Ethanol Equals Energy Independence:
A Lesson from Brazil
Can ethanol help the U.S. achieve energy independence? The answer lies to the south of us in the developing nation of Brazil. With large increases in demand for energy due to rapid industrialization, Brazil has actively sought ways to reduce its dependence on foreign oil. Today, with the rise of flex-fuel cars, ethanol – or alcohol, as it is called there – makes up a whopping 40 percent of the country’s transportation fuel.36 The result is that gasoline consumption in Brazil has actually declined since the 1970s.37 This year, Brazil expects to achieve something that the United States can only dream of: energy independence.38
Brazil’s interest in ethanol was aroused during the energy crisis of the 1970s, when the high cost of imported oil threatened to torpedo the nation’s economy. Determined to create an affordable and homegrown fuel source, the Brazilian government provided low-interest loans to ethanol producers and set minimum prices for their product. (Because Brazil is the largest producer of sugarcane in the world,39 its ethanol producers use sugarcane as their feedstock, with crop waste – known as bagasse – powering their plants.) The government also presented tax incentives to automakers who offered ethanol-powered cars.
These measures helped create an ethanol infrastructure. Ethanol – either in its pure form or as E25, a gasoline blend that is 25 percent ethanol – is now available at nearly every filling station in the country. That infrastructure allowed ethanol to take off in a big way when the first flex-fuel vehicles arrived in Brazil in 2003. The new cars gave Brazilians the ability to choose whether to fill their tanks with ethanol, gasoline, or a blend, depending on their inclinations and the price of fuel. The cars were an instant success. The Wall Street Journal reports that today, 7 out of every 10 new cars sold in Brazil are flex-fuel.40 The nation continues to expand its ethanol production – in part to satisfy a growing demand from countries like India, Sweden, Japan – and the United States.41
Brazil eliminated its financial support for ethanol in the mid-nineties, having successfully created the infrastructure necessary for ethanol-based energy independence. Spurred by market forces, the industry continues to innovate, tripling its productivity and lowering its prices.42 Even without government support, ethanol in Brazil costs less than gasoline.43