Brazil's Earth Day Present: A Sustainable Energy Policy

As millions celebrate Earth Day, Brazil's national energy policy offers an example for nations seeking to do more with less. Brazil loves its Grand Prix auto racing, but biofuels and innovative public transportation systems provide the nation with energy independence.

In Curitiba, an industrial city of 3.7 million in southern Brazil, 1,100 buses run on dedicated flat roads and move 2 million commuters daily. Articulated "bustrains" carrying as many as 270 people run on a 20 percent biodiesel blend, and consume 30 percent less fuel than buses using conventional diesel. A PBS Frontline report calls Curitiba the world's most efficient public transportation system.

Plug that savings into New York's Metropolitan Transportation Authority (where 2.5 million commuters use an aging 4500 bus fleet), the CTA in Chicago, the T in Boston and transportation systems in other cities struggling for infrastructure money to weather the crisis. LA crunched the numbers and used Curitiba as the model for its new Orange Line. When shopping for a transport system to complement modernization of the El Dorado international airport, Bogota, Colombia, a 4 million metro market, also adopted the Brazilian plan.

Since Brazil doesn't need to mess with Texas or OPEC, a government mandate requires automobiles to run on 25 percent biofuel (mostly sugar and soybeans), reducing dependence on imported oil. In the US, automobiles run on just 10 percent, thanks to an apocryphal debate that tags biofuels as a leading cause of global hunger. Brazilian families consume less natural gas, electricity and water thanks to instant hot water heaters, gentle cycle washing machines and tropical and sub-tropical living that doesn't require big monthly heating bills.

Renewable solar and wind-generated power are problematic and expensive options in Brazil and South America, where grids are keyed to basic needs. Since credit to upgrade them is costly, governments in the region prefer to use it for projects with greater political urgency.

In the US, a DOE study says power outages cost US consumers $80 billion annually, close to the amount team Obama will spend to maintain energy security in Iraq this year.

Brazil's national energy policy helps mediate fuel prices but it doesn't keep cars from being expensive. With average annual family incomes at $10,000 (CIA Factbook), compacts by Fiat and Renault running on 25% biofuel start at US $16,500, not including finance charges and insurance. That's about the same price as the Fiesta subcompact Ford plans to market next year in the US, where average family incomes are $50,000.

The global game breaker that could be a big boost for emerging economies is the four-passenger family car produced in India, priced under US $3,000 and ideal for first-time car buyers. Two global auto giants, Renault-Nissan and Tata Motors (who manufacture Jaguar and Land Rover) are producing these vehicles, which run on biofuel or natural gas and get 50 mpg. These vehicles are part of a long tradition of the "people's car" that includes the VW beetle, the Citroen 2-CV, the Fiat 800 and the Honda CV series.

In the US, where the world is accustomed to looking for new thinking on sustainability, NGOs, wonks and fashion victims are going gaga over the one-passenger GM Segway PUMA two wheeler that will sell for around $13,000. If you've got entrepreneurial skills and a friend in the Mumbai hack bureau you could get a fleet of five Tata Nano taxis for that price.

President Luiz Inacio Lula da Silva, in his lame duck year, is pulling out all the stops to cushion the impact of the what he calls the "North American crisis." Brazil's constitutional arrangement of checks and balances gives him a wide berth to issue presidential decrees. Taxes on new car purchases have been lowered twice to stimulate automobile sales. When the president of Banco do Brasil balked at lowering credit card rates that can generate growth and help working families, Lula forced him to resign. While he didn't agree with Lula's methods, former neoconservative president Fernando Enrique Cardoso told a World Economic Forum meeting in Rio last week that Brazil is having a softer landing than most G7 economies.

Working Brazilians can count on a stable economy, but they're feeling some pain. Planning Ministry officials project 2009 growth to top out at one percent but estimate a rebound to 4.5 percent for the 2010 calendar year. Workers laid off at the big Caterpillar plant in Sao Paulo state are "volunteering" part time just to keep health care benefits. EMBRAER, the Boeing of Brazil, completed a 5 percent workforce reduction, sending engineers and technical staff scrambling to preserve their upscale lifestyles. The cost of basic food items and public transportation is edging up. But Lula decreed a modest minimum wage increase that will help keep food baskets of working Brazilians full.

Brazil's sustainable energy dividend is the result of generations of trust and cooperation between a strong federal government, parastatal companies and global businesses who have developed the knack of working with them. In the US, the Edelman Trust Barometer for business has fallen to 38 percent, the lowest it has been since the Enron oil scandals. One more reason for Brazil to trust 25 percent biofuel.

Comments

[Hokhmah]

Illuminating comment from Almir. Bio fuels are part of everyday life in Brasil. People are comfortable and confident knowing that their government can do so much more with them. Earth Day in Brasil was squeezed between a religious and a state holiday, so events can not be compared with the Made in USA Earth Day and its associated mediagenics. The government did announce on that day, I recall, new standards for electric refrigerators and freezers that will consume less electricity doing their jobs and save consumers hundreds of millions of Reals each year in electric bills.

[Almir]

Another persuasive fact for incentiving ethanol production is the electricity generated as by-product of ethanol processing: considering the energetic balance, the electricity generated in sugar cane processing in Brazil is almost as large as its ethanol equivalence. It's like two large scale plants generating electricity exactly when it's more necessary: in the Brazilian dry season! So the producers of ethanol are also having increasing revenues by selling electricity to the country's national electric system, which has become an strategic and reliable source of electricity.

Brazilian ethanol does not intend to concur with petroleum, but it could supply a small part of the world energy demand. With the increasing demand from the countries like India and China, the permanent threat of war in the Middle East and the many environmental problems, there seems to be no easy solution for the energy problem. So the rest of the world will have to accept the reality of ethanol from sugarcane as the right and best solution for the oil crisis.

The problem is that ethanol faces prohibitive barriers to developed markets. United States currently places a 54-cent-a-gallon tariff on ethanol imported from Brazil. It is difficult to understand the maintenance these tariff levels, except for political reasons. The developed world appears purposely myopic in relation to the opportunities Brazil presents, maybe it's because that would upset wealthy US and European farmers – a price apparently not worth paying.

[Almir]

Ethanol production in Brazil uses just one percent of total arable land, and the country can expand its sugarcane fields without disturbing sensitive land areas (like Amazon), just by tapping land such as depleted pastures. Just raising intensity of cattle production from the current 0.8 animals per hectare to 1.2 animals (a target already far exceeded in many parts of the country) would release about 80m hectares of land for crops. There remains plenty of room for expansion: the country has 355 million hectares of farmable land, of which 7 million hectares under sugarcane of which the amount used to make ethanol fills 3.4 million hectares (compared to 200m hectares of pasture). Another 105.8 million hectares remained available, which allows Brazil to increase ethanol production without affecting the environment or food. By comparison, the additional terrain for Brazilian crops could surpass all of the land now under cultivation in the European Union.

Meanwhile, Brazilian food production has doubled in the past decade and that’s the most impressive thing about ethanol from sugarcane: in contrast to corn-based American ethanol or biodiesel derived from soybean oil, there is no cost pressure and no competition with food.

[Almir]

I will take this opportunity to add some useful words about Brazilian bio-fuels.

As food prices continue to threaten food security around the world, Brazilian ethanol is one obvious solution being largely ignored. Brazil set up its efficient fuel alternative program in the 70s, when the first oil crisis hit the world. Now Brazilians drive cars moved by ethanol or gasoline mixed in any proportion. And as Mr. Eric Ehrmann wrote in his excelent article, gasoline in Brazil is not pure, but blended with 25% ethanol, resulting that internal consumption of ethanol in the country is already superior to gasoline's. Ethanol in Brazil is already much cheaper than gasoline at current international oil prices.

Brazilian ethanol is produced from sugarcane without any governmental subsidies and the fuel has a very competitive price. Researchers are increasing the productivity (more fuel extracted per sq.km. of crops) by adapting sugar canes species to each type of land and topography. The productivity now is more than 3 times the records of 30 years ago and it keeps on raising, being expected to soar very soon when the technology to extract ethanol from cellulosic materials (crop waste) will be available for large scale production.