Brazil has built a respectable renewable energy policy over the past 35 years. Spooked by the oil crises of the early 1970s, Brazil’s government promoted ethanol from sugarcane as fuel. Flex-fuel vehicles that run on gasoline or ethanol caught on, and now account for over 90% of Brazil’s automobile sales. Since 1976, pure gasoline has no longer been sold in Brazil; a mix of anywhere from 10% to 25% of cane-based ethanol must be blended with gasoline before going from the pump to the gas tank. And a huge deal announced yesterday will further extend the reach of Brazilian ethanol.
Yesterday energy giant Shell and Cosan SA of Brazil signed binding agreements to form a US$12 billion joint venture for the production and sale of ethanol and electricity from sugar cane. Shell will contribute almost US$2 billion to the effort and over 2700 service stations to the transaction; Cosan will line up 23 sugar mills, power plants that turn sugarcane waste into energy, and 1700 of its service stations behind the JV. The companies are betting that strong cooperation in Brazil will lead to increased ethanol sales abroad.
Brazil’s energy policy is one cog in the machine that has turned Brazil into an economic darling over the past decade. The country of over 190 million has been relatively energy independent, it became a creditor nation for the first time last year; and has tamed inflation while maintaining a respectable growth rate. Poverty is still a problem, but programs like President Luiz Lula da Silva’s Bolsa Familia has improved more families’ quality of life. Visit maddening Sao Paulo, playful Rio de Janeiro, or drum-thumping Salvador, and Brazil’s ethanol program is a source of pride for its people.
Sugarcane ethanol is far more efficient than ethanol from corn and other biofuels, but has its own issues. It has a favorable energy balance: for every one of unit put into ethanol production 8 to 10 units of energy are produced as a result. Many global organizations including the UN and Oxfam have compared sugarcane-sourced fuels favorably over others, and stated that sugarcane ethanol is the best alternative when it comes to food security. Some experts have their doubts: while cane is not grown in the rain forest, it is grown in the cerrado, a savannah-like region that is buffer between the Amazon and the coast. Many native plants, some of which are rare and even valuable for pharmaceutical purposes, are threatened—they are often razed and replaced with lucrative crops like cane, grains, and cotton.
So Brazil’s energy mix is not perfect, but when considering the Canadian tar sands, Gulf oil spills, and the biofuel-versus-food debate, it is one of the more enviable energy policies. It certainly is lucrative as well. Should the Shell-Cosan venture succeed, watch for similar deals on the horizon, especially when we hit the next spike in petroleum prices. Is there a chance that we may see supertankers pull into American ports . . . with Brazilian cane ethanol?