1. Driving with Liquid Solar Energy: The Brazilian Experience with Biofuels Clovis Zapata Research Associate BRASS Cardiff University

2. Presentation Outline The importance of Biofuels; The importance of Biofuels; The Brazilian Ethanol experience; The Brazilian Ethanol experience; The Brazilian Biodiesel Program; The Brazilian Biodiesel Program; Conclusion; Conclusion;

3. The importance of Biofuels Economic; Economic; Environmental; Environmental; Social; Social; Cultural. Cultural.

4. The Ethanol History in Brazil 1925 ford model T

5. The History of Ethanol in Brazil 1925, first experiences with ethanol 1925, first experiences with ethanol 1932, E5 blend was introduced 1932, E5 blend was introduced 1944 E42 was used 1944 E42 was used 1975 the proalcool was introducted. 1975 the proalcool was introducted.

6. The Proalcool Focus on the internal macroeconomic effects of the oil crises. Focus on the internal macroeconomic effects of the oil crises. 1 st phase (1975-1979) E22 blend 1 st phase (1975-1979) E22 blend 2 nd phase (1979-1986) E100 2 nd phase (1979-1986) E100 1986 96% new vehicles sold were E100 1986 96% new vehicles sold were E100 3 rd phase (1987- ) Decline. 3 rd phase (1987- ) Decline.

7. The Proalcool 1993 – E20/E22 Legal Blend. 1993 – E20/E22 Legal Blend. 2003- FlexiFuel Technology. 2003- FlexiFuel Technology. The system allows the vehicle to function with ethanol, gasoline or any mixture of both. This eliminates the uncertainty of choosing gasoline or ethanol fuelled vehicles. The system allows the vehicle to function with ethanol, gasoline or any mixture of both. This eliminates the uncertainty of choosing gasoline or ethanol fuelled vehicles.

8. Ethanol and gasoline vehicles sold in Brazil (1975-2005)

9. Policy instruments -The Brazilian state-owed Petrobras was forced to purchase a minimum amount of ethanol; distribute and supply ethanol in ry single gas station in the country (29.000 filling stations). -The Brazilian state-owed Petrobras was forced to purchase a minimum amount of ethanol; distribute and supply ethanol in ry single gas station in the country (29.000 filling stations). -Subsidies in the form of low rate interest loans to companies willing to enter the ethanol production market -Subsidies in the form of low rate interest loans to companies willing to enter the ethanol production market -Ethanol prices at the pump were established at 59% of the gasoline price, as the government controlled the prices of gasoline for the consumer (ethanol engines consumed an average of 30% more); -Ethanol prices at the pump were established at 59% of the gasoline price, as the government controlled the prices of gasoline for the consumer (ethanol engines consumed an average of 30% more); -The partial subsidy for the producer was financed by the taxation of gasoline. -The partial subsidy for the producer was financed by the taxation of gasoline. -VAT tax reduction for ethanol fuelled cars. -VAT tax reduction for ethanol fuelled cars. -The World Bank provided support of US$ 200 million to support the program. -The World Bank provided support of US$ 200 million to support the program.

10. Economic result Ethanol for automotive fuel purposes has provided savings of up to US$ 60,74 billion, in constant dollars of 2005, to the Brazilian government. If external debt interest rate is included in the calculations the figures add up to US$ 121.26 billion. Nastari et al. (2005) Ethanol for automotive fuel purposes has provided savings of up to US$ 60,74 billion, in constant dollars of 2005, to the Brazilian government. If external debt interest rate is included in the calculations the figures add up to US$ 121.26 billion. Nastari et al. (2005) Creation of 1 million direct jobs and several million indirect ones, mostly in deprived rural areas of Brazil. Creation of 1 million direct jobs and several million indirect ones, mostly in deprived rural areas of Brazil. to produce the same amount of energy, ethanol in Brazil was able to generate 152 times more jobs than oil production. However the quality of the jobs must be questioned. (Magalhães et al 1997). to produce the same amount of energy, ethanol in Brazil was able to generate 152 times more jobs than oil production. However the quality of the jobs must be questioned. (Magalhães et al 1997).

11. Environmental Effects PolutantGasolina VW (E100) Ford (E100) CO100%43%57% HC100%36%76% NOx100%87%79% Lead100%ZeroZero Source: (BEP, 2005) Emissions reduction with E100

12. Other important issues Kioto Protocol - Clean Development Mechanism - CDM. The calculus is CDM is directly dependable the biomass density per hectare vis-à-vis the original vegetation. According to Ribeiro (1997), the areas were sugar cane is planted would grant Brazil a net benefit in terms of CO2. Kioto Protocol - Clean Development Mechanism - CDM. The calculus is CDM is directly dependable the biomass density per hectare vis-à-vis the original vegetation. According to Ribeiro (1997), the areas were sugar cane is planted would grant Brazil a net benefit in terms of CO2. The negative externalities of ethanol are related to the production process. The negative externalities of ethanol are related to the production process. Vinhoto. This by-product must be properly treated and transformed into fertilizer. Vinhoto. This by-product must be properly treated and transformed into fertilizer. Burning of sugarcane plantations after the cane was extracted. This causes polluting emissions, soil nutrient loss and erosion. (MMA, 2003) Burning of sugarcane plantations after the cane was extracted. This causes polluting emissions, soil nutrient loss and erosion. (MMA, 2003)

13. Ethanol learning curve Source: Nastari

14. Future Perspectives Embraer ethanol-fueled Ipanema cropdusting aircraft. The Ipanema is the first series production aircraft in the world coming out of the factory certified for flying with ethanol.

15. The Biodiesel Program

16. The Establishment of 11 refineries; The Establishment of 11 refineries; The adoption of a minimum 2% biodiesel blend in petrol diesel; The adoption of a minimum 2% biodiesel blend in petrol diesel; The insertion of small scale suppliers in the biodiesel supply chain; The insertion of small scale suppliers in the biodiesel supply chain; Subsidies for local producers, with tax differentiation related to the types of oilseeds used the size of the producer and the location. Small producers receive greater tax exemptions; Subsidies for local producers, with tax differentiation related to the types of oilseeds used the size of the producer and the location. Small producers receive greater tax exemptions; Creation of a Social Fuel Seal, to certify fair trade principles. Creation of a Social Fuel Seal, to certify fair trade principles.

17. Conclusion Ethanol in Brazil would not have been successful without massive subsidies. Ethanol in Brazil would not have been successful without massive subsidies. The economic and environmental outcome was positive (Dependency on the international prices of petrol and sugar). The economic and environmental outcome was positive (Dependency on the international prices of petrol and sugar). The Biodiesel program has been based on different concepts but the result is not clear yet. The Biodiesel program has been based on different concepts but the result is not clear yet.