The Fuel from Ipanema – and as she passes…

We’re all in a tizzy over gasoline, oil reserves, air quality, will there be a GM next month, etc.  The discussion over transport fuel brings out hysterics on all sides.

  But there’s a country that seems to have found a solution for its transport fuel.  It has limitless fuel stock, has mandated flex-fuel vehicles, and is not as vulnerable to volatile fuel prices as the United States.

  And that country is . . . Brazil.  What?  Brazil?  Not Germany, Japan, Korea, or France?  Nope.  Brazil?  Yes.

Yep.  The country of samba, Carnival, Daniela Mercury, Black Orpheus, and açai!.

Remember the oil shocks of the 1970s?  This scared the heck out of the Brazilian government, which started promoting the research and development of alternatives to fossil-based fuels.  By the late 70s, refineries in Brazil began blending sugar cane ethanol into gasoline stocks.  Progress had its bumps—in the early 1990s, Brazil began importing ethanol to meet the demand, but starting with the introduction of flex-fuel vehicles earlier this decade, use of ethanol has taken off.  By 2008, almost 90% of cars in Brazil were flex-fuel vehicles, and Brazil is considered by some to be the only country in the world to have a sustainable biofuel economy.

  Why sugar cane?  Well, it grows like a weed, and with the backing of the Brazilian government, growers developed strains of sugar cane that were disease resistant and produced higher yields.  The result?  Brazil has its energy house in order (and even has newly-discovered oil fields off its shores), and for the first time in 2008, it is now a creditor nation.  Ethanol has often become the choice of fuel for Brazilian drivers, as the price has dropped below that of diesel, which by which most cars there run.  Unlike corn ethanol, a disastrous US policy that did nothing save increase the price the food and pollute the Gulf of Mexico with fertilizers and chemicals, Brazil’s food supply has been relatively untouched.

  So why don’t we just export sugar cane ethanol from Brazil?  Well, that’s not going to happen.  The US has place trade restrictions on Brazilian ethanol in the hopes of boosting American corn ethanol production, and although some of the ethanol ends up here, much of it goes to the EU and Japan.  There’s plenty of opportunity for cane ethanol, though—I know of one fellow from my business school who’s working on exporting cane ethanol to Vietnam.

  Now this is not a perfect solution—what works in Brazil may not work in the US.  Some would argue that there are some environmental problems in Brazil resulting from the growing of cane; there is, however, scant evidence that food is being sacrificed for the push to grow this cane.  Labor complaints also had emerged, but my most accounts the government has stamped out most abuses. Ethanol is also not exactly clean burning, and depending with whom you speak, its effect on global warming is equal, or even greater than fossil based fuels.  But I often argue that in switching from fossil based fuels, energy independence is a better argument than global warming, which many refuse to acknowledge, let alone understand.

  So watch out for Brazil.  I think there’s a reason why students learn about BRIC countries—Brazil is definitely on its way to becoming a global leader in the energy debate.  And like Astrud Gilberto’s girl, I think as they pass us, they smile . . . and doesn’t see us as we fall further behind in energy independence.