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Weekly UpdatesBrazil, long impugned as an eco-villain for its pell-mell destruction of the Amazon rain forest, is now energy self-sufficient, but the work of state-run oil major Petrobras, while significant, is not the only the reason why. Forty-five percent of its energy system now is based on renewable sources (the global average is 14%), according to Energy Minister Silas Rondeau.
Of course, it helps that 80% of Brazil's oil comes from its own offshore fields. But much of Brazil's success is due to ethanol, an alcohol made from sugarcane that is used as an additive to gasoline. Half of vehicles on Brazilian highways now run on ethanol, which is cheaper and burns more cleanly than regular gasoline. So-called "bio-fuel" cars are also a big hit with Brazilian consumers; nine out of 10 new vehicles sold in 2007 are expected to be bio-fuel. In 2006, the figure should be 75%. Brazil is also working to add soybean oil to diesel by 2013.
What Brazil is doing is a no-brainer. Brazil started its fuel-alcohol program three decades ago. The military dictatorship at the time offered subsidies and price controls to reduce the nation's dependence on oil after the 1970s oil crisis. But bio-fuel cars didn't become popular until Brazil developed its own version of "flex-fuel" technology in 2003, which allows vehicles to run on ethanol, gasoline or a mixture of both.
Brazilian private companies are busy investing billions in the construction of some 50 new ethanol production plants. Brazil, which produces 5 billion gallons of ethanol annually, exported 684 million gallons last year--a huge 53% slice of the global market--to Latin America, the United States, Asia and Europe. The United States, the world's biggest oil consumer, imports nearly 60% of its petroleum and the U.S. government will spend a paltry $150 million for bio-fuel research in fiscal 2007.
Brazilian leaders, however, are well aware that their nation can't meet the growing demand for ethanol alone. Other nations, particularly poorer nations being squeezed by the tripling of crude prices, recognize that the technology can slash their oil consumption now. "We are looking for partnerships ... to implement ethanol projects in Africa, Latin America and Caribbean countries," Emerson Kloss, agricultural attache at the Brazil Embassy in Washington D.C. told me. "The consolidation of a global ethanol market requires a growing number of players."
As a result, Brazil is looking to share its expertise with the rest of Latin America, a region that appears primed to become a world leader in bio-fuel production. Central America has sent delegations to Brazil to study the production of ethanol; Argentina is using surplus soybeans to make its own bio-fuel; the Dominican Republic is preparing to add ethanol to gasoline until it reaches 22%; Jamaica has been producing ethanol for export to the U.S. market since 2005; Ecuador approved a project to make ethanol; and Colombia, which recently inaugurated its first fuel-alcohol distillery, requires motorists in Bogota, Cali and Popayan to fall their tanks with at least 10% ethanol. More cities are expected to follow.
While that's a good start, Latin American governments must also offer incentives and create agencies to encourage the production of fuel made from corn, prairie grass, sugarcane and vegetable oils such as sunflower, palm, and rapeseed. Brazil, for example, gives tax breaks to companies that buy oil seeds from small farmers, who obviously benefit with jobs and income. Regional governments must also not allow ethanol programs to increase deforestation, itself the source of 80% of carbon emissions in Brazil. Brazilian President Luiz Inacio Lula da Silva, for example, must control sugarcane field expansion into the Amazon, which is already under siege by developers. A regional certification program for bio-fuels based on environmental and social criteria would be a good idea.
At the same time, Latin American governments should pursue renewable energies such as solar, geothermal, and wind power. Thanks to the Kyoto Protocol, the 1997 international treaty on climate change, nearly 600 projects are in the pipeline in the developing world to fight global warming. Forty percent of them are in Latin America, including hydroelectric power plants in Honduras, and wind turbines in Chile and in Brazil, home to the largest wind-power park in Latin America, in the state of Rio Grande do Sul.
With surging oil prices and a growing appetite for bio-fuels, it would be folly for Latin America not to follow Brazil. While high oil prices create pain, especially for the poorest, this may be the economic kick in the pants the world needed to get off crude for good.
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