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Ethanol: Brazil Celebrates, United States Debates

By Carlos Macias

A São Paulo summit brought together heavyweights to talk about Brazil’s ethanol industry as well as related environmental concerns. Meanwhile, Colombia sees its own ethanol presence grow while the United States remains caught up in debate, tariffs, and subsidies.

São Paulo hosted the 2009 Ethanol Summit from June 1 to 3, featuring heavyweights such as President Luiz Inácio Lula Da Silva’s Chief of Staff Dilma Roussef, Petrobras CEO Jose Gabrielli, and environmental activist and former U.S. President Bill Clinton. Speakers discussed new cellulose-based ethanol plants, forecasts of increasing ethanol usage in Brazil, and concerns about deforestation. Meanwhile, Colombia has become South America’s second biggest ethanol player and seeks to build its industry. In the United States, the discussion surrounding biofuels continues to focus on subsidies given to U.S. corn growers, corn-based ethanol’s impact on food prices, and tariffs imposed on Brazilian sugarcane-based ethanol.

At the summit, Roussef announced Brazil’s moves toward producing for commercial use cellulose-based (also known as second-generation) ethanol made mainly from woodchips and switchgrass. She also said Brazil hopes to start selling ethanol in that form domestically by the year 2012. Second-generation ethanol should capture almost 30 percent of the Brazilian market by 2020, according to the president of a private firm who spoke at the summit. Gabrielli trumpeted the fact that Petrobras will invest $2.8 billions in biofuels for the next four years and expects that ethanol will represent 75 percent of the Brazilian car* fuel market by 2020. But with such massive growth, questions surfaced about the dangers of deforestation. Clinton urged Brazil to take decisive steps to protect the rainforest, reduce its carbon footprint, and share its technology with potential ethanol producers like the Dominican Republic and Haiti. In December, Brazilian Environmental Minister Carlos Minc unveiled an ambitious plan to curb deforestation rates by 72 percent by 2017.

Colombia is also pinning hopes on increasing its stake in the ethanol market, given its position as the second largest producer in Latin America. Colombian Agriculture Minister Andrés Fernández said last month that, with six new projects dedicated to ethanol coming online this year, the country’s production capacity should increase twofold. He also said Colombia plans for a fifth of the cars made or imported to have engines using fuel made up 85 percent ethanol blend by 2012. Still, the increases use of ethanol elevates fears that prices on food containing sugar will rise, as they did happened last year in the United States with corn-related products, El Espectador reports.

In the United States, where corn-based ethanol dominates the industry, the debate continues. The Wall Street Journal reports on two federal studies that found corn-based ethanol carries a high price tag for consumers and questionable environmental advantages. In an article for BusinessWeek, automobile journalist Ed Wallace suggests “we must immediately drop the 51 cents per gallon blending credit for ethanol creation in America and drop the 54 cents per gallon tariff on imported Brazilian ethanol.” Lula and U.S. President Barack Obama discussed the 54-cent tariff imposed to Brazilian sugarcane-based ethanol by Washington during his March 14 visit to the White House without any effect. Obama said then that the measure “it is not going to change overnight” but hinted that “over time this source of tension can get resolved.”

On May12, AS/COA’s Energy Action Group hosted a panel discussion on energy security and climate change in the hemisphere.

Editor's note: This article originally stated that Petrobras' CEO said ethanol would take over 75 percent of the Brazilian market by 2020. He was referring specifically to the domestic fuel market for cars, a detail that was omitted.

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