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The Observer: Brazil leads field in alternative fuel race

Brazil leads field in alternative fuel race

As use of ethanol fuel increases, George Bush is looking to his South American neighbour for lessons in energy self-sufficiency. Nick Mathiason reports

Sunday May 21, 2006
The Observer

Giant mechanical claws grab tonnes of sugar cane from huge, open-topped trailer trucks and place them on conveyor belts where they are crushed into juice. Here at the Costa Pinto refining plant an hour's drive from Sao Paulo begins the process which now powers half of Brazil's cars.

It is big business. Cosan, which owns the plant, is Brazil's biggest sugar refiner, publicly quoted and soon to list on Wall Street. It has 16 other facilities like Costa Pinto, producing a billion litres of ethanol and generating $200m. It is planning to accelerate production.

The cause is the soaring price of oil. Last month 85 per cent of Brazilian new car sales were flex-fuel vehicles – with engines that can run on petrol or ethanol.

Ethanol is cheaper than petrol but is not as efficient. Brazilian drivers are canny enough to know that when petrol is at least 30 per cent more expensive than ethanol it pays to fill up the tank on alcohol made from sugar. And they do. Ethanol from sugar has helped transform Brazil's economy and enabled the 180m-strong Latin American powerhouse to be energy self-sufficient.

Brazil is the world's alternative fuel pioneer. It started down this road during the Seventies oil crisis. The government provided incentives, the state oil firm installed pumps and it took off. The industry is now subsidy-free – farmers don't get a penny from the state.

'If we didn't have this programme, Brazil would have bankrupted,' said Professor Suani Coelho, Sao Paulo's state secretary for the environment. 'It was an economic issue. Now there are other benefits.'

The lesson is not lost on George Bush. Behind his ambitious goal of cracking the US's oil addiction are moves to replace 75 per cent of Middle Eastern energy imports with bioethanol – a flammable, colourless, distilled alcohol from oil, corn or grass – by 2025. Bush has visited Cosan's facilities. He is keen to see subsidy-reliant US mid-Western farmers make US energy supplies secure by growing crops to produce bioethanol.

The agenda could transform agricultural economics, help wean farmers off handouts and ease global trade tensions by allowing developing countries to supply the US with crops for food or energy.

There are environmental benefits too. Bioethanol engines produce 15 per cent fewer carbon dioxide emissions. Critics say this is negated by its relative inefficiency. But Brazilians argue this ignores the impact of growing cane, which sucks carbon dioxide out of the atmosphere.

The US may now be intent on swapping gas-guzzlers for sugar-sippers but how realistic is it to expect either the US or Europe to follow Brazil's lead? There is one major stumbling block. The US imposed a hefty $0.54 per gallon tariff on Brazilian ethanol. Brazilians argue that the substance should be freely traded, like oil, but so far farmers and their political representatives are resisting moves to lift the tariff.

There are nine General Motors models in production at the giant Sao Paulo assembly plant. Fifty miles away, at its Cruz Alta test centre, we are offered the opportunity to drive Corsas, Vectras, a Zafira and a red Montana pick-up truck. There are no obvious differences in performance – if anything the cars feel more souped-up. These are all flex-fuel vehicles running on ethanol. GM dominates this market in Brazil, some 95 per cent of its Brazil sales are flex-fuel.

And the bioethanol word is spreading around the world. In India there is a real prospect the tropical Jatropha plant could power vehicles. Encouragingly, this short stubby plant grows in arid areas where other crops won't. Both BP and GM are actively developing this.

Canada's top biotech firm, Iogen, is working with Volkswagen and Shell to produce cellulose ethanol made from non-food agricultural residue. This can cut carbon dioxide emissions by 90 per cent compared with conventional fuels.

Ultimately there are limits. There is only so much land that can be given over to grow the necessary crops. 'Bioethanol is not the answer but is definitely part of the solution,' says Dr Steve Howard, chief executive of the Climate Change Group – an alliance of major world cities, US states and multinational businesses. 'The future of fuel is that there is not one alternative, but a range of choices.'

But perhaps the real opportunity of bioethanol is that it represents the first realistic alternative fuel that will pave the way for other technologies.

Elizabeth Lowery is GM's environment and energy vice-president. She believes that, by 2012, 10 per cent of GM's US car sale will be run on E85 fuel (a mix of 85 per cent ethanol and 15 per cent petrol).

But Lowery is already thinking of the next generation of cars, which she is convinced will be powered by fuel cells. GM has spent $1.5bn developing fuel cells. The bioethanol programme is in effect providing the intelligence to get there. 'You don't spend $1.5bn if you don't believe this is the transport of the future,' she says.

Europe is way behind the US in adopting biofuels. In the US there are five million cars that run on bioethanol out of 150m, and 600 pumps. Sweden, the most advanced European country, has only 7,000 cars and 300 pumps – ten per cent of the national network. GM is looking to see how consumers react to its new Saab biopower model, which runs on an E85 blend. In Somerset, the police force is trialling E85 Saabs but there is precious little government support.

The lesson from Brazil is clear. Only government commitment can produce an alternative fuel revolution. Maybe it will take an oil shock on a par with that of the 1970s to focus minds.

Biofuel: Sweet sucess

Sugar juice is fermented, separated and distilled using technology that is by no means cutting edge. In fact, some parts of the 70-year-old factory look dilapidated.

Nevertheless, in the peak harvesting season – between May and July – 600 trucks arrive at Costa Pinto, from which 30,000 tonnes of sugar is produced.

Nothing is wasted. Bagasse, a residue material, is burnt and the steam used to power not just the factory but local communities with nine megawatts of power. Reinvestment next year will see the amount of energy sent back to the grid increase five times. The remaining waste is used as fertiliser.

From being dependent on energy imports, Brazil is set to become a major energy power. Today this vast country gives over 4.5 million hectares to growing sugar cane – equivalent to the total amount of land cultivated in the UK.

From the 310m tonnes of sugar cane that is crushed, Brazil produces 6.5 billion litres of anhydrous alcohol – the type suitable for powering vehicles. So far exports have raised $2bn (£1.1bn) for the Brazilian treasury. This is expected to grow substantially as the US takes Brazilian imports.

The Sao Paulo state government is reviewing whether to give over more land to grow cane. Some are calling for a tenfold increase of land provision. But that would have a catastrophic environmental impact. There are fears that as more farmers grow sugar cane, oranges, and soya and cattle farmers move to forest areas, there will be an untenable depletion of precious rainforests. But this is played down by the authorities. In Sao Paulo state, there is a 2,000-strong environmental police force constantly monitoring illegal logging.

More realistic is a doubling of current land use which would lead to perhaps a fourfold increase in yield as scientists develop better strains.

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