US Funding Aims to Boost Renewable Energy

As the price of fuel rises, many nations are developing alternatives to petroleum-based products like gasoline. In the United States, much of the gasoline sold is blended with around 10 percent ethanol, a fuel made from crops such as corn and sugar. But elsewhere, ethanol plays a much larger role. Brazil is the world's largest exporter of ethanol and most of its cars run entirely on it. But environmental groups say ethanol may not be a viable alternative to gasoline. Steve Mort has more in this week's Searching for Solution report from Sao Paulo, Brazil.

Using 'Alcool' Motorists in Brazil fill up their tanks with ethanol - known here as alcool. It is available at nearly every fueling station in Brazil and is roughly half the price of gasoline. For drivers here, using ethanol instead of gasoline makes sense.

"The green fuel as we call it, the alcool, I -- especially nowadays when we talk about environmental responsibilities, I think is extremely important to the world," one motorist said.

Ninety percent of new cars sold in Brazil can run on alcool. Brazil is the world's largest exporter of ethanol, and the second largest producer of it behind the United States.

Sao Paulo-based Dedini makes equipment used in ethanol distilleries. The company's vice president Jose Luis Oliverio predicts growth in U.S. demand for bio-fuels, benefiting ethanol-exporting nations such as Brazil.

"The United States has an objective to blend 10 and then 20 percent of ethanol in their gasoline,” he said. “This will be a huge amount of ethanol. And that will open opportunities to the ethanol imported from other countries."

Making and Exporting Ethanol

While Brazilians consume most of their country's ethanol, about three billion liters is exported annually. The U.S is the largest importer, despite imposing about two dollars per liter tariff on Brazilian ethanol. Brazil uses sugar cane to produce ethanol, while the U.S. mostly uses corn. The U.S. government says domestic commodity prices mean American-produced sugar cane ethanol is double the price of corn-based ethanol. The Brazilian sugar industry, however, says its crops can yield more than twice as much ethanol per hectare as corn can.

Impact on Environment and Food Costs But environmentalists say Brazil is using too much land to grow crops, including sugar, threatening rain forests. Scott Paul from Greenpeace says demand for agricultural land in Brazil could reverse recent declines in deforestation. 

"The dominance of the agricultural sector is paramount with Lula's government,” Paul said. “And there is tremendous concern that we're going to see a rollback." Critics claim the thirst for crop-based ethanol is pushing up food prices. But Brazil's government disputes that. Economists predict Brazil will produce a record 27 billion liters of ethanol in 2008, and will ship more overseas than ever before.