The Prolcool Program in Brazil

Since 1975, Brazil has mandated that ethanol be blended with all gasoline sold in the country. Although the required blend level is adjusted frequently, it has been in the range of 20%-25%, and all filling stations are required to sell gasohol (E25) and pure ethanol (E100). Tax preferences have been given to vehicles that run on pure ethanol, and more recently, the introduction of the so-called flex fuel vehicles by most of the local automakers allows for any proportion between ethanol and gasoline (E0-E100) to be used any time. This has led to the present (and growing) 73% share that flex fuel cars hold in the local market [7,8], which should reach 85% by the end of 2006 [9]. In 10 years, 16 billion US$ were invested in genetic research for sugar cane improvement, alcohol subsidies and agrobusiness, and policies have included blending mandates, retail distribution requirements, production subsidies, and other measures [10].

After a rocky period in the 1980s and 1990s, when high demand resulted in a sellers market which led to high alcohol prices and delivery shortages [10]. The escalating oil prices and the event of the flex fuel car have brought attention back to ethanol. Advances in electronic fuel injection technology solved many of the technological problems associated with ethanol engines (in cool mornings, drivers had to spent their precious minutes for their car engines to warm up before they could drive). In 1985, with falling oil prices, the Brazilian government was not able to keep up with the required subsidies, and in 1989 ethanol shortages and high prices resulted in very disappointed drivers and the near collapse of this promising technology. In 1990 the sector was deregulated, and the Alcohol and Sugar Institute (IAA—Instituto do Acucar e do Alcool), which regulated export quotas and subsidies, was closed down. In a free, deregulated market, ethanol producers chose to turn back to sugar when the international price of that commodity recovered, and the automakers reduced alcohol driven car production to negligible levels. More recently, with the boom in flex fuel car sales, ethanol prices soared once again. This time, however, with flex fuel cars came the choice for consumers to avoid abusive price increases from alcohol producers, and whenever ethanol prices go over the mark of 70% of gasoline price, flex fuel car drivers fill up with the traditional fossil fuel. Although at present, seven out of ten cars sold in Brazil run on both fuels, only 2% of the Brazilian fleet are flex fuel cars, with an aged 16% share running exclusively on ethanol, 10% on diesel, and 72% on E25 gasoline. These shares, however, are changing fast. The first flex fuel model was released in 2003, when Volkswagen sold 48,000 units. Cumulative sales have recently reached the 1.2 million mark [9].

Having produced 36% of the 42.2 billion liters of ethanol consumed worldwide in 2005 [8], Brazil produces the lowest cost ethanol worldwide, thanks to genetic R&D. This has led to a more robust sugar cane variety that is also richer in saccharose, and the country expects to produce another 16 billion liters of ethanol in 2006. Brazil is now producing ethanol at 6550 liters per hectare, having nearly doubled the productivity from 1975 when the yield was at 3500 liters of ethanol per hectare. RD&D efforts continue, with the release of new generation of flex fuel cars, and increased productivity levels in the sugar cane industry.

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