Bioenergy in Brazil – from traditional to modern systems - Biomass as Energy Source: Resources, Systems and Applications - page 77

modern character of the metallurgical industry stands in strong contrast with the conditions of
charcoal production in many regions of the country.
4.4 BIOFUELS FOR TRANSPORT
4.4.1 The development of modern bioethanol production
The history of modern bioenergy in Brazil is strongly linked to the development of the ethanol
industry after the 1970s. The oil price shock of 1973 caught the world by surprise, revealing
not only the strong reliability of global energy systems on oil but also the vulnerability of many
economies to oil price variations. In Brazil, oil imports amounted to approximately 70% of the
national needs in the 1970s and actually increased to a proportion of 85% by 1980 (EPE, 2011a).
Oil price increases implied very large and increasing energy import costs, strongly affecting the
Brazilian trade balance. However, between 1980 and 2005, Brazil not only managed to revert
the situation, but actually became an oil exporter. The ethanol development in Brazil is now well
known for being the most successful of the global attempts to substitute oil in transport, both
when it comes to scope and scale. It is well documented and, therefore, there is no need to review
the whole process here (Moreira and Goldemberg, 1999; Hira and Oliveira, 2009). However, it
is worth looking into what has been achieved in the past decades and putting it in perspective
to understand the transition that is being accomplished in Brazil, from traditional to modern
bioenergy.
Like many other countries, when oil prices went up, Brazil had to search for new energy
sources particularly to substitute oil. Sugar production was well established in the country - it
was actually Brazil's oldest industry. However, despite its export capacity, the industry was still
rather traditional and had low productivity. Nevertheless, the government identified the sugar
industry as a good starting point for building an ethanol industry. Using the existing agricultural
structure and the potential for coordinating sugar and ethanol production, a set of supply and
demand measures were put in place to boost the segment. It made sense in the context of rising
oil prices, the rapidly growing car ownership in the country, increasing transport needs, and
the ambition to develop agriculture and industry, generate jobs and economic development. In
addition, sugar prices declined significantly in 1974 and this served to mobilize producers to
modernize the industry and develop new products. Finally, Brazil had previous experience with
using ethanol in transport particularly from the world war periods (Hira and Oliveira, 2009).
The Brazilian ethanol program Proalcool was launched in 1975 with the objective to reduce oil
dependency, promote the development of ethanol fuel and strengthen the sugarcane and sugar-
producing sector (GoB, 1975). It included both expansion of sugarcane production and distilleries,
as well as development and modernization of the whole supply chain from agriculture to distri-
bution. Initially, also manioc was contemplated as a potential ethanol crop, but sugarcane crops
and sugar production offered a synergy of higher economic value, creating impulse for the so-
much-needed modernization of agriculture and the sugar industry (Moreira and Goldemberg,
1999; Hira and Oliveira, 2009). The triggering effect that the ethanol program had on the industry
is illustrated by the rapid expansion of the sugarcane and sugar-ethanol production. Figure 4.6
shows the development of sugarcane crops between 1970 and 2010.
The Proalcool program combined a number of elements that, together with the exogenous
shock represented by increasing oil prices, contributed to the successful development of the
sugar-ethanol industry in Brazil. The policies put in place included incentives to expand ethanol
production, mandatory targets for ethanol mix in the gasoline, agreement with car manufacturers
to produce ethanol-cars, procurement to create government car fleets driven by ethanol, research
and development to improve crops and yields of sugarcane.
The Brazilian move was innovative and bold, and the results came relatively fast. There was
significant improvement in yields on the agricultural side and design of distilleries, and successful
expansion of the distribution infrastructure throughout the country. In the first ten years, the