In contrast to a number of countries that have failed to create an economically viable biofuel industry, Brazil has developed the first successful biofuel economy in the world. With roots in a program first launched in 1975, Brazil’s success stems from a variety of factors that are seemingly unique to this South American nation. As ethanol is a natural by-product of the sugar milling process, Brazil’s vast sugarcane industry contributes to its ability to produce ethanol at a price competitive with oil. Much can be learned from Brazil’s success, and these lessons suggest that nations seeking to develop economically viable alternative energy sources should analyze their own unique qualities so that they incentivize an alternative source of energy that is compatible.
Unlike other South American countries blessed with vast hydrocarbon reserves, Brazil is forced to import virtually all of its oil and natural gas. Thus, in order to reduce its dependence on foreign producers and to take advantage of its burgeoning sugar industry, Brazil enacted legislation that mandated ethanol be added to gasoline to create a mixture comprised of at least 5% ethanol in 1931. Devastated by OPEC’s 1973 oil embargo, Brazil responded by launching the National Alcohol Program in 1975. Consequently, sugarcane farmers were incentivized to grow additional sugarcane for the purpose of producing ethanol and sugarcane and ethanol production grew.
One factor contributing to the economic viability is Brazil’s long history growing sugarcane. Sugarcane was one of the first commodities Brazil exported to Europe, and Brazil has grown sugarcane since approximately 1532. Accordingly, Brazil has developed, mainly through its state-owned Brazilian Agricultural Research Corporation, some of the most advanced biotechnology and agronomic technology in the world. This investment has yielded impressive results: from 1977 to 2004, the amount of recoverable sugar from sugarcane has increased by 1.5% per year, and has resulted in an increase from 95 to 140 kilograms per hectare. This has translated into a vast increase in liters of ethanol per hectare.
One other critical factor is the availability of cheap, arable land. According to a recent study, Brazil has approximately 610,000,000 hectares of arable land, representing 71% of its total area. Moreover, this land gets abundant rainfall and sunlight, meaning that ”everything just grows faster, bigger, and better all year round.” Indeed, there is so much arable land that many have concluded that Brazil’s success is impossible to replicate in other countries because they are not able to devote as much land to ethanol production as Brazil can.
Brazil’s success has not been replicated elsewhere. While the United States is the largest producer of ethanol fuel, the United States has heavily subsidized its industry and has thus created an artificially low price. Brazil’s ability to produce ethanol at competitive price stems not from subsidy, but from its unique combination of agricultural technology and vast swaths of arable land. Only by identifying their own market advantages will another country succeed in developing an alternative energy industry.
Stephen Dotts is a 3L and a Senior Editor for the Journal of Law and International Affairs at the Penn State University Dickinson School of Law.
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