Thursday, May 11, 2006

Brazilian Sugar Cane Ethanol

The oil shocks of the late 1970's not only severely affected the United States, they had a tremendous impact on the rest of the world. Brazil decided right away to do something about this, and thanks to that decision, they are ahead of the biodiesel fuel revolution by leaps and bounds. Using economic reasoning, Brazil realized the most efficient means of gaining footing on OPEC was to introduce a substitute that would effectively compete. The government introduced such substantial tax breaks for ethanol cars between 1983 and 1988 that by the end of the 80's, 90% were powered by the fuel.
Now, with the introduction of "flex" vehicles, (allowing users to choose their fuel mix ratios) the consumer has more power than it did by relying solely on oil based fuel. Not to mention, creating thousands of jobs in Brazil's poorest regions also helps the economy tremendously. It not only gives jobs to those that would never previously have been able to attain one, but it substantially reduces the strain on many Brazilian cities, of which large parts tend to be slums. Producing sugar cane ethanol is "profitable as long as oil costs more than $37 a barrel."
I think from an efficiency standpoint, this seems to be an extremely efficient move by Brazil. Creating jobs within the country, reducing dependence on foreigners, reducing prices of fuel, and reducing stress on cities to support their impoverished populations are all benefits of this move. The only people that seem to be worse off are the OPEC guys.

1 comment:

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