossil fuel use in production, increasing energy cogeneration, and continued efforts to reduce costs and lower prices relative to oil.
Brazil has already done much of the homework. Sugarcane growers, ethanol refineries, producer associations, government authorities and researchers teamed up to develop the technology needed to promote higher sugarcane yields and sugar content, more efficient juice extraction methods, and cogeneration of electricity during the production process.
A steady flow of investments now permit refineries to produce more ethanol per hectare of sugarcane and generate electricity from the steam created from the burning of the waste (bagasse). This sustainable cycle of cogeneration is capable of fueling the production process without reliance on fossil fuels.
Brazilian industry has also taken additional measures to achieve a positive and sustainable energy balance. Organic fertilizers, including the by-products of sugarcane processing, vinasse and filter cake, are increasingly used to replace petrochemical based products.
Moreover, genetic engineering has reduced the need for dangerous pesticides while the introduction of green cane harvesting has reduced carbon emissions from the burning of fields before harvest. These innovations demonstrate that ethanol can be produced through low cost, and increasingly sustainable techniques.
Brazil is also taking additional measures to make ethanol cheap for consumers. Sillas Olivo Filho, Petrobras' Manager of Commercial Ethanol Sales, predicts ten percent annual growth in production to meet the escalating domestic and foreign demand.
Aside from delivering blended gasoline and pure ethanol fuel to growing numbers of domestic consumers, Brazil is the largest exporter of ethanol. In 2004 the country exported to India, the U.S., South Korea, Japan and members of the European Union among others. The country's exports could increase substantially if more countries turn to ethanol to reduce energy costs and improve air quality.
The Brazilian government is preparing for ethanol's global role. According to Minister Furlan, "we are also expanding the cultivation of sugarcane to meet the increasing domestic and foreign demand for ethanol.
We project that by 2013 we will need to increase cultivation by 3 million hectares from the 5.7 million currently used for sugarcane. Brazil does have the potential for increasing sugarcane cultivation since their remains vast tracts, up to 90 million hectares, of unused agricultural lands."
Petrobras, Brazilian government authorities and private stakeholders are increasing their investments in production, pipelines, railways and port facilities to meet the rising demand and further reduce production and logistical costs.
Minister Furlan notes, "the logistical infrastructure for the export of ethanol serves up to 2.5 billion liters a year. With the recent negotiation of additional export contracts, Petrobras will make additional investments to expand the logistical capacity to serve up to 9 billion liters and construct fuel pipelines to add another 3 billion liter export capacity. By 2010 Brazil will have an export capacity of 12 billion liters a year."
These efforts promise to lower the costs to domestic consumers and importers in order to make the energy balance meaningful to consumers at the pump. According to Sillas Olivo Filho of Petrobras, "additional infrastructure and international standards are needed to further reduce costs and make the price right for international markets as petroleum based fuels did in the past."
Brazil's sugarcane ethanol has overcome the energy balance challenge and demonstrated increasing market viability. The challenge now is harnessing this experience to make a global ethanol market that can compete with petroleum.
Going Global with Ethanol
Brazil's ethanol experience plays well to the hometown audience, but to take the show on the road requires multilateral cooperation and a partnership with the second largest producer of ethanol, the United States. Since the 1970s, the U.S. industry has depended upon corn for production and politics for profits.
The only production related advantage is corn's ability to be stored and used between harvests. Corn is more expensive than sugarcane and other promising biomass alternatives, and provides less ethanol production per hectare. U.S. corn cultivation requires greater amounts of petrochemical fertilizers and toxic pesticides than Brazil's sugarcane fields.
Corn processing, for sweetener or ethanol, requires additional fossil fuel. Without the capacity for cogeneration, corn based ethanol's energy balance lags far behind Brazil's sugarcane based ethanol. Corn based ethanol producers only generate 2 units of energy for each unit required in production.
Brazil's industry generates at least 3.7, and possibly up to 10.2 units. After three decades, ethanol production in the U.S. remains locked to efforts to increase the price of corn, rather than improve air quality and lower dependence on oil.
The developing U.S. ethanol industry is held "captive" to the political interests of domestic corn and sugar producers. For decades, U.S. ethanol producers have received tax credits for each gallon. This ensured that corn producers had a secondary market to dump surplus and increase aggregate prices for corn, from 25 to 50 cents a bushel.
Legislation in 2004, the American Jobs Creation Act, instituted the Volumetric Ethanol Excise Tax Credit (VEETC), which continues to offer domestic gasoline refiners a 51-cent kickback on every gallon of ethanol used. The 2005 Energy bill incorporates this subsidy within a larger mandate, requiring gasoline refiners to nearly double their use of renewable energy additives (read ethanol) in the coming years.
These policies do promote greater ethanol use, but only to the limits of current or forecasted corn based production. They fall short of moving the country toward higher blend ratios that could guarantee lower greenhouse gas emissions.
In addition, domestic producers are protected from imports, largely Brazilian. The U.S. adds on a 54 cent per gallon secondary duty to the normal tariff to shield domestic producers from competitive imports based on cheaper biomass and more efficient technology.
According to Taxpayers for Common Sense, "between the ethanol mandate, the 51-cent per gallon tax incentive, and the huge host of handouts and tax breaks for producers, the ethanol industry is riding high.
Ethanol producers don't need to compete with gasoline to take in huge profits; they can still haul home truckloads of cash so long as Congress remains their sugar daddy. But while corporate agriculture is getting drunk off of ethanol subsidies, taxpayers are getting stuck with a nasty hangover."
In fact, the largest ethanol producer, Archer Daniels Midland (ADM), controls handsome global market shares in corn and other feed grains. ADM and their partners have carefully steered the U.S. Congress toward a policy that increases the value of corn, but effectively increases the price of ethanol. Such a policy does little to achieve energy security in renewable fuels or lower emission levels.
U.S. energy and ethanol policies effectively curb the production of biomass alternatives to supply ethanol refineries. The generous subsidies doled out to corn fed ethanol producers and gasoline refineries diminish interest in cheaper forms of biomass and more efficient technology.
Most of the ethanol production facilities are owned by corn producers to increase the price of their harvest, with little interest in making the investments necessary to improve the energy balance, lower costs and make their product work for consumers at the pump.
Gasoline refineries, even those that market "cleaner" gasoline like British Petroleum, are very resistant to increasing the blend of ethanol to cheapen gasoline, improve air quality or make E85 widely available. Moreover, the most promising biomass alternative, sugarcane from Hawaii, Louisiana and Florida, already enjoy generous subsidies and protection that bring in exorbitant rents from higher than world market prices.
The 2005 Energy Bill does provide a six million dollar budget to promote sugarcane based ethanol, but this pales in comparison to Subtitle E, Section 951 which authorizes $1.82 billion dollars over three years for fossil fuel based research and commercial applications. Decades of protection and subsidies for U.S. ethanol production have actually worked to undermine the market viability of this important tool for sustainable development on a global level.
There is a growing demand for ethanol in the U.S. An increasing number of states, including California, have banned the very toxic gasoline oxygenate MTBE leaving refineries to choose ethanol to meet federal emission standards under the Clean Air Act. Hawaii and Minnesota now require ethanol to be blended in all gasoline, with many more states considering such a mandate.
Also, Minnesota, the third largest producer of ethanol in the country, has legislated a graduated increase of the blend ratio to eventually reach twenty percent by 2013. The U.S. Governors Ethanol Coalition recommends that ethanol make up at least ten percent of the nation's fuel use, and that the federal government provide the funds necessary to develop large scale production with cheaper, more widely available biomass.
The Renewable Fuels Association (RFA), the major representative of the U.S. ethanol industry, has also advocated for increases in the use of ethanol. Yet, the RFA is reluctant to advocate a partnership with Brazil, preferring to seek shelter for producer-members that process ethanol merely as an instrument to add value to the corn harvest.
Senate Finance Committee chairperson, Charles Grassely, represents the largest ethanol producing state, Iowa. As the voice of corn fed ethanol and one of the most important trade policymakers, Senator Grassely regularly submits legislation to curb the cheaper Brazilian imports. Ever vigilant, the RFA and Senator Grassely have narrowly focused on Brazil as a threat to the domestic market, rather than a co-star in a global cast of ethanol producers and consumers.
The U.S. and Brazil, due to their productive capacity, automobile industries, growing consumption, and history of compromise and cooperation in matters related to air quality are best prepared to partner up in developing the technology, standards and infrastructure necessary to give structure to the global ethanol marketplace.
Matt Peak, Clean Transportation Policy Analyst for CALSTART, suggests that U.S. policymakers should encourage "price competitiveness," to make ethanol a "tremendous boon to the country's economy, job base, foreign policy and level of greenhouse gas emissions."
A partnership between the U.S. and Brazil promises to accelerate advances in sustainable and low cost production, expand commercialization, and set standards for the manufacture of flex fuel vehicles around the world. Replacing MTBE with ethanol is a good first act, but the plot can only thicken if ethanol is produced to compete with petroleum.
Together, the U.S. and Brazil are capable of meeting the imposing obstacles. According to Brazilian Minister Furlan, "the growing need to make political and strategic decisions over ethanol, and its impact upon the national energy security of many nations, are important obstacles to be overcome in the coming years."
Yet, without strategic cooperation between the heavyweights of ethanol, policymakers and investors around the globe will think twice before regulating higher ethanol blends and promoting flex fuel vehicle markets.
The world is waiting. Canada, China, India, Japan and Russia are considering higher ethanol blends to cut energy costs and meet the challenges of Kyoto. The European Union is actively searching to find the best ways to develop and commercialize ethanol and biodiesel. Most automakers oppose emission standards, but are now capable of delivering E85 or E100 flex fuel vehicles with few additional costs.
An emerging, environmentally conscious and "Green Cities" based global movement is searching for sustainable, and often market friendly, solutions to global warming. Critics are right to identify the environmental drawbacks of ethanol, but even the most severe recognize that it can be "important in regions or cities with critical pollution problems." Strategic cooperation can make ethanol a partial, pragmatic solution to the many problems related to energy security, climate control and rural development throughout the world.
The U.S. government supports increasing ethanol production and reduction of greenhouse gases, but from a unilateral and protectionist framework that undermines the nation's potential leadership role. The next act is fast approaching, with both the Bush administration and U.S. Congress taking a back seat to efforts to bury fossil fuel once and for all.
It may well play out that California, host of World Environment Day 2005 and home to a mammoth fleet of passenger and commercial vehicles, has the last say, given its strict emissions standards and escalating need for ethanol. Should California policymakers opt to follow in the policy steps of Minnesota and Hawaii, the story of ethanol will no doubt sweeten.
If California and its booming clean vehicle industry choose a leading role, then the U.S. and Brazil may well find their way to the center-stage of this drama, helping to fuel sustainable global development for decades to come.
Mark S. Langevin, Ph.D., is Assistant Professor of Political Science at Chapman University College in Santa Maria, California. He is also National Organizer for the Brazil Strategy Network, a U.S.-based group of forty academics, activists, trade union leaders and representatives from non-government organizations dedicated to Brazil-related issues. The group was formed in October of 2002 in Washington, D.C., following the election of Luiz Inácio Lula da Silva as President of Brazil.
At Chapman, he sits on the university's "Critical Friends" board of the Paulo Freire Democratic Project. He has lived and worked in Brazil, conducted research on United States-Brazil Economic Relations, and is an appointee to the California State Senate - California/Brazil Partnership's Strategic Action Team. His e-mail address is: langevin@chapman.edu.
This article was originally published in InfoBrazil - www.infobrazil.com.
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