Flex-fuel fuels free market for 16 million brazilian

Fortune Magazine provide a round-up of the state and extent of the ethanol industry in the US and looks to Brazil for answers. Fourty per cent of the fuel Brazilians use in their cars is ethanol and yet the annual GDP growth rate of 2.6% disproves the assertion that moving from the hydrocarbon to carbohydrate energy will adversely affect an economy.

But ethanol will never really take off unless consumers demand it, and while the U.S. industry still relies on taxpayer largesse, Brazil has leaped to the next step: a profitable free-market system in which the government has gotten out of the way.

There are now 1.3 million flex-fuel cars on the road and this figure is fast growing; as of last December, 73% of cars sold in Brazil came with flex-fuel engines. It seems this is the key: offering drivers a bowser choice of gasoline or E85 ethanol, which ever is cheaper at the time; fuel-flex fuels the free market and ethanol demand is growing.

The climatic benefits from this are profound. E85 fuel is carbon neutral, meaning that it recycles the atmospheric carbon dioxide fixed as growing sugar cane when it is burnt as car fuel. The fuel only has to travel 25 kms to be refined.

While oil frequently has to be shipped halfway around the world before it's refined into gasoline, here the sugar cane grows right up to the gates of Sert Ãozinho's Santa Elisa mill, where it will be made into ethanol. There's very little waste--leftovers are burned to produce electricity for Santa Elisa and the local electrical grid. "The maximum distance from farm to mill is about 25 miles," says Fernando Ribeiro, secretary general of Unica, the trade association that represents Brazilian sugar-cane growers. "It's very, very efficient in terms of energy use."

Brazil is ideal for growing sugar cane, the most energy-rich ethanol feedstock, and a boom is underway where 250 mills have sprouted in southeastern Brazil, and another 50 are under construction to service the 34,000 gas stations and 16.5 million drivers.

Economic benefits of ethanol uptake are transforming the economy. Brazil does not have to import cars as it makes it's own fuel-flex vehicles in a fast growing market, and energy independence is having a multiplier effect:

Not only does Brazil no longer have to import oil but an estimated $69 billion that would have gone to the Middle East or elsewhere has stayed in the country and is revitalizing once-depressed rural areas. More than 250 mills have sprouted in southeastern Brazil, and another 50 are under construction, at a cost of about $100 million each. Driving to lunch at his local churrasco barbecue spot in Sert Ãozinho, the head of the local sugar-cane growers' association points to one new business after another, from farm-equipment sellers to builders of boilers and other gear for the nearby mills. "My family has been in this business for 30 years, and this is the best it's been," says Manoel Carlos Ortolan. "There's even nouveaux riches."

So bravo Brazil for showing fossil-fuel based economies, like Australia and the United States, that you can enjoy the prospect of long term environmental sustainability for your children and grand-children, as well as healthy economic growth.

Even though the U.S. will never be a sugar-cane powerhouse like Brazil, investors now view Rio as the future of fuel. "I hate to see the U.S. ten years behind Brazil, but that's probably about where we are," says one shrewd American freethinker, Ted Turner.

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