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Six typical Brazilian flex-fuel models from several car makers, popularly called "flex" cars, that run on any blend of hydrous ethanol (E100) and gasoline (E20 to E25).

Brazil is the world's second largest producer of ethanol and the world's largest exporter, and it is considered to have the world's first sustainable biofuels economy and the biofuel industry leader.¹²³⁴ Together, Brazil and the United States lead the industrial world in global ethanol production, accounting together for 70% of the world's production⁵ and nearly 90% of ethanol used for fuel. ⁶ In 2006 Brazil produced 16.3 billion litres (4.3 billion U.S. liquid gallons),⁷ which represents 33.3% of the world's total ethanol production and 42% of the world's ethanol used as fuel.⁶ Brazil’s 30-year-old ethanol fuel program uses modern equipment and cheap sugar cane as feedstock, the residual cane-waste (bagasse) is used to process heat and power, which results in a very competitive price and also in a high energy balance (output energy/input energy), which varies from 8.3 for average conditions to 10.2 for best practice production.⁸

Brazil has ethanol fuel available throughout the country. Shown here a typical Petrobras gas station at São Paulo with dual fuel service, marked A for alcohol (ethanol) and G for gasoline.

There are no longer light vehicles in Brazil running on pure gasoline. Since 1976 the government made it mandatory to blend anhydrous ethanol with gasoline (E20), fluctuating between 10% to 22%.⁹ and requiring just a minor adjustment on regular gasoline motors. In 1993 the mandatory blend was fixed by law at 22% anhydrous ethanol (E22) by volume in the entire country, but with leeway to the Executive to set different percentages of ethanol within pre-established boundaries. In 2003 these limits were set at a minimum of 20% and a maximum of 25%.¹⁰ Since July 1st, 2007 the mandatory blend is 25% of anhydrous ethanol and 75% gasoline or E25 blend.¹¹ By the end of 2008 there were 35,000 filling stations throughout the country¹² with at least one ethanol pump.¹ The Brazilian car manufacturing industry developed flexible-fuel vehicles that can run on any proportion of gasoline (E20-E25 blend) and hydrous ethanol (E100).¹³ Introduced in the market in 2003, the flex-fuel vehicles became a commercial success,¹⁴ and by August 2008, the fleet of "flex" cars and light commercial vehicles reached 6.2 million new vehicles sold, which represents around 23% of Brazil's motor vehicle fleet.¹⁵¹⁶ The success of "flex" vehicles, together with the mandatory E25 blend throughout the country, have allowed ethanol fuel consumption to achieve a 50% market share of the gasoline-powered fleet by February 2008.¹⁷¹⁸ When trucks and other diesel-powered vehicles are considered, ethanol produced from sugar cane represented 18% of the country's total fuel consumption in 2006.¹⁹²⁰

History

Early experiences

Sugarcane has been cultivated in Brazil since 1532, introduced in Pernambuco that year, sugar was one of the first commodities exported to Europe by the Portuguese settlers.²¹ Ethyl alcohol or ethanol is obtained as a by-product of sugar mills producing sugar, and can be processed to produce alcoholic beverages, ethanol fuel or alcohol for industrial or antiseptic uses. The first use of sugarcane ethanol as fuel in Brazil dates back to the late twenties and early thirties of the twentieth century, with the introduction of the automobile in the country. After World War I some experimenting took place in Brazil's Northeast Region,²² and as early as 1919, the Governor of Pernambuco mandated all official vehicles to run on ethanol.²³ The first ethanol fuel production plant went on line in 1927, the Usina Serra Grande Alagoas (USGA), located in the Northestern state of Alagoas,²² producing fuel with 75% ethanol and 25% ethyl ether. As other plants began producing ethanol fuel, two years later there were 500 cars running on this fuel in the country's Northeast Region.²²

A decree was issued on February 20th, 1931, mandating the blend of 5% hydrated ethanol to all imports of gasoline by volume.²³ The number of distilleries producing ethanol fuel went from 1 in 1933 to 54 by 1945.²³ Fuel-grade ethanol production increased from 100,000 liters in 1933 to 51.5 million liters in 1937, representing 7 percent of the country's fuel consumption. Production peaked to 77 million liters during World War II, representing 9.4% of all ethanol production in the country. Due to German submarine attacks treathen oil supply, the mandatory blend was as high as 50 percent in 1943.²³ After the end of the war cheap oil caused gasoline to prevail, and ethanol blends were only used sporadically, mostly to take advantage of sugar surpluses,²³ until the seventies, when the first oil crisis resulted in gasoline shortages and awareness on the dangers of oil dependence.²²²³

The Pro-Alcohol era

As a response to the 1973 oil crisis, the Brazilian government began promoting bioethanol as a fuel. The National Alcohol Program -Pró-Álcool- (Portuguese: 'Programa Nacional do Álcool'), launched in 1975, was a nation-wide program financed by the government to phase out automobile fuels derived from fossil fuels, such as gasoline, in favor of ethanol produced from sugar cane.²⁵²⁶²⁷ The decision to produce ethanol from sugarcane was based on the low cost of sugar at the time, the existing idle capacity for distillary at the sugar plants, and the country's ample tradition and experience with this feedstock. Other sources of fermentable carbohydrates were also explored such as manioc and other feedstocks.⁹ The first phase of the program concentrated in production of anhydrous ethanol for blending with gasoline.⁹

A Dodge 1800 was the first prototype engineered with an ethanol-only engine. Exhibit at the Memorial Aeroespacial Brasileiro, CTA, São José dos Campos.

After testing in government fleets with several prototypes developed by the local subsidiaries of Fiat, Volkswagen, GM, and Ford, and compelled by the second oil crisis, the Fiat 147, the first modern commercial ethanol-only powered car (E100 only) was launched to the market in July 1979.²⁶ Brazilian carmakers modified gasoline engines to support hydrous ethanol characteristics and changes included compression ratio, amount of fuel injected, replacement of materials that would get corroded by the contact with ethanol, use of colder spark plugs suitable for dissipating heat due to higher flame temperatures, and an auxiliary cold-start system that injects gasoline from a small tank in the engine compartment to help starting when cold. Six years later around three quarters of Brazilian passenger cars were manufactured with ethanol engines.²⁸²⁵

The Brazilian government also made mandatory the blend of ethanol fuel with gasoline, fluctuating from 1976 until 1992 between 10% to 22%.⁹ Due to this mandatory minimum gasoline blend, no longer is pure gasoline (E0) sold in country. A federal law was passed in October 1993 establishing a mandatory blend of 22% anhydrous ethanol (E22) in the entire country. This law also authorized the Executive to set different percentages of ethanol within pre-established boundaries, and since 2003 these limits were fixed at a maximum of 25% (E25) and a minimum of 20% (E20) by volume.¹⁰⁹ Since then, the government has set the percentage on the ethanol blend according to the results of the sugarcane harvest and the levels of ethanol production from sugarcane, resulting in blend variations even within the same year.⁹ Since July 2007 the mandatory blend is 25% of anhydrous ethanol and 75% gasoline or E25 blend.¹¹

The 1979 Brazilian Fiat 147 was the first modern automobile launched to the market capable of running only on hydrous ethanol fuel (E100).

The Brazilian government provided three important initial drivers for the ethanol industry: guaranteed purchases by the state-owned oil company Petrobras, low-interest loans for agro-industrial ethanol firms, and fixed gasoline and ethanol prices where hydrous ethanol sold for 59% of the government-set gasoline price at the pump. These incentives made ethanol production competitive.²⁹

After reaching more than 4 million cars and light trucks running on pure ethanol by the late 1980s,²⁴ representing one third of the country's motor vehicle fleet,³⁰ ethanol production and sales of ethanol-only cars tumbled due to several factors. First, gasoline prices fell sharply as a result of the 1980s oil glut. The inflation adjusted real 2004 dollar value of oil fell from an average of US$78.2 in 1981 to an average of US$26.8 per barrel in 1986.³¹ Also, by mid 1989 a shortage of ethanol fuel supply in the local market left thousands of vehicles in line at gas stations or out of fuel in their garages.²⁷³⁰ At the time ethanol production was tightly regulated by the government, as well as pricing of both gasoline and ethanol fuel, the latter subject to fixed producer prices. As a complement, the government provided subsidies to guarantee a lower ethanol price at the pump as compared to gasoline, as consumers were promised that ethanol prices would never be more higher than 65% the price of gasoline. As sugar prices sharply increased in the international market by the end of 1988 and the government did not set the sugar export quotas, production shifted heavily towards sugar production causing an ethanol supply shortage, as the real cost of ethanol was around US$ 45 per barrel.³⁰²⁸ As ethanol production stagnated at 12 billion liters⁹ and could not keep pace with the increasing demand required by the now significant ethanol-only fleet, the Brazilian government began importing ethanol from Europe and Africa in 1991.¹³³² Simultaneously, the government began reducing ethanol subsidies, thus marking the beginning of the industry's deregulation and the slow extinction of the Pró-Álcool Program.⁹³² In 1990, production of ethanol-only vehicles fell to 10.9% of the total car production as consumers lost confidence on the reliability of ethanol fuel supply, and began selling or converting their cars back to gasoline fuel.²⁴³⁰

The Flex-fuel era

The 2003 Brazilian VW Gol 1.6 Total Flex was the first flexible-fuel car capable of running on any blend of gasoline and ethanol.

See also: Flexible-fuel vehicle in Brazil

Confidence on ethanol-powered vehicles was restored with the introduction in the Brazilian market of flexible-fuel vehicles starting in 2003. A key innovation in the Brazilian flex technology was avoiding the need for an additional dedicated sensor to monitor the ethanol-gasoline mix, which made the first American M85 flex fuel vehicles to expensive.³³ This was accomplished through the lambda probe, used to measure the quality of combustion in conventional engines, is also required to tell the engine control unit (ECU) which blend of gasoline and alcohol is being burned. This task is accomplished automatically through software developed by Brazilian engineers, called "Software Fuel Sensor" (SFS), fed with data from the standard sensors already built-in the vehicle. The technology was developed by the Brazilian subsidiary of Bosch in 1994, but was further improved and commercially implemented in 2003 by the Italian subsidiary of Magneti Marelli. A similar fuel injection technology was developed by the Brazilian subsidiary of Delphi Automotive Systems, and it is called "Multifuel".³³ This technology allows the controller to regulate the amount of fuel injected and spark time, as fuel flow needs to be decreased and also self-combustion needs to be avoided when gasoline is used because ethanol engines have compression ratio around 12:1, too high for gasoline.

In March 2003 Volkswagen launched in the Brazilian market the Gol 1.6 Total Flex, the first commercial flexible fuel vehicle capable of running on any blend of gasoline and ethanol.^{3435 36} Chevrolet followed two months later with the Corsa 1.8 Flexpower, using an engine developed by a joint-venture with Fiat called PowerTrain. That year production of full flex-fuel reached 39.853 automobiles and 9.411 light commercial vehicles. By 2008, popular manufacturers that build flexible fuel vehicles are Chevrolet, Fiat, Ford, Peugeot, Renault ,Volkswagen, Honda, Mitsubishi, Toyota and Citröen.³⁷ Flexible fuel cars were 22% of the car sales in 2004, 73% in 2005³⁸, and reached 87.6% in July 2008.³⁹ The latest innovation within the Brazilian flexible-fuel technology is the development of flex-fuel motorcycles that are expected to be launched to the market in 2009.⁴⁰⁴¹

Historical trend of Brazilian total production of light vehicles, ethanol-only, flex fuel, and gasoline vehicles from 1979 to 2007.²⁴

The flexibility of Brazilian FFVs empowered the consumers to choose the fuel depending on current market prices. The rapid adoption and commercial success of "flex" vehicles, as they are popularly known, together with the mandatory blend of alcohol with gasoline as E25 fuel, have increased ethanol consumption up to the point that during the first two months of 2008 ethanol consumption increased by 56% when compared to the same period in 2007, and achieving a landmark in ethanol consumption in February 2008, when ethanol retail sales surpassed the 50% market share of the gasoline-powered fleet.¹⁷¹⁸ This level of ethanol fuel consumption had not been reached since the end of the 80s, at the peak of the Pró-Álcool Program.¹⁷⁴²¹⁸ and from 1979 until October 2008, Brazil has successfully reduced by 12.3 million the number of vehicles running just on gasoline (5.7 million ethanol-only and 6.6 million flex-fuel vehicles),²⁴ thereby reducing the country's dependence on oil imports. The number of ethanol-only vehicles still in use is estimated between 2 to 3 million vehicles.¹³

Brazilian flex engines are being designed with higher compression ratios, taking advantage of the higher ethanol blends and maximizing the benefits of the higher oxygen content of ethanol, resulting in lower emissions and improving fuel efficiency.⁴³ The early technology in flex fuel engines had a fuel economy with hidrated ethanol (E100) that was 25 to 35% lower than gasoline, but flex engines are now being designed with higher compression ratios, taking advantage of the higher ethanol blends and maximizing the benefits of the higher oxygen content of ethanol, resulting in lower emissions and improving fuel efficiency, allowing flex engines in 2008 models to reduced the fuel economy gap to only 20 to 25% that of gasoline.⁴³

Latest developments

BEST's E95 trial bus operating in São Paulo, Brazil.

Under the auspices of the BioEthanol for Sustainable Transport (BEST) project, the first ethanol-powered (E95) bus began operations in São Paulo city on December 2007 as a one-year trial project.⁴⁴ The bus is a Scania model with a modified diesel engine capable of running with 95% hydrous ethanol with 5% ignition improver.⁴⁵ Scania adjusted the compression ratio from 18:1 to 28:1, added larger fuel injection nozzles, and altered the injection timing.⁴⁶ During the trial period performance and emissions will be monitored by the National Reference Center on Biomass (CENBIO - Portuguese: Centro Nacional de Referência em Biomassa) at the Universidade de São Paulo, and compared with similar diesel models, with special atention to carbon monoxide and particulate matter emissions, as significant reductions are expected.⁴⁵ Performance is also important as previous tests have shown a reduction in fuel economy of around 60% when E95 is compared to regular diesel.⁴⁴

The latest innovation within the Brazilian flexible-fuel technology is the development of flex-fuel motorcycles. In 2007 Magneti Marelli presented the first motorcycle with flex technology. Delphi Automotive Systems also presented in 2007 its own injection technology for motorcycles.⁴⁰ Besides the flexibility in the choice of fuels, a main objective of the fuel-flex motorcycles is to reduce CO₂ emissions by 20 percent, and savings in fuel consumption in the order of 5% to 10% are expected.⁴⁰ These flex motorcycles are expected to be launched in the market by 2009.⁴⁷

Production

Economic and production indicators

Production by harvest year 1990/91 to 2007/08.⁴⁹ Green is hydrated ethanol (E100) and yellow is anhydrous ethanol use for gasohol blending.

Ethanol production in Brazil uses sugarcane as feedstock and relies on first-generation technologies based on the use of the sucrose content of sugarcane. Ethanol yield has grown 3.77% per year since 1975 and productivity gains been based on improvements in the agricultural and industrial phases of the production process. Further improvements on best practices are expected to allow in the short to mid-term an average ethanol productivity of 9,000 liters per hectare.⁵⁰

There were 378 ethanol plants operating in Brazil by July 2008, 126 dedicated to ethanol production and 252 producing both sugar and ethanol. There are 15 additional plants dedicated exclusively to sugar production.⁵¹ These plants have an installed capacity of crushing 538 million metric tons of sugarcane per year, and there are 25 plants under construction expected to be on line by 2009 that will add an additional capacity of crushing 50 million tons of sugarcane per year.⁵¹ The typical plant cost approximately USD 150 million and requires a nearby sugarcane plantation of 30,000 hectares.⁵⁰

Ethanol production is concentrated in the Central and Southeast regions of the country, led by São Paulo state, with around 60% of the country's total ethanol production, followed by Paraná (8%), Minas Gerais (8%) and Goiás (5%).⁴⁹ These two regions have been responsible for 90% of Brazil's ethanol production since 2005⁸⁴⁹ and the harvest season goes from April to November. The Northeast Region is responsible for the remaining 10% of ethanol production, lead by Alagoas with 2% of total production.⁴⁹ The harvest season in the North-Northeast region goes from September to March, and the average productivity in this region is lower than the South-Central region.⁵² Due to the difference in the two main harvest seasons, Brazilian statistics for sugar and ethanol production are commonly reported on a harvest two-year basis rather than on a calendar year.

For the 2008/09 harvest it is expected that approximately 44 percent of the sugarcane will be used for sugar, 1% for alcoholic beverages, and 55% for ethanol production.⁴⁸ An estimate of between 24.9 billion litres (6.58 billion U.S. liquid gallons)⁵¹ to 27.1 billion litres (7.16 billion gallons)⁵² of ethanol are expected to be produced in 2008/09 harvest year, with most of the production being destined for the internal market, and only 4.2 billion liters (1.1 billion gallons) for exports, with an estimated 2.5 billion liters (660 million gallons) destined for the US market.⁴⁸ Sugarcane cultivated area grew from 7 million to 7.8 million hectares of land from 2007 to 2008, mainly using abandoned pasture lands.⁴⁸ In 2008 Brazil has 276 million hectares of arable land, 72% use for pasture, 16.9% for grain crops, and 2.8% for sugarcane, meaning that ethanol is just requiring aproximately 1.5% of all arable land available in the country.⁴⁸

As sugar and ethanol share the same feedstock and their industrial processing is fully integrated, formal employment statistics are usually presented together. In 2000 there were 642,848 workers employed by these industries, and as ethanol production expanded, by 2005 there were 982,604 workers employed in the sugarcane cultivation and industrialization, including 414,668 workers in the sugarcane fields, 439,573 workers in the sugar mills, and 128,363 workers in the ethanol distilleries.⁵³ While employment in the ethanol distilleries grew 88.4% from 2000 to 2005, employment in the sugar fields just grew 16.2% as a direct result of expansion of mechanical harvest instead manual harvesting, which avoids burning the sugarcane fields before manual cutting and also increases productivity. The states with the most employment in 2005 were São Paulo (39.2%), Pernambuco (15%), Alagoas (14.1%), Paraná (7%), and Minas Gerais (5.6%).⁵³

Agricultural technology

Sugarcane (Saccharum officinarum) plantation ready for harvest, Ituverava, São Paulo State.

Evolution of the ethanol productivity per hectare of sugarcane planted in Brazil between 1975 and 2004. Source: Goldemberg (2008).⁵⁰

Typical ethanol distillery and dehydration facility, Piracicaba, São Paulo State.

Variation of ethanol prices to producers in 2007 reflecting the harvest season supply.⁵⁴ Yellow is for anhydrous ethanol and green is for hydrated ethanol (R$ per liter).

Ethanol fuel ready for distribution, Piracicaba, São Paulo State.

A key aspect for the development of the ethanol industry in Brazil was the investment in agricultural research and development by both the public and private sector.³² The work of EMBRAPA, the state-owned company in charge for applied research on agriculture, together with research developed by state institutes and universities, especially in the State of São Paulo, have allowed Brazil to became a major innovator in the fields of biotechnology and agronomic practices,⁵⁵ resulting in the most efficient agricultural technology for sugarcane cultivation in the world.³² Efforts have been concentrated in increasing the efficiency of inputs and processes to optimize output per hectare of feedstock, and the result has been a threefold increase of sugarcane yields in 29 years, as Brazilian average ethanol yields went from 2,024 liters per ha in 1975 to 5,917 liters per ha in 2004; allowing the efficiency of ethanol production to grow at a rate of 3.77% per year.⁵⁰ Brazilian biotechnologies include the development of sugarcane varieties that have a larger sugar or energy content, one of the main drivers for high yields of ethanol per unit of planted area. The increase of the index total recoverable sugar (TRS) from sugarcane has been very significant, 1.5% per year in the period 1977 to 2004, resulting in an increase from 95 to 140 kg/ha.⁵⁰ Innovations in the industrial process have allowed an increase in sugar extraction in the period 1977 to 2003. The average annual improvement was 0.3%; some mills have already reached extraction efficiencies of 98%.⁵⁰

Biotechnology research and genetic improvement have led to the development of strains which are more resistant to disease, bacteria, and pests, and also have the capacity to respond to different environments, thus allowing the expansion of sugarcane cultivation to areas previously considered inaqueate for such cultures.⁵⁵⁵⁶⁵⁷ By 2008 more than 500 sugarcane varieties are cultivated in Brazil, and 51 of them were release just during the last ten years. Four research programs, two private and two public, are devoted to further genetic improvement.⁵⁶⁵⁷ Since the mid nineties, Brazilian biotechnology laboratories have developed transgenic varieties, still non commerciallized. Identification of 40,000 cane genes was completed in 2003 and there are a couple dozen research groups working on the functional genome, still on the experimental phase, but commercial results are expected within five years.⁵⁸

Also, there is ongoing research regarding sugarcane biological nitrogen fixation, with the most promising plant varieties showing yields three times the national average in soils of very low fertility, thus avoiding nitrogenous fertilization.⁵⁹ There is also research for the development of second-generation or cellulosic ethanol.³² In São Paulo state an increase of 12% in sugar cane yield and 6.4% in sugar content is expected over the next decade. This advance combined with an expected 6.2% improvement in fermentation efficiency and 2% in sugar extraction, may increase ethanol yields by 29%, raising average ethanol productivity to 9,000 liters/ha.⁵⁰ Approximately US$50 million has recently been allocated for research and projects focused on advancing the obtention of ethanol from sugarcane in São Paulo state.⁶⁰

Production process

Sucrose extracted from sugarcane accounts for little more than 30% of the chemical energy stored in the mature plant; 35% is in the leaves and stem tips, which are left in the fields during harvest, and 35% are in the fibrous material (bagasse) left over from pressing. Most of the industrial processing of sugarcane in Brazil is done through a very integrated production chain, allowing sugar production, industrial ethanol processing, and electricity generation from byproducts.⁵⁰⁶¹ The typical steps for large scale production of sugar and ethanol include milling, electricity generation, fermentation, distillation of ethanol, and dehydration.

Milling and refining

See also: Sugarcane

Once harvested, sugarcane is usually transported to the plant by semi-trailer trucks. After quality control sugarcane is washed, chopped, and shredded by revolving knives. The feedstock is fed to and extracted by a set of mill combinations to collect a juice, called garapa in Brazil, that contain 10–15 percent sucrose, and bagasse, the fiber residue. The main objective of the milling process is to extract the largest possible amount of sucrose from the cane, and a secondary but important objective is the production of bagasse with a low moisture content as boiler fuel, as bagasse is burned for electricity generation (see below), allowing the plant to be self-sufficient in energy and to generate electricity for the local power grid.⁶¹ The cane juice or garapa is then filtered and treated by chemicals and pasteurized. Before evaporation, the juice is filtered once again, producing vinasse, a fluid rich in organic compounds. The syrup resulting from evaporation is then precipitated by crystallization producing a mixture of clear crystals surrounded by molasses. A centrifuge is used to separate the sugar from molasses, and the crystals are washed by addition of steam, after which the crystals are dried by an airflow. Upon cooling, sugar crystallizes out of the syrup.⁶¹ From this point, the sugar refining process continues to produced different types of sugar, and the molasses continue a separate process to produce ethanol.

Fermentation, destillation and dehydration

See also: Ethanol fermentation and Azeotropic distillation

The resulting molasses are treated to become a sterilized molasse free of impurities, ready to be fermented. In the fermentation process sugars are transformed into ethanol by addition of yeast. Fermentation time varies from 4 to 12 hours resulting in an alcohol content of 7 to 10 percent by total volume (°GL), called fermented wine. The yeast is recovered from this wine through a centrifuge. Making use of the different boiling points the alcohol in the fermented wine is separated from the main resting solid components. The remaining product is hydrated ethanol with a concentration of 96°GL,⁶¹ the highest concentration of ethanol that can be achieved via azeotropicdistillation, and by national specification can contain up to 4.9% of water by volume.⁶² This hydrous ethanol is the fuel used by ethanol-only and flex vehicles in the country. Further dehydration is normally done by addition of chemicals, up to the specified 99.7°GL in order to produce anhydrous ethanol,⁶¹ which is used for blending with pure gasoline to obtain the country's E25 mandatory blend.¹¹ The additional processing required to convert hydrated into anhydrous ethanol increases the cost of the fuel, as in 2007 the average producer price difference between the two was around 14% for São Paulo State.⁵⁴ This production price difference, though small, contributes to the competitiveness of the hydrated ethanol (E100) used in Brazil, not only with regard to local gasoline prices but also as compared to other countries such as the US and Sweden, that only use anhydrous ethanol for their flex fuel fleet.⁶³

Electricity generation from bagasse

See also: Bioenergy

Since the early days bagasse was burnt in the plant to provide the energy required for the industrial part of the process. Today, the Brazilian best practice uses high-pressure boilers that increases energy recovery, allowing most sugar-ethanol plants to be energetically self-sufficient and even sell surplus electricity to utilities.⁵⁰ By 2000, the total amount of sugarcane bagasse produced per year was 50 million tons/dry basis out of more than 300 million tons of harvested sugarcane. Several authors estimated a potential power generation from the use of sugarcane bagasse ranging from 1,000 to 9,000 MW, depending on the technology used and the use of harvest trash. One utility in São Paulo is buying more than 1% of its electricity from sugar mills, with a production capacity of 600 MW for self-use and 100 MW for sale.⁶⁴ According to analysis from Frost & Sullivan, Brazil's sugarcane bagasse used for power generation has reached 3.0 GW in 2007, and it is expected to reach 12.2 GW in 2014. The anaylis also found tha sugarcane bagasse cogeneration accounts for 3% of the total Brazilian energy matrix.⁶⁵ The energy is especially valuable to utilities because it is produced mainly in the dry season when hydroelectric dams are running low.

According to a study commissioned by the Dutch government in 2006 to evaluate the sustainability of Brazilian bioethanol "...there are also substantial gains possible in the efficiency of electricity use and generation: The electricity used for distillery operations has been estimated at 12.9 kWh/tonne cane, with a best available technology rate of 9.6 kWh/tonne cane . For electricity generation the efficiency could be increased from 18 kWh/tonne cane presently, to 29.1 kWh/tonne cane maximum. The production of surplus electricity could in theory be increased from 5.3 kWh/tonne cane to 19 kWh/tonne cane".⁶¹

There are several improvements to the industrial processes, such as adopting a hydrolysis process to produce ethanol instead of surplus electricity, or the use of advanced boiler and turbine technology to increase the electricity yield, or a higher use of excess bagasse and harvest trash currently left behind in the fields, that together with various other efficiency improvements in sugarcane farming and the distribution chain have the potential to allow further efficiency increases, translating into higher yields, lower production costs, and also further improvements in the energy balance and the reduction of greenhouse gas emissions.⁶¹

Exports

Brazilian ethanol exports by selected country and region (2005-2007)66676869 (Millions of liters)
Country/Region(1)	2007	%	2006	%	2005	%
United States(2)	932.75	26.4	1,777.43	51.9	270.97	10.5
CBI countries(3)	910.29	25.8	530.55	15.5	554.15	21.4
Jamaica	308.97		131.54		133.39
El Salvador	224.40		181.14		157.85
Costa Rica	170.37		91.26		126.69
Trinidad and Tobago	158.87		71.58		36.12
Mexico	42.21		50.24		100.10
European Union	1,004.17	28.4	587.31	17.1	530.73	20.5
Netherlands	808.56		346.61		259.40
Sweden	116.47		204.61		245.89
Japan	364.00	10.3	225.40	6.6	315.39	12.2
Niger	122.88		42.68		118.44
Republic of Korea	66.69		92.27		216.36
India	0		10.07		410.76	15.8
Total world exports	3,532.67	100	3,426.86	100	2,592.29	100
Notes: (1)Only countries with more than 100,000 liters imports on a given year are shown. (2)It includes exports to Puerto Rico and U.S.Virgin Islands. (3) Including Mexico that trades with the U.S. under the North American Free Trade Agreement (NAFTA).

Brazil is the world's largest exporter of ethanol, in 2007 exported 933.4 million gallons (3,532.7 million liters),⁶⁶⁶⁷ representing almost 20% of its production, and accounts for almost 50% of the global exports. ⁴⁵ Since 2004 Brazilian exporters have as their main customers the United States, Netherlands, Japan, Sweden, Jamaica, El Salvador, Costa Rica, Trinidad & Tobago, Nigeria, Mexico, India, and South Korea.⁴⁵

The countries in the Caribbean Basin import relative high quantities of Brazilian ethanol, but not much is destined for domestic consumption. These countries reprocess the product, usually converting Brazilian hydrated ethanol into anhydrous ethanol, and then re-export to the United States, gaining value-added and avoiding the 2.5 percent duty and the USD 0,54 per gallon tariff, thanks to the trade agreements and benefits granted by Caribbean Basin Initiative (CBI). This process is limited by a quota, set as 7% of U.S. ethanol consumption.⁷⁰ Although direct U.S. exports fell in 2007, imports from four CBI countries almost doubled, increasing from 15.5% in 2006 to 25.8% in 2007, reflecting increasing re-exports to the U.S., thus partially compensating the loss Brazilian direct exports to the U.S. This situation has caused some concerns in the United States, as this country and Brazil are trying to build a partnership to increase ethanol production in Latin American and the Caribbean. as the U.S. is encouraging "new ethanol production in other countries, production that could directly compete with U.S.-produced ethanol".⁷¹

The U.S., potentially the largest market for the Brazilian ethanol, currently imposes trade restrictions on Brazilian ethanol of $USD 0.54 per gallon, in order to encourage domestic ethanol production, most of which has so far been based on processing corn instead of sugar cane or soybeans, which is much less efficient. There is concern that allowing the Brazilian ethanol to enter the U.S. market without taxation will undercut the budding ethanol industry in the United States⁷². One of the arguments for that is that Brazil currently subsidises its ethanol production, which is false, as the subsidies program finished in the 1990s⁷³. Others argue that rather than impose trade restrictions on the import of the Brazilian product, that the U.S. should make subsidies of its own available to support its fledgling domestic producers. Exports of Brazilian ethanol to the U.S. reached a total of US$ 1 billion in 2006, an increase of 1,020% over 2005 (US$ 98 millions),⁷⁴ but fell significantly in 2007 due to sharp increases in American ethanol production from maize.⁷⁵⁷⁶

As shown in the table, together, the United States, the European Union, the CBI countries with Mexico, and Japan, were the destination of 91% of Brazilian ethanol exports, both in 2007 and 2006. As of 2007, the European Union region, led by the Netherlands, is the main importer of Brazilian ethanol, with 265.3 million gallons (1,004.2 million liters)⁶⁶. However, and despite of reduced direct imports, the United States continues to be the single one country where Brazilian ethanol is exported, reaching 228.96 million gallons (866.6 million liters) to the continental U.S., 13.78 million gallons (52.1 million liters) shipped to the U.S. Virgin Islands, and 3.68 million gallons (14.0 million litters) shipped to Puerto Rico, for a total export for the U.S. in 2007 of 246.4 million gallons (932.75 million liters),⁶⁶ down from 469.6 million gallons (1.77 billion liters) in 2006.⁶⁸

Prices and effect on oil consumption

Alcohol and gasoline prices per liter at Rio de Janeiro (left) and São Paulo (right), corresponding to a price ratio of E100 ethanol to E25 gasoline of 0.64 and 0.56.

Historical variation of ethanol production by region from 1990/91 to 2006/07 (harvest year).⁴⁹ Light green is the production for the State of São Paulo.

Most automobiles in Brazil run either on hydrous alcohol (E100) or on gasohol (E25 blend), as the mixture of 25% anhydrous ethanol with gasoline is mandatory in the entire country.¹¹ Since 2003, dual-fuel ethanol flex vehicles that run on any proportion of hydrous ethanol and gasoline have been gaining popularity, surpassing 6 million new cars and light commercial vehicles sold by August 2008,¹⁵ and as the same month, 75% of light vehicle manufacturing production is flexible fuel without additional cost for buyers.¹⁶ Customers have 49 models available to chose from. Brazilian full flex-fuel vehicles have electronic sensors that automatically detect the type of fuel and the blend mix, and accordingly adjust the engine combustion. Users have the freedom to choose depending on the free market prices of each fuel.¹

Due to the lower energy content of ethanol fuel, full flex-fuel vehicles get fewer miles per gallon. Ethanol price has to be between 25-30% cheaper per gallon to reach the break even point.² As a rule of thumb, Brazilian consumers are frequently advised by the media to use more alcohol than gasoline in their mix only when ethanol prices are 30% lower or more than gasoline, as ethanol price fluctuates heavily depending on the harvest yields and seasonal fluctuation of sugarcane harvest.⁷⁷⁷⁸Since 2005, ethanol prices have been very competitive without any subsidies,¹ even with gasoline prices kept constant in local currency since mid-2005,⁷⁹ at a time when oil was just approaching USD 60 a barrel. The price ratio between gasoline and ethanol fuel has been well above 30% during this period for most states, except during low sugar cane supply between harvests and for states located far away from the ethanol production centers. According to Brazilian producers, ethanol can remain competitive if the price of oil does not fall below USD 30 a barrel.³

By 2008 consumption of ethanol fuel by the Brazilian fleet of light vehicles, as pure ethanol and in gasohol, is replacing gasoline at the rate of about 27,000 cubic metres per day, and by February 2008 the combined consumption of anhydrous and hydrated ethanol fuel surpassed 50% of the fuel that would be needed to run the light vehicle fleet on pure gasoline alone. Consumption of anhydrous ethanol for the mandatory E25 blend, together with hydrous ethanol used by flex vehicles, reached 1.432 billion liters, while pure gasoline consumption was 1.411 billion liters¹⁷¹⁸

However, the effect on the country's overall petroleum consumption was smaller than that, as domestic oil consumption still far outweighs ethanol consumption. In 2005, Brazil consumed 2 million barrels (320,000 m³) of oil per day, versus 280,000 barrels (45,000 m³) of ethanol.⁸⁰ Although Brazil is a major oil producer and now exports gasoline (19,000 m³/day), it still must import oil because of internal demand for other oil byproducts, chiefly diesel fuel, which cannot be easily replaced by ethanol. In 2006 ethanol represented 18% of total fuel consumption in the road transport sector when trucks and other diesel-powered vehicles are considered.¹⁹²⁰

Consumer price spread between E25 gasoline and E100 by state. Red and orange show states with average prices below the break even range. Ethanol price should be between 25 to 30% cheaper than gasoline to compensate its lower fuel economy.	State	Average retail price (R$/liter)		Price spread E25 - E100	State	Average retail price (R$/liter)		Price spread E25 - E100	State	Average retail price (R$/liter)		Price spread E25 - E100
		E100	E25	(%)		E100	E25	(%)		E100	E25	(%)
	Acre (AC)	2.080	2.943	29.32	Maranhão (MA)	1.709	2.628	34.97	Rio de Janeiro (RJ)	1.676	2.531	33.78
	Alagoas (AL)	1.844	2.766	33.33	Mato Grosso (MT)	1.452	2.677	45.76	Rio Grande do Norte (RN)	1.940	2.669	27.31
	Amapá (AP)	2.246	2.686	16.38	Mato Grosso do Sul (MS)	1.683	2.676	37.11	Rio Grande do Sul (RS)	1.779	2.574	30.89
	Amazonas (AM)	2.773	2.452	27.69	Minas Gerais (MG)	1.610	2.377	32.27	Rondônia (RR)	1.839	2.669	31.10
	Bahia (BA)	1.630	2.522	35.37	Pará (PA)	2.120	2.772	23.52	Roraima (RO)	2.154	2.710	20.52
	Brasília (DF)	1.884	2.586	27.15	Paraíba (PB)	1.883	2.553	26.24	Santa Catarina (SC)	1.697	2.556	33.61
	Ceará (CE)	1.768	2.510	29.56	Paraná (PR)	1.445	2.429	40.51	São Paulo (SP)	1.306	2.398	45.54
	Espírito Santo (ES)	1.795	2.662	32.57	Pernambuco (PE)	1.700	2.573	33.93	Sergipe (SE)	1.888	2.518	25.02
	Goiás (GO)	1.581	2.565	38.36	Piauí (PI)	1.927	2.655	27.42	Tocantins (TO)	1.708	2.748	37.85
	Country average	1.513	2.511	39.75	Source: Agência Nacional do Petróleo (ANP). Average retail prices for week of 26/10/2008 to 01/11/2008.8182 Note: Data is presented in local currency because the exchange rate for the Brazilian real has been fluctuating heavily due to the ongoing global financial crisis. Exchange rate for 2008-10-31 was USD 1 = R$ 2.16.83

Comparison with the United States

Brazil's sugar cane-based industry is far more efficient than the U.S. corn-based industry. Sugar cane ethanol has an energy balance 7 times greater than ethanol produced from corn.¹ Brazilian distillers are able to produce ethanol for 22 cents per liter, compared with the 30 cents per liter for corn-based ethanol.⁸⁴ Sugarcane cultivation requires a tropical or subtropical climate, with a minimum of 600 mm (24 in) of annual rainfall. Sugarcane is one of the most efficient photosynthesizers in the plant kingdom, able to convert up to 2% of incident solar energy into biomass. Sugarcane production in the United States occurs in Florida, Louisiana, Hawaii, and Texas. The first three plants to produce sugarcane-based ethanol are expected to go online in Louisiana by mid 2009. Sugar mill plants in Lacassine, St. James and Bunkie were converted to sugar cane-based ethanol production using Colombian technology in order to make possible a profitable ethanol production. These three plants will produce 100 million gallons of ethanol within five years.⁸⁵

U.S. corn-derived ethanol costs 30% more because the corn starch must first be converted to sugar before being distilled into alcohol. Despite this cost differential in production, the U.S. does not import more Brazilian ethanol because of U.S. trade barriers corresponding to a tariff of 54-cent