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High hopes over rising demand for fuel alcohol

A look at the rising demand for renewable energy around the globe.

RIO DE JANEIRO - Brazil is fully exploring the intoxicating prospects for the export of fuel alcohol, in view of the potentially huge markets opening up in China and the wealthiest, most industrialised nations of Asia, Europe and North America.

Brazil is the world's largest producer of ethyl alcohol, also known as ethanol. Last year alone it produced 14.75 billion litres, or 38 percent of the worldwide total. This year, it expects to export 2.2 billion litres, three times the amount in 2003.

Using sugar cane as the raw material, Brazil's ethanol has the lowest production cost internationally.

The global demand for ethanol would be 7.5 times greater than Brazil's current output if the whole world added 10 percent of this fuel alcohol to its gasoline, said Plinio Nastari, the president of Datagro, a sugar industry consultancy firm.

The use of ethanol-gasoline blends as automotive fuel is a growing trend, boosted by efforts to curb pollution, the rise in oil prices, and the upcoming entry into force - next February - of the Kyoto Protocol to the U.N. climate change convention.

The Kyoto Protocol is aimed at reducing emissions of ¡±greenhouse gases¡±, like carbon dioxide, which trap heat in the earth's atmosphere and lead to global warming. Because the burning of fossil fuels is the main source of greenhouse gases, the use of ethanol can make a significant contribution to cutting down emissions.

Brazil is considered the only supplier capable of meeting the huge rise in demand for ethanol expected in the near future.

But the enthusiastic investment in the country's sugar cane industry, which is already attracting considerable foreign capital, has also raised fears among environmentalists that the country will be transformed into one big sugar cane field.

In addition, there is concern on the part of importing countries, which are worried about being held hostage by Brazil as practically the sole ethanol supplier.

According to forecasts, in order to keep up with the increase in domestic and foreign demand, the area used for sugar cane cultivation will have to expand by 75 percent in ten years, thereby encroaching on the ¡±cerrado¡±, a vast grasslands and savannah region in the southeastern section of the central Brazilian plateau.

The cerrado constitutes a highly unique but seriously threatened ecosystem, which is already suffering the consequences of the expansion of the agricultural frontier over the last three decades.

In addition to accounting for over half of Brazil's soy production, the region has also been increasingly used for the cultivation of coffee, cotton, and more recently, sugar cane.

Mario Barroso, the Cerrado Programme coordinator for Conservation International (CI), a non-governmental agency, told IPS that the problem is not the particular crop planted, but rather the unregulated and uncontrolled ¡±invasion¡± of the region with large-scale monoculture of any kind.

There is legislation in Brazil to ensure sustainable land use, such as the Forestry Code, which establishes that 20 percent of the forest cover must be preserved. If the rules are followed and the trees in protected areas and on river banks and slopes are left intact, there should be reasonable protection, said Barroso.

For his part, Antonio de Padua Rodrigues, technical director of the Sao Paulo Sugarcane Industry Union (UNICA), which represents the largest businesses in this sector, maintains that sugarcane does not pose this kind of environmental threat.

UNICA estimates that Brazilian ethanol production, which totalled 14.75 billion litres last year, should grow by another 10 billion litres, of which only 30 percent will be for export.

This will require expanding the current area of sugar cane cultivation, which covers over five million hectares, by an additional 2.5 million hectares, Padua Rodr¨ªgues estimates.

But there will be no need to advance much further into the cerrado region, since almost all of the expansion will take place in the southern Brazilian state of Sao Paulo, he said.

Moreover, the land that will be used for sugar cane is already deforested, and has been abandoned by the cattle farming industry, in which new production techniques have drastically reduced the amount of pastureland needed, he told IPS.

Productivity in sugar cane farming has also increased significantly, greatly reducing the need for land, particularly in Sao Paulo, home to 60 percent of the country's sugar and ethanol production.

In 1980, roughly 3,500 litres of ethanol were produced per hectare, but today that yield has doubled, he added.

Lawmaker Fernando Gabeira, a well-known environmentalist, said that the major producers - at least on the plantations he has visited in Sao Paulo - have incorporated environmental protection measures into their operations, as a result of legislative requirements, a sense of social responsibility, and the benefits they can entail for production.

For example, on many plantations, other crops are interspersed with sugar cane, and some of these can help fertilise the soil by fixing nitrogen from the atmosphere, he explained.

It would be contradictory to expand sugar production as a means of solving a global problem like climate change while damaging the local environment in the process, said Gabeira, who nonetheless stressed the need for in-depth environmental impact studies and strict monitoring to prevent the destruction of biodiversity.

His hope is that this will be a transitional phase, until other alternative energy sources, like hydrogen, become viable.

But Padua Rodr¨ªgues does not expect sudden or explosive growth of the international fuel alcohol market. ¡±It is developing, but this is a slow process,¡± he maintained.

In any event, only 40 percent of the ethanol exported by Brazil is used for fuel, while the rest is for industrial use, he noted.

Potential large-scale importers want a guaranteed supply, but they will be hesitant to sign long-term contracts with Brazil until there are other suppliers, a free market, and other mechanisms to ensure the stability of both supplies and prices, said Padua Rodr¨ªgues.

In order for this international market to develop, as Brazil would like to see, other sugar-producing countries like Australia, Colombia, Guatemala, India, Mexico and Thailand will also have to expand and diversify their exports, he concluded.

Published by IPS, 12/15/04

Undergraduate International Relations Society