Ethanol and biofuels: a sticky subject

9/14 - Correction: Units in chart are billions of liters, not millions
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This week's Economist features an article on Brazilian biofuels production that demonstrates perfectly the potential synergies between mitigation and adaptation, as well as the crucial role policy plays in exploiting those synergies.

Some excerpts follow:

"The industry is struggling to turn all these economic and environmental benefits into reliable revenues. For that it largely blames the government and is duly arguing for a more favourable regulatory regime. But it should watch out. The government, in turn, accuses the industry of wanting to have the best of both the agricultural and energy worlds. It could yet make the industry’s life harder....

...Realising this potential requires big capital investments. Large-scale exports depend on new pipelines and a port. Three out of four sugar mills are not connected to the electricity grid...

...The sugar people complain that, although the price of ethanol rises and falls with world sugar demand, petrol prices in Brazil do not adjust quickly to changes in the oil price. They also think that on environmental grounds ethanol should be lower-rated for value-added tax than diesel, as it is in São Paulo but not in other states. And they complain that regulation hampers their expansion. Ethanol and electricity co-generation could make up more of Brazil’s energy matrix, argues Mr Jank. “But the long-term future of the ethanol industry depends on government policies,” he says....

...Officials complain that when the world sugar price is high—as it is today—the mills divert cane away from producing ethanol. To ensure stable supplies, ethanol should be regulated as a fuel by the National Petroleum Agency, says Tereza Campelo, an official on the staff of President Luiz Inácio Lula da Silva. She accuses the industry of wanting to have all the advantages of being treated as an energy producer and none of the disadvantages."

Full article here (may require sign-in)