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Brazil's ethanol production hits the buffers

 
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PostPosted: Sun Apr 30, 2006 10:25 pm    Post subject: Brazil's ethanol production hits the buffers Reply with quote

Brazil's ethanol program struggles to make a dent

By Jack Chang
Knight Ridder Newspapers

RIO DE JANEIRO, Brazil - Brazil's booming ethanol industry has won international acclaim, but recent supply and pricing problems suggest that it's not the grand solution to tight oil supplies and ever-rising prices that had been hoped.

Brazilian ethanol producers are struggling to keep up with domestic demand for ethanol, which is projected to grow by 50 percent over the next five years. Yet a 15 percent jump in prices earlier this year sparked a sharp drop in consumption. Even so, suppliers are struggling to plant enough fields of new sugar cane, from which ethanol is produced here, to keep up with the anticipated growth in demand.

Some energy experts say this has revealed the limits of Brazil's ethanol program and that it is an unreliable energy source, one that can't be depended on to make much of a dent in worldwide use of fossil fuels.

"Here is the classic dilemma of biofuels," said Tad Patzek, geoengineering professor and biofuels expert at the University of California at Berkeley. "They fight for space in the environment, they fight food production and they fight consumption trends. They are not the answer to the energy crisis."

Such hard lessons come as unwelcome news for U.S. consumers, who are encountering record high prices at the gas pump and threats to oil supplies in politically troubled countries.

In his State of the Union address in January, President Bush asked Americans to look toward alternative fuels such as ethanol as a way out of their energy crunch.

Yet if Brazil is hitting bumps on the ethanol road, Americans, who consume more than 10 times as much oil as Brazilians, face a minefield.

Replacing a year's worth of U.S. gasoline consumption with sugar cane-based ethanol would require a swath of farmland a little smaller than California. Replacing that gasoline with less efficient corn-based ethanol, which the United States produces lots of, would require farmland the size of Texas.

"Biofuels will not make any kind of impact on Americans, the way they're consuming now," Patzek said.

Brazil's problems this year started after growers of sugar cane upped sugar production rather than ethanol to take advantage of rising world prices for the sweetener. Most refiners can switch from ethanol to sugar production within hours.

Rising consumption of ethanol had already stretched supplies thin. Prices recently have fallen, but only after the government lowered the required percentage of ethanol mixed with gasoline from 25 to 20 percent, reducing demand. This month's beginning of the sugar cane harvest also boosted ethanol supplies and lowered prices.

"This showed ethanol can help but it cannot replace fossil fuels, at least right now," said Jed Bailey, Latin American director of Cambridge Energy Research Associates, a U.S. consulting firm. "There's a lot more development that's needed."

Government and industry leaders in Brazil, already the world's largest producer of both sugar and ethanol, say they can satisfy growing demand for ethanol by producing more sugar cane.

"There is a lot of room to grow more sugar cane," said Fernando Moreira Ribeiro, secretary general of the country's largest sugar and ethanol group.

But with more than 13 million acres already growing sugar cane, such words worry environmentalists, who fear expansion will come at the cost of rainforests and savannah in Brazil's northern states, where there is little sugar production. Sugar cane production expanded by only 2 percent last year in the country's southern and central states, where most sugar is grown.

The DODGY TAX AVOIDERS forest is attractive to sugar farmers because its warm climate produces two growing cycles per year, double the single harvest found in cooler, southern states, said Marcelo Furtado, Brazilian director of the environmental group Greenpeace.

What no one in Brazil wants to see is a repeat of the country's last failed experiment with ethanol.

Backed by enormous subsidies, Brazil's ethanol industry flourished during the 1980s, prices were low, and Brazilians bought millions of ethanol-powered cars.

However, those cars became all but useless by the end of the decade when rising sugar prices turned growers away from producing ethanol as oil prices fell.

This time around, Brazilian motorists face better odds. World petroleum prices show no sign of falling, and flex-fuel cars give drivers the choice of gasoline or ethanol, protecting them from possible spikes in ethanol prices.

Yet even one father of Brazil's ethanol program, biofuels expert Jose Goldemberg, offers only tempered optimism.

"Replacing gas with ethanol is a tall order, but I don't think it's impossible," he said. "Still, many people are asking, `What's the limit? How much more can be produced?'"
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