Rafael Silva Capaz

Ethanol from Sugarcane in Brazil: Economic Perspectives

Abstract Since 1931 the gasoline sold in all Brazilian gas stations has been mandatorily blended with ethanol from sugarcane, adopting in average 7.5% of this biofuel. As a reaction to the oil shock in the 1970s, from 1975 the production and use of ethanol in Brazil registered a strongexpansion due to government incentives to increase ethanol blending to 25% and introducevehicles able to use pure hydrous ethanol. In this period, a considerable reduction in production costs and productivity gainswereobserved. In the 2000s, with the advent of flex-fuel cars and the growing concern about sustainability of energy systems, the ethanol industry returned to growth. However, inrecent years government hasintroduced gasoline subsidies, reducing ethanol consumption and inhibiting investments in greenfield ethanol production units. In this paper, the development of ethanol production and use in Brazil are commented, presenting the evolution of ethanol costs and prices.

Incentives and Barriers for Liquid Biofuels in Brazil

Bioenergy has been an important share of the Brazilian energy matrix, supported by an ample basis of natural resources, an appropriate climate, large availability of land and water, and enough expertise on agriculture and forestry management. Currently, ethanol and biodiesel supply about 20% of road transport fuel in Brazil, with the major contribution of ethanol. Since the early 1900s, ethanol-blended gasoline has been used in Brazil, but a national program aimed at market development was only launched in the 1970s. Further, the production and use of biodiesel started just in 2005 with progressive blends with diesel. Gasoline has more than 20% anhydrous ethanol by volume, and hydrated ethanol is traded freely. In turn, biodiesel is blended with diesel at 7% by volume, with plans to increase to 10%. Both Brazilian biofuel programs demonstrate the relevance of adopting efficient agroindustrial strategies as well as the possibility of sound coexistence between bioenergy and other uses of agriculture. This chapter presents a summary of the evolution of ethanol and biodiesel programs in Brazil, focusing on the institutional aspects and the decisive role of public policies to foster the development of the biofuel market.