Joseph Goldemberg - Specialized Research AI at MIT

José Goldemberg

The Brazilian Experience with Biofuels

Innovations Case Narrative

From a technical perspective, there is nothing new in the renewed interest in using
biofuels in the internal combustion engines on our roads. In the late 1800s, Henry
Ford used ethanol to drive automobiles and Rudolf Diesel used biodiesel from
peanuts to drive trucks. But these fuels were replaced in the early 1900s by gasoline
and diesel oil distilled from petroleum; they became cheap and seemingly inex-
haustible in the United States and a few other countries with easy access to oil.
Meanwhile biofuels, particularly ethanol (also an alcoholic beverage), were expen-
sive and produced in minor amounts compared to the huge quantities needed for
large vehicle fleets.

Oil-poor countries, including Brazil, had a different experience. Since 1920,
Brazilians have conducted technical studies on ethanol-run vehicles, including rac-
ing cars; because ethanol works so well as a fuel it makes a good alternative to
imported gasoline. In 1931, a Brazilian law required that all gasoline include 5 per-
cent bioethanol from sugarcane and the government regulated prices to make it
possible. Over the years the blend remained almost constant and was slowly raised
to 7.5 percent. Such blends did not require changes in the engines. In the early
1970s, Brazil imported all of its gasoline and petroleum from abroad, at an annu-
al cost of U.S. $600 million. In 1973, with the first oil shock, imports rose to more than $4 billion annually, contributing greatly to the deficit in hard currency and
badly damaging the economy.1

Professor José Goldemberg earned his Ph.D. in Physical Sciences from the University
de São Paulo in 1954, where he became a full professor and served as rector from 1986
to 1990. A member of the Brazilian Academy of Sciences, he has served as the presi-
dent of the Brazilian Association for the Advancement of Science, as Brazil’s Secretary
of State for Science and Technology, and as Minister of State for Education. He has
conducted research and taught at the University of Illinois, Stanford University of
Paris (Orsay), and Princeton University. From 1998 to 2000, he chaired the World
Energy Assessment for the U.N. Development Program. Between 2002 and 2006, he
was Secretary for the Environment of the State of São Paulo. He has authored many
technical papers and books on nuclear physics, sustainable development, and energy,
and is the 2008 recipient of the Blue Planet Prize.

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José Goldemberg

Earlier

Given this situation, the representatives of the sugar producers proposed ways
to reduce Brazil’s dependence on imported oil by increasing the amount of ethanol
in gasoline. This move also made use of the idle capacity in sugar refineries, which
can easily be converted to produce ethanol, and today most can produce both
sugar and ethanol. In November of 1975, as a result of those proposals, the feder-
al government established the National Alcohol Program (PROALCOOL) by
decree, and set production
goals of three billion liters
of ethanol by 1980 and 10.7
billion liters in 1985.
that

year,
President Ernesto Geisel
had visited the Air Force
Technological Center in São
São
José dos Campos,
Paulo,
very
and was
impressed by the work
being done there by engi-
led by Urbano
neers,
Ernesto
on
ethanol-fueled cars using
hydrated ethanol (95.5%
pure ethanol and 4.5%
water). Important changes
in the engine were needed
to use that fuel, which
required a compression
ratio of 12:1, compared to
8:1 for regular gasoline. The
higher compression ratio
meant higher efficiency, which partly compensates for ethanol’s lower energy con-
tent. Combining all these factors, 199 liters of pure (anhydrous) ethanol can
replace one barrel of gasoline (159 liters).

Stumpf,

This change to engines meant a drastic change in auto manufacture, but under
government pressure, local carmakers adapted. Meanwhile, sugar producers wel-
comed these changes, which let them divert more sugarcane to ethanol produc-
tion, and better face oscillations in sugar prices on the international market. Also
enthusiastic were nationalistic elements in the government, who saw ethanol as an
instrument of national independence—although Brazilian auto manufacturers
could no longer export their cars. It was also a problem to drive Brazilian cars in
neighboring countries (and even some states in Brazil) that did not have service
stations selling hydrated ethanol. The production of these cars began in earnest at
the end of the decade; between 1979 and 1985, they accounted for 85 percent of all

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The Brazilian Experience with Biofuels

Figure 1. Evolution of Ethanol Production in Brazil.

Source: UNICA (Sugarcane Industry Association) statistical database.

http://english.unica.com.br/dadosCotacao/estatistica/.

new car sales.2 Over the same period, the percentage of ethanol in gasoline reached
approximately 20 percent.

Once ethanol was added to gasoline, MTBE (methyl tert-butyl ether) was elim-
inated as an additive: ethanol has a higher octane number than gasoline and per-
forms the same role as MTBE. Soon, two fleets of automobiles were circulating in
the country, with some running on gasoline, using a blend of up to 20 percent
anhydrous ethanol and 80 percent gasoline, and others running entirely on hydrat-
ed ethanol. These goals were achieved through mandatory regulations and subsi-
dies: Brazil was under an authoritarian government from 1964 to 1985.

In 1985, the scenario changed dramatically, as petroleum prices fell and sugar
prices recovered on the international market. Subsidies were reduced and ethanol
production could not keep up with demand. By 1990, sales of cars running on pure
ethanol dropped to 11.4 percent of the total and continued to drop.3 The produc-
tion of ethanol leveled, off but the total amount being used remained more or less
consistent because the blend was increased to 25 percent and more cars were using
the blend (see Figure 1).

Then, after 2003, ethanol consumption rose again, as flexible-fuel engines were
introduced in the cars produced in Brazil. These cars are built to use pure ethanol
with a high compression ratio (approximately 12:1) but can run with any propor-

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José Goldemberg

Figure 2. Economic Competitiveness of Ethanol Fuel Compared to Gasoline.

tion of ethanol and gasoline, from zero to 100 percent, as they have sensors that
can detect the proportion and adjust the ignition electronically. Flex-fuel cars were
an immediate hit; today they represent more than 95 percent of all new cars sold
because they allow drivers to choose the cheapest blend on any given day.

Today Brazilians are driving about 24 million automobiles. Most of the pure-
ethanol cars on the road—2.8 million in 2000—have been retired. Already seven
million flex-fuel cars are on the road and their numbers are increasing rapidly.4
Ethanol to supply these cars is produced in 414 distilleries, of which 60 percent are
equipped to produce both sugar and ethanol.5 In 2007, production reached 22 bil-
lion liters. For 2008 the estimated production was 26.1 billion liters; assuming that
the recent growth of 8 percent per year continues, it should reach 30.5 billion liters
in 2010, using an area of approximately four million hectares of sugarcane. In
2008-2009, 35 new distilleries were to start production, and another 43 are in var-
ious degrees of development. In 2015, production should reach 47 billion liters and
the land required approximately six million hectares.6 As Figure 2 shows, the cost
of ethanol production in Brazil has dropped significantly over the years.7

In 1980, ethanol cost roughly three times as much as gasoline on the interna-
tional market, but by 2004 technological gains and economies of scale had made it
competitive with gasoline. Productivity has increased almost 4 percent per year for
the last 30 years. The number of liters of ethanol produced per hectare of sugar-
cane harvested increased from 3,000 liters/ha to more than 6,000 liters/ha, and
today ethanol is fully competitive with gasoline without any subsidies.8

What drove this extraordinary expansion of ethanol production from sugar-
cane? Economic and strategic factors were crucial in reducing Brazil’s dependence
on petroleum, but environmental issues are also key. Ethanol does not have the
impurities that gasoline does, such as sulfur oxides and particulates, which are the

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The Brazilian Experience with Biofuels

Figure 3. Location of Sugarcane plantations and Distilleries in Brazil.

Source: C. Macedo, 2005. Sugarcane’s Energy: Twelve Studies on Brazilian
Sugarcane. São Paulo: Berlendis & Vertecchia.

primary cause of poor air quality in large cities like Beijing, Mexico City, São Paulo
and even Los Angeles. In São Paulo the air quality has improved remarkably as
gasoline was replaced by ethanol; today it represents more than 50 percent of the
fuel used in cars.

In addition, over its life cycle, ethanol from sugarcane produces considerably
lower amounts of CO2 , the main contributor to global climate change, than gaso-
line. This is because sugarcane bagasse, the fibrous waste that remains after the
plant is crushed, can provide the heat and electricity needed in ethanol produc-
tion, including the crushing and distillation processes.9

The calculations mentioned above do not include emissions from changes in
land use, including massive deforestation, which could cause increased emissions
of greenhouse gases (GHG), as Fargione et al. demonstrated.10 However, they
looked at a worst-case scenario that is not currently occurring, since biofuel pro-
duction is not expanding into virgin tropical forests. If that did happen, of course,
it would release a large amount of CO2, but extensive studies have been conducted
on the CO2 releases resulting from other agricultural practices that do not involve
deforestation, and the results are much less alarming.11

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José Goldemberg

The whole issue of CO2 emissions from changes in land use, as raised by
Searchinger et al,12 is not really a matter of food versus fuel, but should more
appropriately be called a problem of food versus climate, since it applies to the
expansion of agricultural areas in general. In addition, in Brazil, sugarcane planta-
tions are being expanded into degraded pasturelands and are not displacing other
crops. They are also very far from the wet tropical Amazonia forest where sugar-
cane does not grow well, as Figure 3 shows.

In 2001, in the state of São Paulo, the average number of cattle per hectare was
1.28; as of 2008 it had increased to 1.56, because the expanding sugarcane planta-
tions put pressure on cattle grazing. In the country as a whole the density is even
lower, at closer to one animal per hectare.13 The deforestation in the Amazon basin
is linked closely with the raising of cattle for meat, for both domestic consumption
and export; it is not linked with ethanol production. Today, Brazil has approxi-
mately 200 million head of cattle on 237 million hectares.14

The expansion of ethanol production has had important repercussions for the
ownership and management of the sector, which in Brazil is entirely in the hands
of private groups. Although Petrobras, the state-owned Brazilian oil company, is
beginning to invest in this area, it is still a very small player.15 Traditionally, sugar-
producing units were family-owned enterprises such as Costa Pinho, São
Martinho, and Santa Elisa, but new ones are owned by Brazilian companies includ-
ing Votorantim, Vale, and Odebrecht. Foreign companies entering the sugarcane
business include French (Tereos, Louis Dreyfus), Spanish (Abengoa), British
(British Petroleum), and Japanese (Mitsui, Marubeni) groups. The financial sector
is also quite visible, including Merrill Lynch, Soros, and Goldman Sachs. The pres-
ence of foreign investors has given the sector a new dynamism and new concepts
of management, but as of 2007, investments by foreigners were only 12 percent of
the total.16

THE SUSTAINABILITY OF ETHANOL PRODUCTION FROM SUGARCANE

One crucial question surrounding the growth of ethanol production from sugar-
cane in Brazil is the sustainability of that growth. What are the issues regarding soil
quality, water consumption, and agrochemical inputs, as well as the social impacts?
Goldemberg et al explored these issues exhaustively in a recent article,17 summa-
rized here.

Soil Quality

Sugarcane culture has become more sustainable over the years as practices have
been introduced to protect against erosion, soil compaction, and moisture loss,
and to insure the appropriate use of fertilizers. In Brazil, some soils have been pro-
ducing sugarcane for more than 200 years, with no reduction in yield. Sugarcane
culture in Brazil is well known for its relatively small loss of soil to erosion, espe-
cially when compared to soybeans and corn.18

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The Brazilian Experience with Biofuels

Definitions of First- and Second-generation Biofuels

First-generation biofuels
First-generation biofuels are those on the market in considerable quantities
today. Typical first-generation biofuels are sugarcane ethanol, starch-based or
“corn” ethanol, biodiesel, and pure plant oil (PPO). The feedstock for produc-
ing first-generation biofuels may be crops that produce sugars, starches, or oils,
or animal fats, most of which can also be used as food and feed; food residues
can also be used. A first-generation biofuel can be blended with petroleum-
based fuels, combusted in existing internal combustion engines, and/or distrib-
uted through existing infrastructure, or it can be used in existing alternative
vehicle technology like flexible-fuel vehicles (FFVs) or natural gas vehicles. First-
generation biofuels are produced commercially today; almost 50 billion liters
annually. There are also other niche biofuels, such as biogas, which are derived
through the anaerobic treatment of manure and other biomass materials.
However, the relatively small volumes of biogas are currently used for trans-
portation.

Second-generation biofuels
Second-generation biofuels are those biofuels produced from cellulose, hemicel-
lulose, or lignin. These biofuels can also be blended with petroleum-based fuels,
combusted in existing internal combustion engines, and distributed through
existing infrastructure; they may also be dedicated for use in slightly adapted
vehicles with internal combustion engines, e.g., vehicles for di-Methyl Ether
(DME). Examples of second-generation biofuels are cellulosic ethanol and
Fischer-Tropsch fuels; the latter technology synthesizes fuel from gases produced
from the gasification of fossil fuels or biomass.

Source: IEA Bioenergy Task 39.
http://www.task39.org/About/Definitions/tabid/1761/languange/en_US/Defaul
t.aspx.

Water

Water is used in two ways in producing sugarcane and ethanol. First, great quanti-
ties of water are needed to grow the cane. The cane requires significant rainfall, in
the range of 1,500 to 2,500 mm a year, ideally spread uniformly across the growing
cycle.19 Most sugarcane production in Brazil relies on rain, rather than irrigation,
including nearly the entire São Paulo sugarcane-producing region.

Large amounts of water are also used to convert sugarcane to ethanol. In 1997,
this amount was calculated as 21 cubic meters per ton of cane. Of that, 87 percent
was used in four processes: sugarcane washing and three other industrial process-
es of ethanol production. However, most of the water used is recycled, and water

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José Goldemberg

consumption has decreased substantially in recent years. Also, a dry process for
washing cane is replacing the standard wet-washing process.20 In addition, sugar-
cane is 70 percent water, which should provide enough for all the steps needed in
ethanol production. Distilleries are being developed to be self-sufficient in their
water consumption.21

Agrochemicals

Many inorganic compounds are introduced during the production of ethanol,
including chemicals that kill weeds, insects, mites, and fungi, along with defoliants
and other chemicals that help the cane to mature more quickly.

Fewer agrochemicals are used in sugarcane production than for some other
crops. Pesticide consumption per hectare for sugarcane is lower than for citrus,
corn, coffee, and soybeans. On the other hand, sugarcane requires more herbicides
per hectare than coffee, but still less than do citrus, corn, and soybeans. Also, com-
paring Brazil’s major crops (those grown on areas larger than one million
hectares), sugarcane uses smaller amounts of fertilizer than cotton, coffee, and
oranges, and about the same amount as soybeans. It also uses less fertilizer than
sugarcane crops in other countries; for example, Australian cane growers use 48
percent more fertilizer than Brazilians.22 One practice that helps here is using
industrial waste as fertilizer, especially vinasse, the byproduct of ethanol distilla-
tion process, and filter cake, which remains after cane juice is filtered and then goes
through a process of fermentation/distillation, which results in ethanol. This has
led to substantial increases in productivity and in the potassium content of the
soil.23

Genetic research, especially the selection of resistant varieties, has made it pos-
sible to reduce the diseases affecting sugarcane, such as the mosaic virus, sugarcane
smut and rust, and the sugarcane yellow leaf virus. With genetic modifications,
some now being field tested, plants are more resistant to herbicides, fungus, and
the sugarcane beetle. At present, more than 500 commercial varieties of sugarcane
are being grown.

Social Aspects

Brazil’s labor laws are well known for their worker protection. Workers involved in
sugarcane production experience better employee relations, and better protection
of their rights, compared to those in other rural sectors. Overall, 40 percent of
Brazilians are in formal employment; in comparison, in the sugarcane industry the
rate is now 72.9 percent (up from 53.6 percent in 1992); it is 93.8 percent in São
Paulo as of 2005 and only 60.8 percent in the north/northeast region.

Many of Brazil’s sugarcane plantations are large, and almost 75 percent of the
land in use is owned by large producers. However, in the southeast, around 60,000
small producers are organized in cooperatives. A long-established payment system
based on the sucrose content in sugarcane has promoted significant growth in
agricultural productivity. In the southeast, people working with sugarcane earn

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The Brazilian Experience with Biofuels

Table 1. Ethanol Consumption in Brazil, U.S., EU, other countries.

more than those working with coffee, citrus, and corn, but less than those working
with soybeans, as that work is highly mechanized and the jobs more specialized. In
the northeast, people working in sugarcane earn more than those in coffee, rice,
banana, manioc (cassava) and corn; their income is about equivalent to that for
citrus, and lower than for soybeans. However, the enforcement of labor regulations
in some parts of the country could be improved.

INTERNATIONAL DIMENSIONS OF THE ETHANOL PROGRAM

The 2007 U.S. Energy Bill24 set a target of producing 15 billion gallons (56.8 billion
liters) of ethanol per year from corn by 2015, using first-generation technologies,
which will probably require an agricultural area of approximately 14 million
hectares.

Further expansion of production is planned, up to 21 billion gallons (79.5 bil-
lion liters) a year, using cellulosic materials and second-generation technologies
that are still in an experimental phase. By 2020 the European Union directive will
require 3.9 billion gallons per year to replace 10 percent of the gasoline it uses, but
today it produces only two billion liters per year, mainly from sugar beets.25
Production of ethanol from corn, using first-generation technologies, will be at
least 87.8 billion liters per year in 2015, up from 36.8 billion in 2006, as shown in
Table 1.

There is an important difference between the production of ethanol from sug-
arcane, or from corn in the U.S., and from starchy feedstocks such as wheat and
sugar beets in Europe. The industrial process requires external sources of energy
(fuel oil or gas) to supply electricity and heat. In practical terms, in the U.S. and
Europe, ethanol is obtained by burning coal (the main source of energy in the
region) to turn corn into ethanol; on the other hand, sugarcane converts the sun’s
energy into ethanol through photosynthesis. The concept of energy balance is used

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José Goldemberg

Figure 4. Reductions in GHG Emissions per KM from Biofuels, compared with
Gasoline and Mineral Diesel.

Source: R. Doornbosch, and R. Steenblik, 2007. “Biofuels: Is the cure worse than the disease?”
Presentation at OECD Roundtable on sustainable development, Paris, September, 2007, (p. 17)
www.foeeurope.org/publications/2007/OECD_Biofuels_Cure_Worse_Than_Disease_Sept07.pdf .

to evaluate the use of fossil fuels in preparing ethanol: it is the ratio of the amount
of energy contained in the ethanol to the amount of fossil fuel energy used to pro-
duce it. For sugarcane this ratio is 8:1, and for corn in the U.S. only it is 1.3:1.

Many studies have been conducted on this subject and the results are sensitive
to assumptions about the use of fertilizers, pesticides, and other inputs. Still, a fair
estimate is that compared to gasoline, ethanol from corn emits 30 percent less CO2
and ethanol from sugarcane 82 percent less, as Figure 4 shows.

In the U.S., efforts to expand ethanol production from corn will face severe
obstacles. Already 18 percent of the nation’s corn, grown on a total of 37 million
hectares, is being used for ethanol production, and that land use is cutting into
soybean production. Production of ethanol from cellulosic materials, which could
be a solution, is still facing technological problems that are not likely to be solved
by 2015. However, productivity increases, including genetic modification, might
help to significantly reduce the amount of additional land needed.26

This large demand for ethanol, and the corresponding use of agricultural land
to produce it, has generated a number of objections to the use of biofuels. Some
argue that the competition between land for fuel (ethanol) and land for food, in
both the U.S. and Europe, is causing famine around the world and leading indi-
rectly to deforestation in the Amazon and other tropical areas.27 The recent rise in
the prices of agricultural products, after several decades of declining real prices, is
often seen as a cause of famine, and led to the politically laden controversy of fuel
“versus” food. In the aggregate, grain prices have more than doubled since January

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The Brazilian Experience with Biofuels

Figure 5. Cost Ranges for Ethanol and Gasoline Production, 2006

Source: World Watch, 2006. Biofuels For Transportation: Global Potential and Implications for
Sustainable Agriculture and Energy in the 21st Century (p. 2)
www.worldwatch.org/system/files/EBF008_1.pdf.

2006, with over 60 percent of the rise since January 2008, closely following the
price of petroleum; prices began to drop as the 2008 crop was harvested. In con-
trast, the point has been made that higher crop prices will not necessarily harm the
poorest people; many of the world’s 800 million undernourished people are farm-
ers or farm laborers, who could benefit from higher prices.28 More recently the
price of agricultural products has decreased following the decline in petroleum
prices.

To keep the issue in perspective, it is important to remember several facts. First,
around the world, 93 million hectares are currently being used to grow soybeans
and 148 million hectares for corn, while the amount used in the U.S. to produce
ethanol is approximately seven million hectares. Second, in general the prices of
food commodities have been decreasing since 1975, but fluctuations frequently
occur in those prices, as well as in the areas planted and the prices of crude oil.
Those fluctuations, which have occurred for decades, result from an enormous
number of factors and events.29

Worldwide, 1.5 billion hectares of the arable land is already being used for
agriculture and another 440 million hectares is potentially available, including 250
million hectares in Latin America and 180 million in Africa. So the area currently
being used for biofuels is only 0.55 percent of the land in use; even if it were to
grow by an order of magnitude, it would not be a very disturbing expansion.30

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Table 2. Subsidies for biofuels in the U.S. and EU, 2006

Source: R. Steenblik, 2007. Biofuels – At What Cost? Geneva: The Global Subsidies Initiative (GSI)
of the International Institute for Sustainable Development (IISD).
www.globalsubsidies.org/files/assets/oecdbiofuels.pdf.

This problem has been extensively analysed in many reports, particularly by
the World Bank,31 which pointed out that several individual factors have driven up
grain prices and in combination led to an upward price spiral. Among them are
high energy and fertilizer prices, the continuing depreciation of the U.S. dollar,
drought in Australia, growing global demand for grains (particularly in China),
changes in some nations’ import-export policies, speculative activity on future
commodities trading, and regional problems driven by subsidies of biofuel pro-
duction in the U.S. and Europe. For example, in the U.S., from 2006 to 2007, corn
acreage grew 19 percent to almost 37 million hectares, an increase of 7 million
hectares. Most of this expansion came at the expense of soybean acreage, which
decreased by 17%, from 31 to 26 million hectares, 5 million hectares.32 This is
approximately 6 percent of the world’s area used for that crop, and that change is
helping to drive up prices.

Though these land changes were reversed in 2008, other countries had to
expand their soybean production, possibly increasing deforestation in Amazonia.
Such speculations about a “domino effect” are not borne out by the facts: the area
used for soybeans in Brazil (mainly in Amazonia) has not increased since 2004.33
The reality is that deforestation in the Amazon has been going on for a long time
at a rate of approximately one million hectares per year34, and recent increases are
due not to soybean expansion but to cattle and are unrelated to ethanol produc-
tion.

REPLICATING THE BRAZILIAN EXPERIENCE ELSEWHERE

Almost 100 countries are producing sugarcane, over an area of 20 million hectares
(approximately 0.5 percent of the total world area used for agriculture). The 15
most important producers represent 86 percent of the total production of sugar-
cane.35 It is easy to convert sugar plants to ethanol distilleries and most of the exist-

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The Brazilian Experience with Biofuels

Biofuels and the World Trade Organization

The World Trade Organization (WTO) does not currently have a specific trade
regime for biofuels. Therefore, international trade in biofuels falls under the
rules of the General Agreement on Tariffs and Trade (GATT, 1994), which cov-
ers trade in all goods, as well as other relevant WTO agreements such as those on
agriculture, technical barriers to trade, the application of sanitary and phytosan-
itary measures, and subsidies and countervailing measures. Agricultural prod-
ucts are subject to GATT and to the general rules of the WTO, insofar as the
Agreement on Agriculture (AoA) does not contain derogating provisions.

Key trade-related issues include the classification for tariff purposes of bio-
fuel products as agriculture, industrial or environmental goods; the role of sub-
sidies in increasing production; and the degree of consistency among various
domestic measures and WTO standards.

The AoA covers products from Chapters 1 to 24 of the Harmonized System,
with the exception of fish and fish products and the addition of many specific
products, including hides and skins, silk, wool, cotton, flax, and modified starch-
es. The discipline of the AoA is based on three pillars: market access, domestic
subsidies, and export subsidies. One of its main features is that it allows mem-
bers to pay subsidies in derogation from the Agreement on Subsidies and
Countervailing Measures.

The Harmonized System classification affects the way products are charac-
terized under specific WTO agreements. For example, because ethanol is consid-
ered an agricultural product, it is subject to Annex 1 of the AoA. Biodiesel, on
the other hand, is considered an industrial product and is therefore not subject
to the disciplines of the AoA. Paragraph 3 (iii) of the Doha Development Agenda
has launched negotiations on “the reduction or, as appropriate, elimination of
tariff and non-tariff barriers to environmental goods and services.” Some WTO
members have suggested that renewable energy products, including ethanol and
biodiesel, should be classified as “environmental goods” and therefore subject to
negotiations under the “Environmental Goods and Services” cluster.

Sources:
FAO, 2007. Recent trends in the law and policy of bioenergy production promotion and use, FAO

Legislative Study No. 95. Rome: FAO.

GBEP, 2007. A review of the current state of bioenergy development in G8 +5 countries. Rome: GBEP
Secretariat, FAO. In FAO, 2008, The State of Food and Agriculture 2008. Biofuels: prospects,
risks and opportunities. Rome: FAO.
www.fao.org/docrep/010/a1348e/a1348e00.HTM.

ing plants in Brazil have a dual purpose. This makes it clear that the production of
ethanol from sugarcane could be expanded significantly if other countries follow
Brazil’s example, using a fraction of their sugarcane for ethanol.

The question then arises: why are other sugarcane-producing countries not
using some of their raw material to produce ethanol, which they could then export

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José Goldemberg

Table 3. Projects under Development.

Source: J.L. Olivério, vice president of operations, Dedini Organization, personal communication.

to the U.S. and Europe, where production costs are significantly higher, as shown
in Figure 5.

The main reason is the high import duties imposed on ethanol imports in the
U.S. and Europe to protect local industries which are heavily subsidized. Table 2
gives estimates of the subsidies in the U.S. and European Union which totalled
almost $12 billion in 2006.

Removing these subsidies is a topic of discussion in the Doha round of nego-
tiations, but prospects for progress in this area are poor (see Box 2). However, sev-
eral countries in Central America benefit from their privileged access to the U.S.
market. For members of the Caribbean Basin Initiative (CBI), the oldest group, up
to 7 percent of the previous year’s U.S. ethanol demand is exempt from import tar-
iffs.36 This agreement has been used mostly to allow these countries to import
dehydrated Brazilian ethanol; in the past, European hydrous ethanol was also
included. Dehydration plants are located in Costa Rica, the Dominican Republic,
Trinidad and Tobago, El Salvador and Jamaica. The U.S. imported 482 million
liters from these countries in 2006 and 877 million liters in 2007, considerably less
than the 1.3 billion liters that the 7 percent limit represents on ethanol imported
from Caribbean countries.

The Central America Free Trade Agreement, or CAFTA, signed in August 2004,
immediately eliminated all tariffs and quantitative restrictions on 80 percent of
manufactured goods in that market, including ethanol, with the remainder phased
out over a few years. Nearly all of the 6 nations in CAFTA have already initiated
plans to develop large-scale ethanol production. El Salvador is the most advanced;

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The Brazilian Experience with Biofuels

it has already drafted legislation to continue developing a local ethanol market and
is beginning to invest in ethanol production. An old distillery that can produce 60
million liters a year is being revamped to double its capacity and is already export-
ing all its production. Similar initiatives are underway in Guatemala and Costa
Rica.37

Across the Atlantic, two key elements of the E.U.’s General System of
Preferences are the Everything but Arms (EBA) initiative and the Special Incentive
Arrangement for Sustainable Development and Good Governance (GSP+). EBA
provides special treatment for 50 least-developed countries, giving duty-free access
to imports of all products except arms and ammunition, without any restrictions
on quantity, with the exception of rice and sugar up to October 2009.38 At present,
GSP+ benefits 16 countries, mostly in Latin America and the Caribbean.39 Any
GSP+ beneficiary country must be both “vulnerable,” according to a definition
established in the regulation, and have ratified and effectively implemented 27
specified international conventions in the fields of human rights, core labor stan-
dards, sustainable development, and good governance. This program grants spe-
cial duty-free access to the E.U. market for denatured or non-denatured alcohol.40
To benefit from such advantages, a few countries in Latin America and Africa
are starting to divert some of their sugarcane to ethanol production and others,
especially Venezuela, are expanding their sugarcane plantations. Table 3 provides a
list of projects underway around the world.

This development represents a modernization of the sector which traditional-
ly was in the hands of prosperous family groups that benefited from special rela-
tionships with the European Union, as described above, that let them sell sugar at
far more than the international price; their price was based on the much higher
price of locally-produced sugar from sugar beets or sweet sorghum. This comfort-
able situation discouraged them from entering into the ethanol business, which
required additional investments and know-how.

CONCLUSION

If second-generation technologies do not materialize until 2022, most of the
ethanol required in the U.S. will probably have to be imported from countries in
the Southern Hemisphere, such as Brazil where the expanses of land and good cli-
mate particularly favor its production from sugarcane.

If it were possible, worldwide, to place 10 million hectares into sugarcane cul-
tivation, up from the 2.9 million hectares currently in use in Brazil, it would be
possible to produce 70 billion gallons of ethanol; together with the U.S. produc-
tion from corn, that would more than suffice to meet projected worldwide needs
as of 2022. Carbon emissions would be reduced by at least 57 million tons per year.
In all likelihood, ethanol consumption, which represented 0.4 million barrels
of oil equivalent per day in 2006 (1.2 percent of all gasoline in use in the world)
will grow to 2.6 million barrels of oil equivalent per day in 2022, replacing 10 per-
cent of all gasoline used in the world. Considering that current oil consumption is

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José Goldemberg

85 million barrels a day and that it might grow to 100 million by 2012, ethanol
would be contributing the equivalent of almost 3 percent of the world’s consump-
tion of oil. That is a significant amount and will help drive down the world price
of petroleum.

As discussed above, neither the U.S. nor the European Union will be able to
produce all the ethanol it needs; in all likelihood they will have to import it from
Brazil and other tropical sugarcane-producing countries. This could be a mutual-
ly beneficial solution, reducing the cost of fuel for consumers in the U.S. and
Europe and generating hundreds of thousands of jobs in the developing countries.

1. J.R. Moreira and J. Goldemberg, 1999. “The alcohol program.” Energy Policy 27, 229–245.
2. BNDES (Brazilian Development Bank) and CGEE (Center for Strategic Studies and Management
Science, Technology and Innovation), 2008. Sugarcane-based Bioethanol: Energy for Sustainable
Development. Rio de Janeiro: BNDES and CGEE. www.bioetanoldecana.org

3. M.I.G. Scandiffio. Análise prospectiva do álcool combustível no Brasil – Cenários 2004–2024. Ph.D. the-

sis, State University of Campinas, Faculty of Mechanical Engineering, 2005.

4. Datagro, 2009. Informativo Reservado Mensal sobre a Indústria Sucroalcooleira (Sugar/Ethanol Industry

Reserved Monthly Newsletter), number 05P.

5. Ministry for Agriculture, Livestock and Supply, September, 2008. “Current situation of sugarcane in
Brazilian mills.” www.agricultura.gov.br/pls/portal/docs/PAGE/MAPA/SERVICOS/USINAS_DESTI-
LARIAS/USINAS_CADASTRADAS/UPS_29-09-2008_0.PDF.

6. BNDES/CGEE, 2008.
7. J. Goldemberg, S.T. Coelho, O. Lucon, & P.M. Nastari, 2004. “Ethanol learning curve: The Brazilian

experience.” Biomass Bioenergy 26, 301–304.

8. Núcleo de Assuntos Estratégicos da Presidência da República, January, 2005. Cadernos NAE /. nº. 2–

Biocombustíveis. Brasília. http://www.nae.gov.br/cadernosnae.htm

9. J. Goldemberg, 2007. “Ethanol for a sustainable energy future.” Science 315, 808–810.
10. J. Fargione, J. Hill, D. Tilman, S. Polasky, and P. Hawthorne, 2008. “Land clearing and the biofuel car-

bon debt.” Science 319, 1235–1238.

11. C.E.P. Cerri; M. Easter; K. Paustian, K. Killian; K. Coleman; M. Bemoux; P. Falloon; D.S. Powlson; N.H.
Batjes; E. Milne; & C.C. Cerri, 2007. “Predicted soil organic carbon stocks and changes in the Brazilian
Amazon between 2000 and 2030.” Agriculture, Ecosystems and Environment 122, 58–72. See alsoL.B.
Guo & R.M. Gifford, 2002, “Soil carbon stocks and land use change: A meta analysis.” Global Change
Biology 8, 345–360; and D. Murty, M.U.F. Kirschbaum, R.E. Mc Murtie, & H. McGylvray, 2002, “Does
conversion of forest to agricultural land change soil carbon and nitrogen? A review of the literature.”
Global Change Biology 8, 105–123.

12. T. Searchinger, R. Heimlich, R.H. Houghton, F. Dong, A. Elobeid, J. Fabiosa, S. Togkoz, D. Hayes, & T.
Yu, 2008. “Use of U.S. croplands for biofuels increases greenhouse gases through emissions from land
use change.” Science 319, 1238–1240.

13. J. Goldemberg, S.T. Coelho, & P.M. Guardabassi, 2008. “The sustainability of ethanol production from

sugarcane.” Energy Policy 36, 2086–2097.

14. IBGE (Brazilian Statistics Bureau), 2009. Sistema de Recuperação Automática – SIDRA.
www.sidra.ibge.gov.br/bda/pecua/default.asp?t=2&z=t&o=22&u1=1&u2=1&u3=1&u4=1&u5=1&u
6=1&u7=1

15. Unica (Sugarcane Industry Association), personal communication.
16. Unica, personal communication.
17. Goldemberg et al., 2008. See full citation at note 13.
18. Macedo, 2005.
19. Macedo, 2005.
20. Macedo, 2005.

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The Brazilian Experience with Biofuels

21. V. Bastos, of Dedini Organization, presentation at workshop entitled Uso da água na produção de
etanol de cana-de-açúcar [use of water in the production of ethanol from sugarcane], Campinas,
November 24, 2008. www.apta.sp.gov.br/cana

22. Macedo, 2005.
23. Macedo, 2005.
24. The Energy Independence and Security Act of 2007 (P.L. 110-140, H.R. 6).
25. Directive 2009/28/Ec of the European Parliament and of the Council of 23 April 2009 on the pro-
motion of the use of energy from renewable sources and amending and subsequently repealing
Directives 2001/77/EC and 2003/30/EC. http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0016:0062:EN:PDF.

26. J. Goldemberg and P. Guardabassi, 2008. Are biofuels a feasible option? Energy Policy 37, 10–14.
27. A. Walter, P. Dolzan, O. Quilodrán, J. Garcia, C. da Silva, F. Piacente, and A. Segerstedt, 2008. A
the Brazilian Ethanol. Campinas: University of Campinas.

Sustainability Analysis of
http://www.unica.com.br/download.asp?mmdCode=1A3D48D9-99E6-4B81-A863-5B9837E9FE39.

28. International Centre for Trade and Sustainable Development (ICTSD), 2008. “Biofuels production,

trade and sustainable development: Policy discussion.” Draft paper, Geneva.

29. R.L. Naylor, A.J. Lisha, M.B. Burke, W.P. Falcon, J.C. Gaskell, S.D. Rozelle, & K.G. Cassman, 2007. “The

ripple effect: Biofuels, food security and the environment.” Environment 49, 30–43.

30. G. Berndes, M. Hoogwijkb, & R. van den Broeck, 2003. “The contribution of biomass in the future

global energy supply: A review of 17 studies.” Biomass and Bioenergy 25, 1–28.

31. World Bank, 2008. Double

fuel prices.
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21827681~pagePK:642570
43~piPK:437376~theSitePK:4607,00.html.

jeopardy: Responding

food and

to high

32. HGCA (Home Grown Cereals Authority), 2008. “North American crop update,” 2007.
www.openi.co.uk/h070724.htm. Also see W.F. Laurence, 2007. “Switch to corn promotes Amazon
deforestation.” Science 318, 1721.

33. CONAB (National Supply Company), 2006. Agricultural database, 2006. www.conab.gov.br/conab-

web/download/safra/BrasilProdutoSerieHist.xls

34. INPE (National Institute for Spatial Research), 2008. “Prodes Project: Satellite monitoring of Amazon

Forest, Annual Estimates 1988–2007.” www.obt.inpe.br/prodes/prodes_1988_2007.htm.

35. FAOSTAT

(United Nations Food and Agricultural Organization database),

2007.

http://faostat.fao.org/default.aspx.

36. HART Downstream Energy Services (HDES), 2004. “Ethanol Market Fundamentals,” document pre-
pared for the New York Board of Trade, March 9, 2004. Also see Suani Teixeira Coelho, 2005.
“Biofuels: Advantages and Trade Barriers, speech at the United Nations Conference on Trade and
Development,” Geneva, February 4, 2005. “The CBI currently provides 19 beneficiary countries with
duty-free access to the U.S. market for most goods.” These countries are Antigua and Barbuda, Aruba,
Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Grenada, Guyana, Haiti,
Jamaica, Montserrat, Netherlands Antilles, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, and Trinidad and Tobago.

37L.A.H. Nogueira, 2007. “Biocombustíveis na América Latina: A situação atual e perspectivas [Biofuels
in Latin America: Current situation and perspectives].” Série Cadernos da América Latina, v2. São
Paulo: Fundação Memorial da América Latina.

38. The EBA beneficiaries are Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi,
Cambodia, Cape Verde, the Central African Republic, Chad, Comoros Islands, Djibouti, Equatorial
Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Laos, Lesotho, Liberia,
Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao
Tome and Principle, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, The Congo, The Maldives, The
Solomon Islands, Timor-Leste, Togo, Tuvalu, Uganda, Vanuatu, Yemen, and Zambia.

39. The current beneficiaries are Armenia, Azerbaijan, Bolivia, Colombia, Costa Rica, Ecuador, El
Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Paraguay, Peru, Sri Lanka and
Venezuela. GSP+ status will lapse on December 31, 2011, and the countries must reapply for it.

40.

European

Commission

2008.

Generalized

System

Preferences.

http://ec.europa.eu/trade/issues/global/gsp/index_en.htm;
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:334:0090:0091:EN:PDF; and
http://trade.ec.europa.eu/doclib/docs/2008/july/tradoc_139962.pdf.

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