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Brazil Ethanol

In: Business and Management

Submitted By scmp
Words 4566
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Research Paper
HUMN 432 - Society, Culture and Technology

Ethanol in Brazil

Team A

I. Introduction 3
II. Brazil 4 a. Short history 4 b. Brazil during the oil crisis in the 70’s 6
III. Ethanol as bio-fuel 7 a. Extraction process 7 b. Energetically self sufficient ethanol plants in Brazil 8 c. Energy from Ethanol 9 d. Flex-Fuel Vehicles 10
IV. Economic Effects of Ethanol as Bio-Fuel 10 a. Brazil not endangered by a new oil crisis 10 b. Export 12 c. Vertical industries 13 d. Environmental benefits 14
V. Ethical and Social Implications 15 a. A market not dominated by oil barons 15 b. Independent economy 16
VI. Brazil in a global economy and ethanol in the US 18 a. Future of ethanol as bio-fuel in Brazil 18 b. Ethanol in the United States 19 c. E85 21
VII. Conclusion 22
VIII. Works Cited 23
I. Introduction

Fuel, at its simplest, makes us go. It is a necessity to modern day life. Even if everyone were to walk, rather than drive, there would be a need for it. This is one thing that is in common around the world. The dependence on oil based gasoline has many of the most powerful countries forking out quite a bit for their fuel. This is, of course, the case in the United States. There is no doubt that this country needs an alternative fuel, or to cut back on its use of the current fuel. However, because we are so dependent at this time on oil based gasoline and other fuels, Americans tend to be a bit hesitant of truly switching over to some of the other products. We need examples. We need to know that it will work and that it will save us money. We, as Americans, need to feel confidant enough to truly look into another source of energy as our main fuel. Brazil is the perfect example that we need to show that alternative fuel can make a big difference and can be used to fuel an economy.
II. Brazil

a. Short history

The first question that comes to mind when looking at a country’s history is: “What are the ingredients which make up Brazilian heritage in the current century?” Well, when it comes to heritage, you will find an unparalleled diversification when you look into the Brazilian culture. In today’s Brazilian society, there are many ethnical groups blended together and they are: African, Amerindian, Asian, European, Indian, and Middle Eastern (Geographia). Now, let’s take a look into how this current multifaceted Brazilian nation has developed over time. The very first historical record of civilization is documented when Pedro Cabral, of Portuguese decent, discovered the country known as Brazil in the 1500’s (Geographia). Portugal’s claim did not go unchallenged. The French Huguenots established a residence lasting eleven years before being ousted by the Portuguese. The Dutch, also, arrived in the mid 1600’s, and remained for 24 years until driven out (Answers). In summation, the 16th through 17th centuries were mainly dominated by Portugal (Geographia). The largest industry was agriculture followed by, red dye, gold, and sugarcane. The 18th century, however, marked a change for Brazil. During this century, African slaves were brought into the economy. From 1807 to 1821 Brazil became the capital of Portugal until Prince Dom Joao declared Brazil a separate country under his rule (Geographia). During the 19th century close to a million European immigrants flocked to Brazil to fuel the growing coffee industry. After the coffee industry collapsed, the workers were then used to grow sugarcane. Since then, Brazil has been unable to maintain a single form of government for more than a few years (Geographia). Brazil is currently a democracy which elects strong dictatorship type personalities. Poor infrastructure has caused the country to have low educational levels and a corrupt government. Brazil today is the world’s fifth most populated country and ninth largest economy. Sugarcane, the largest agricultural product, produces many exports one of which is ethanol (Wikipedia).
b. Brazil during the oil crisis in the 70’s

The use of ethanol became prominent during the 1970’s oil crisis. In this crisis, Arab members in the Organization of Petroleum Exporting Countries (OPEC) “…announced that they would no longer ship petroleum to nations that had supported Israel in its conflict with Syria and Egypt — that is, to the United States and its allies in Western Europe” (Wikipedia). It was during this time oil prices quadrupled for Brazil. In consequence, in 1975 Brazil's government, then a military government, decreed a national ethanol program, called Proalcool, to separate their dependency on Middle-Eastern oil originally for “patriotic, not financial or economic reasons” (The Brazilian National Programme of Fuel Alcohol (Proalcool)). The Proalcool’s goal was to convert sugarcane into bio-fuel (ethanol). Using direct investments, subsidies and tax brakes they started the ethanol experiment. Millions of acres of sugarcane were being used for sugar and ethanol production. This led Brazil to use bio-fuel to power vehicles before any other nation had even thought of it. 30 years later nearly 90% of all cars are produced to use an alcohol based fuel.
III. Ethanol as bio-fuel

a. Extraction process

Ethanol, also referred to as ethyl alcohol is a flammable and colorless, chemical compound that is most often found in alcoholic beverages. This grain alcohol goes through a process of Fermentation. Fermentation is when “Certain species of yeast metabolize sugar in the absence of oxygen; they produce ethanol and carbon dioxide” (Wikipedia). The process of extracting ethanol is a rather grueling one. Before taking apart the bio-fuel, it must be purified. Let’s take a look at the technical manner of the breakdown; “Fractional distillation can concentrate ethanol to ninety-six percent ethanol and four percent water is a zoetrope with a boiling point of 78.2 C, and cannot be further purified by distillation. Therefore, 96% ethanol in water is fairly common solvent” (Wikipedia.com). Now let’s focus our attention towards terms that is understandable for us all. The brewing of ethanol is a water mixture. 96% of the blend contains ethanol and the remaining four percent is water. Once the mixture of ethanol-water is brewed, lime or salt can be used to further “dry” the creation. “Lime (calcium oxide), when mixed with water in ethanol will form calcium hydroxide, which then can be separated. Dry salt will dissolve some of the water content of the ethanol as it passes through, leaving a purer alcohol” (Wikipedia). That is how the extraction process takes place.

b. Energetically self sufficient ethanol plants in Brazil

Sugarcane is the basis for Brazil’s ethanol industry. Brazil is the leading industry for ethanol and the United States is following in their tracks. “Ethanol plans are co-located with sugarcane mills, primarily in Sao Paulo state, home to two-third of the plants” (Johnson). Once the leaves are stripped of the cane, they have to be processed within 24 hours because they are perishable. Following the crushing of the stems, fermentation of the cane juice begins. “About 6,400 liters (1,664 gallons) of hydrated ethanol is captured” (Johnson). The aftermath of the sugarcane (bagasse) can be burned and used towards generators of electricity for ethanol plants. Farmers can also utilize the juice by pouring it back onto their land. ’The Brazilian ethanol plans are completely energy self-sufficient” exclaims Severinghaus, “plus, at the flip of a switch, they can produce either ethanol or crystalline sugar on any given day...” (Johnson). Either choice can be quite profitable. The energy surplus is sold to the national grid. The process, in its entirety, makes no use of fossil fuels. As mentioned in the topic above, energy from ethanol can be used towards ethanol plants and for lands of the farmers. The product that is created after the sugarcane leaves are removed has become an amazing and interesting technology. The fact that it can generate electricity and be used towards plants is fascinating.

c. Energy from Ethanol

The energy balance of ethanol is positive in Brazil, mainly because the extraction process uses energetically self sufficient plants and does not involve burning of fossil fuels. In driving a car running on ethanol, the mileage per gallon is lower when compared with a gas burning engine. However, since ethanol costs much less than gasoline at current oil prices, there is a net financial gain in driving on ethanol. Filling up the tank with ethanol in Brazil costs 60% less then the price of gasoline. This is profitable as long as the barrel of crude oil is over $30 (Rother). The international oil market today makes ethanol in Brazil highly profitable.

d. Flex-Fuel Vehicles

A flex-fuel vehicle, also known as variable fuel vehicles, is a means of transportation that has a single fuel tank, fuel system, and engine. Flex-fuel technology was first created by Ford Motor Company back in the mid 1980s. They are also known as variable fuel vehicles. The primary purpose of a flex-fuel vehicle is to run on unleaded gasoline and ethanol as a mixture. Not just any car can run on ethanol and gasoline. The vehicle has to be adaptable because alcohol fuel tends to become corrosive over the years. Along with the adaptable vehicle there has to be special sensors for the fuel line to detect the mixture of the contents. “There must also be a special sensor in the fuel line to analyze the fuel mixture and control the fuel injection and timing to adjust for different fuel compositions” (Fueleconomy.gov).

IV. Economic Effects of Ethanol as Bio-Fuel

a. Brazil not endangered by a new oil crisis

By mid-1980s, due to technical advances in engine design, more than half of the cars on Brazilian roads ran on ethanol (The Brazilian National Programme of Fuel Alcohol (Proalcool)). In the 1990s, because of the falling oil prices, poor cane harvest seasons and high sugar prices the ethanol became less attractive and this made the Brazilian government to change the emphasis from ethanol-only to ethanol-oil blend, mandating a minimum of 25% of ethanol in gasoline. The breakthrough came in 2003 with the skyrocketing oil prices and the introduction of flex-fuel. Now more than 70% of all new cars sold in Brazil are flex-fuel cars (Rother). Until 1996, Petrobras, the national oil company, was buying ethanol from the private sector and selling it to gas station chains. With the sales and exports growing, the government stopped the subsidies for ethanol and Petrobras buys ethanol only as an additive for gasoline. Because of low internal demand, Petrobras sells its surplus gasoline on the international market at a low price (The Brazilian National Programme of Fuel Alcohol (Proalcool)). At the end of 2004 Brazil had an oil production of 1.6 million bbl/day and a consumption of 2.1 million bbl/day, the gap being filled by net imports (Country Analysis Briefs Brazil). Brazil hopes to become energy independent by the end of 2006, replacing the oil imports with an increase in ethanol production.
b. Export

Having covered the internal demand for an energy source, Brazil becomes the world’s biggest ethanol exporter, with 2 billion litters exported in 2005 (Press Release). The export is bound only to increase because the Brazilian model cannot be replicated everywhere in the world. They benefit from a tropical climate, three harvests a year, immense areas where the sugarcane can be grown, and years of research in molecular biology aimed at squeezing more and more ethanol from sugarcane. Other countries that are facing urgency in finding an alternative fuel have to rely on Brazilian ethanol exports. The urgency comes from rising crude oil prices but also from the ratification of the Kyoto protocol which mandates a major decrease in the CO2 levels. Currently Brazil produces 35% of the world’s ethanol total (Press Release), which makes them a Saudi Arabia of ethanol. The exports could be higher but Brazil still lacks in infrastructure to move the ethanol from distilleries to ports which is done today only by trucks. Petrobras plans to build a pipeline that can move 4 billion litters a year from ethanol distilleries to Brazilian ports (Petrobras Considering 1-Billion Gallon/Year Ethanol Pipeline).

c. Vertical industries

Like any industry that has a major impact in the economy of a country, the rise of the Brazilian ethanol industry pulls after it a vast array of related industries. Most of them are related with the process of growing the sugarcane and extracting the ethanol. The field of molecular biology has benefited enormously. For decades the researchers in this field have been busy with finding the sugarcane varieties that would give the highest quantity of ethanol upon distillation. The agriculture also saw major benefits because of the need to come up with new machines that would speed up the processes of plantation and harvest. The sugar mills, after years of research and technical advances, have become a model of efficiency. Maybe the most important industry that benefited from this ethanol adventure is the car manufacturing commerce. In 2003 the Brazilian division of Magneti Marelli, a part manufacturer that makes ignition systems for engines, came up with a system that senses the concentrations of ethanol and gasoline and sets the engine timing accordingly (History). This led to the apparition of flex-fuel cars which now account for more than 70% of the new vehicles sold in Brazil (Rother).

d. Environmental benefits

Ethanol, a renewable energy source, is a promising alternative for reducing the CO2 levels, the most important greenhouse gas. In the ethanol extraction process, the distilleries are self sufficient energetically. They burn the bagasse (the sugarcane waste) to create electricity for their activities and the surplus is sold to the grid (Rother). When using ethanol as a fuel, the CO2 emissions resulted after burning are reabsorbed by the sugarcane plantations, thus making the ethanol a CO2 neutral fuel (Farrell et al.). Even when factoring in the production process, and factoring out the CO2 absorption, the ethanol is more environmentally friendly than petroleum because of lower net CO2 output levels (Farrell et al.). So far the only negative environmental impact of using ethanol as a biofuel seems to be a reduction in biodiversity because of using immense areas for growing only sugarcane.
V. Ethical and Social Implications

a. A market not dominated by oil barons

Ethanol is a natural fuel that could help release the stranglehold that oil barons have over the gasoline industry. The price of gasoline is increasing while the price of ethanol is decreasing, but in part because oil companies are refusing to buy the available supplies to blend with their gasoline (Cooper). It seems like a logical decision to purchase ethanol for gasoline, but oil companies are continuing to purchase oil products from crude oil refining companies. There is no doubt that the price of crude oil is a contribution to the increase of the price at the pump, but so too did increasing profits and margins for domestic refining and marketing (Cooper). It is clear that rising gas prices are in part due to oil prices, but oil companies are taking advantage by raising their profit margins as well. A switch to ethanol would mean lower gas prices, but the profit margins would not be as high. Fortunately for ethanol producers such as Brazil, it is inevitable that ethanol will take its fair share of the market. "The way we figure it, ethanol will be cheaper than gasoline as long as the price of oil is over $45 a barrel," said William Bernquist, coordinator for research and development at the Sugarcane Technology Institute in Piracicaba, Brazil. With oil upwards of $60 dollars a barrel, and no relief in sight, Bernquist predicts that ethanol will stay cheaper for some time (Regan). Gasoline all over the world could be cheaper with a switch to ethanol. Assuming that refiners and gasoline marketers in New York Harbor took advantage of lower-priced ethanol in March 2006, they could have lowered gasoline prices by 5 cents a gallon (Cooper, 8). There are similar situations to this all over the world and when oil companies make the switch to ethanol, there will be relief in gas prices all over the world.

b. Independent economy

Using ethanol, Brazil will be able to achieve an independent economy. Brazil consumes nearly 4 billion gallons of ethanol annually (Ethanol Worldwide). This is huge amount of Ethanol. All of this is ethanol is produced in Brazil and they still produce enough for exports. By producing this much Ethanol, Brazil is well on its way to achieving an independent economy. However, Brazil did not always produce this much ethanol. The production of ethanol actually stayed about the same from 1970 to 1984 (Brazilian Sugar). 1985 is when the production of ethanol became wide scale in Brazil. From 1985 until the present day that has been a steady increase in the production of ethanol. The production of so much ethanol in Brazil has been planned for one purpose and that is to become free of imported oil by the end of 2006 (Regan). This is what Brazil has been trying to achieve for over 30 years. Being free of imported oil will save Brazil a lot of money. Brazil will no longer need to rely on oil. This is something that many countries including the United States have strived to become. This shows how long of a process it is to become independent of oil. A country must fill all their gas pumps with an ethanol gasoline instead of oil mixed gasoline. Then everyone in the country needs to get flex vehicles. In order to get flex vehicles for everyone, Brazil would have to run a campaign convincing everyone to get a flex vehicle. Right now about 70 percent of the people in Brazil own flex vehicles (Regan). It took a lot of effort on Brazil’s part, but it was worth the effort. They are now nearly free from oil.
VI. Brazil in a global economy and ethanol in the US

a. Future of ethanol as bio-fuel in Brazil

Brazil, with its tropical conditions and ability to grow sugarcane had a definite advantage over other countries that do not have the ability to produce such a high ethanol yielding product. If the world makes a switch to using higher ethanol based fuels, then Brazil is an excellent position in that economy. For now, Brazil is putting the technology to use for itself, because the rest of the world had not really grabbed onto the idea just yet. We have already seen how ethanol is used to as a major export, but the independence from oil is also important. Ethanol is about 30 percent less expensive than gasoline; according to the World Bank, it’s about 50 cents cheaper per gallon to produce sugarcane ethanol (Regan). Having this money freed up in Brazil is sure to boost their economy. Brazil is reinvesting a lot of the money back into the research of ethanol and for more sugar mills. Becoming a world leader in ethanol could lead to Brazil being very important in the global economy. They will have not only an independent economy, but they will be a world leader in ethanol exports for many years to come.
b. Ethanol in the United States

All this has not gone unnoticed here in the United States. With the price of oil rising every day and the supply dwindling, we are looking for new fuel options any way we can. There are many alternatives we can use to produce cleaner, cheaper fuels. Choosing the best, most economical fuel is an important factor in deciding on what we will use as a replacement fuel if any. A fuel of choice should be one that can uphold the economic impact of the oil industry losing out a huge customer base to the fuel as well as cover the economic impact to produce and use the new fuel. The fact that ethanol can meet most, if not all of these requirements, is what makes it such an appealing choice as a fuel alternative. The biggest advantage of ethanol is that it is a clean burning fuel made from organic material and therefore a renewable fuel. The appealing thing about this is that the supply can be refreshed each year, assuming nothing happens to the crops, or the ability to grow any of the many different types of vegetation that can be used to refine ethanol. This is an obvious advantage over the current oil based fuel, which we will not be able to continue to use indefinably. Another factor, and probably one of the biggest factors of any alternative fuel’s success is the economic factor. Despite our ability to produce and use it, if it is not affordable then it will not succeed. It is debatable whether or not ethanol, produced from corn starch, would really save anything. In fact, as of July 2005, “if we buy enough ethanol (5.85) gallons to drive just as far as we can on 3.94 gallons of gasoline, it will cost us (counting all subsidies) $5.33 more than what we would have had to pay for the gasoline” (http://zfacts.com/p/60.html). This is of course assuming that the majority of ethanol is produced from corn, rather than the sugarcane that can be grown in the tropics of Brazil. There are some factors that are not included in the equation. Although most corn based ethanol is produced in a wet mil, farmer’s organizations building mills today favor the dry mill since it requires less capital to build, a smaller staff to run, and tends to receive tax advantages due to smaller capacity. This ability to cut the costs, is the direction that ethanol needs to go in order to be a success fuel in countries that cannot produce sugarcane. However there is hope. The cost of creating ethanol is already cheaper now than it was predicted in the early 70s. On top of this, where one may lose money, they may save money. High ethanol fuels are much easier on car engines due to the clean burning nature of the fuel. Unfortunate, there is not currently enough data to support the savings one way or another. However, it is something to consider in the long run once more cars are either able to run on higher mixtures of ethanol based fuel, such as E85.

c. E85

E85 is a mixture of ethanol and oil to produce gasoline, 85% ethanol and 15% oil based. There are cars that will run on E85 today, and there are stations that fill them. However, they are far and few between. If this fuel does not catch on, it will be doomed, regardless of the economic and environmental impact it may have. People need to purchase cars that can run E85. Filling stations need to provide E85 fuel to use in these cars, and there have to be enough of each in order for the other to catch on. Currently, all but 14 states have filling stations somewhere that offer E85 as an option for fuel. Within each state, however, you will be lucky to find maybe ten filling stations that provide E85. Most of these filling tend to be on military or government agency sites and rarely ever located in a normal every day area. So, the choices, if one wants to use the fuel and has a vehicle that can use it, they are restricted to the area they can go. Certainly they can use other fuel, but the whole purpose is to use the E85. Most people probably feel that if they are just going to have to purchase the normal fuel most of the time anyway, then what’s the point. The only time you could really take advantage of the fuel would be if you live near a fueling station. If this continues, there is not much hope for E85 in the future here in the United States.

VII. Conclusion

Whether or not ethanol will benefit Brazil in the world economy on a large scale really has yet to be seen. The potential is astounding, yet the success of the technology outside depends on the world making that shift to rely more on ethanol than oil based fuel. In either case, Brazil is doing well by becoming self sufficient in the fuel industry. Its ethanol production relieves a heavy burden on the country in an area where other countries have the potential of being choked by high prices of fuel. This is where the real benefit of the Ethanol is for Brazil. So long as the climate stays the same, and the sugarcane crops remain healthy and abundant, fuel should be the last thing on Brazil’s mind.
VIII. Works Cited
1. Brazil, History. Geographia. Interknowledge Corp, 1998. http://www.geographia.com/brazil/brazihistory.htm
2. Brazil, History of Brazil. Wikipedia Foundation Inc., last modified 02:24, 28 March
2006. http://en.wikipedia.org/wiki/History_of_Brazil
3. Brazil, General Information. Answers Corporation. 2006. http://www.answers.com/topic/brazil
4. Brazil Leading U.S. in Renewable Fuels Race. Johnson, Dale. 10 Feb 2006. Truth about Trade & Technology. http://www.truthabouttrade.org/article.asp?id=5227
5. Ethanol. Wikipedia, the free encyclopedia. http://en.wikipedia.org/wiki/Ethanol
6. Is Ethanol Energy-Efficient? Journey to Forever. http://journeytoforever.org/ethanol_energy.html
7. Flex-Fuel Vehicles. http://www.fueleconomy.gov/feg/flextech.shtml
8. "Country Analysis Briefs, Brazil." Brazil Country Analysis Brief. 2005. Energy Information Administration. 15 Apr. 2006 http://www.eia.doe.gov/emeu/cabs/Brazil/Oil.htm.
9. ROHTER, LARRY. "With Big Boost From sugarcane, Brazil Is Satisfying Its Fuel Needs" The New York Times 10 2006. 15 Apr 2006 http://www.nytimes.com/2006/04/10/world/americas/10brazil.html?_r=3&oref=slogin&oref=slogin&oref=slogin
10. Alexander E. Farrell, Richard J. Plevin, Brian T. Turner, Andrew D. Jones, Michael
O’Hare, Daniel M. Kammen. "Ethanol Can Contribute to Energy and Environmental Goals." SCIENCE 27 2006. 15 Apr 2006 http://rael.berkeley.edu/EBAMM/FarrellEthanolScience012706.pdf
11. "History." Magneti Marelli. 15 Apr. 2006 http://www.magnetimarelli.com/company/main.htm
12. "THE BRAZILIAN NATIONAL PROGRAMME OF FUEL ALCOHOL (PROALCOOL)." Embassy of Brazil. 15 Apr. 2006 http://brazilembassyinindia.com/proalcool.htm
13. "PRESS RELEASE." 2005. Petrobras. 15 Apr. 2006 http://www2.petrobras.com.br/ingles/pop/record/etanol.html
14. "Petrobras Considering 1-Billion Gallon/Year Ethanol Pipeline." 2 2006. Green Car Congress. 15 Apr. 2006 http://www.greencarcongress.com/2006/02/petrobras_consi.html
15. Over a Barrel. Cooper, Mark. May 2005. Consumer Federation of America. http://www.ethanol.org/documents/CFAOverABarrel.pdf
16. In Brazil, the Driving is Sweeter. Regan, Trish. 29 Mar 2006. CBS News. http://www.cbsnews.com/stories/2006/03/29/eveningnews/main1454613.shtml
17. Ethanol Worldwide. Ethanol: Useful Information and Resources. http://www.ethanolindia.net/ethanol_world.html 18. Brazilian Sugar. Oct 2003. http://www.fas.usda.gov/htp/sugar/2003/Brazilsugar03.pdf 19. Ethanol Production at $7.87/Gas-Gallon Saved? Last Modified: 16 Apr 2006.
20. http://www.zfacts.com/p/60.html

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