Article

Ethanol: Lessons from Brazil

David B. Sandalow

The following article was published in an Aspen Institute volume titled “A High Growth Strategy for Ethanol.”

Ethanol is hot. In the United States, production increased by more than 20% in 2005. The nation’s 97 ethanol plants are operating at close to full capacity, with another 33 plants under construction. Politicians from President George W. Bush to Senator Richard Lugar to Senator Barack Obama to Democratic National Committee Chair Howard Dean all support aggressive programs to promote ethanol.

Yet today ethanol provides only about 3% of the United States’ transportation fuel. Few experts expect this figure to increase to more than 7% by 2010. In Brazil, in contrast, ethanol provides more than 40% of the fuel for transportation. Flex-fuel cars – capable of running on gasoline or ethanol — grew from less than 1% of the Brazilian new car market in 2001 to more than 70% today.

As the United States explores ways to reduce oil dependence, many observers are looking south for guidance. This paper summarizes the history of the Brazilian ethanol program, describes the program’s current status and considers lessons for the United States from the Brazilian experience.