First, both come
from the Ford Motor Company, although almost 100 years apart. Second,
both were designed to run on ethanol, a bio-fuel derived from starches
like corn or sugar. The Model T was eventually re-designed to run on
gasoline, which was, at the time, much less expensive than ethanol.
But times
change. In Brazil, ethanol is now about 20 percent less expensive than
gasoline. The Ford EcoSport, available in Brazil and other Latin
American countries, is a “flex-fuel” vehicle – it can run on gas or
ethanol.
Relative prices of Gasoline and Ethanol in Brazil
(dollars per
gigajoule)
reprinted courtesy of The Wall Street Journal
Seven of every
ten new cars sold in Brazil are flex-fuel. Most drivers in Brazil like
the flexibility of “hedging at the pump,” mixing fuels depending on
prices. They prefer cars that give them a choice.
Ethanol is one
of the major reasons that Brazil expects to become energy independent in
2006. The country’s use of gasoline has actually declined since the
late 1970s.
The ability of
the Brazilian economy to use ethanol has been developed over the course
of more than three decades. According to a recent article in The
Wall Street Journal, the oil shock of 1973 convinced Brazilian
policymakers that the country needed to invest in alternatives to
petroleum. Brazil embarked on a variety of industrial policies that
developed the bio-fuel industry, and then weaned it from the huge
subsidies that the government had used to get it started.
Brazil derives
its ethanol from sugar cane. After decades of government support,
Brazil’s sugar industry is now self-sufficient. By 2010, Brazil expects
to export over a billion dollars of ethanol to countries like Japan and
Sweden. Ethanol produces less carbon dioxide than fossil fuels, so
these countries want to use it instead of petroleum to meet the
emission-reduction provisions of the Kyoto Protocol.
The story of
Brazil’s energy odyssey illustrates some of the common stages that
radical innovations go through, often moving from early success in the
lab through many failures in implementation. When successful, these
radical innovations can transform industries and societies.
Brazil’s energy
ministries now handle a string of visitors from many countries, such as
China, India, and the US. All these countries have a
petroleum-dependent energy policy and would like to develop other
sources.
“It's always struck me as odd that [the United States] hasn't put far
more resources into research on alternative energy … It almost offends
my pride as a U.S. scientist that we've fallen down so badly in this
competition.”
MIT Professor Kerry Emmanuel, in an interview in The New York Times,
10 Jan 06
Sometimes
there’s a big advantage in being a follower. Brazil has demonstrated
some viable alternatives to a petroleum-based future. In the US, the
recent Energy Bill passed by Congress calls for more than doubling
ethanol use by 2012.
The US starts
from a very low base, however. According to The New York Times,
of the more than 180,000 gas stations in the US, only 460 sell E-85, a
gasoline-ethanol mix containing 85% ethanol.
Still, when oil
prices go up, drivers will switch to ethanol if they can. Brazil’s
experience shows that ethanol is a feasible alternative to gasoline.
Brazil created the industry over three decades with aggressive
government policies. The next five years will tell us whether the US
can create its own ethanol industry with a lighter governmental hand.
More information:
1.
Ford’s
website on ethanol vehicles is
here.
2.
The
Wall Street Journal article from 9 Jan 06 on Brazil and Ethanol is
here.
3.
For more
on US Sugar Subsidies, here’s a
complaint from a public interest group.
4.
My
previous update on E-85 ethanol in the US is
here.
5.
The
New York Times interview with MIT Prof Kerry Emmanuel is
here.
