Brazil

There are very few initiatives dedicated to industrial biotechnology in Brazil. Energy and biofuels policies can serve as a case-study for upcoming policies for other bio-based products.


Policy

Bioethanol production for transportation has almost a century history in Brazil. First steps in 1912 were merely experiences on automotives running on ethanol. National programmes started in 1931 with Decree 197.717 which permitted the blend of ethanol in gasoline up to 5% and 10% for official fleet.
During the oil crises of the 70’s the government created PROALCOOL , a program to increase sugar-cane alcohol production to use as a substitute of gasoline. When the second shock came in 1979, the government went for a more ambitious and comprehensive program, promoting the development of new plantations and the development of a fleet of ethanol-fuelled vehicles. The blending was increased from 15 to 25% between 1979 and 2002.

Nowadays, the current situation can be described as follows:

  • Acohol-gasoline mixture set to 25% since July, 2003.
  • The automotive industry has launched “flexible-fuel cars” in March, 2003.
  • Advantage to alcohol consumption if oil prices are above US$ 35 / per barrel.
  • May, 2005: for the first time, flexi-fuel vehicles sales exceeded gasoline-fuelled vehicle sales, 49.5% against 43.3%.
A new law was developed in 2005 on biodiesel production. It establishes minimum percentage for blending biodiesel to diesel fuels from 2% in 2008 to 5% in 2013. An important part of this programme is the development of family agriculture into biodiesel production process, as well as environmental preservation.


Research and development

Agronomic improvement of sugar cane production, lead by Institutes such as the Centro de Tecnologia Canavieira or the Campinas Agronomic Institute have allowed through 30 years of research to more than double the sugar-cane yield of 40 tons per hectare. First using traditional breeding techniques researchers produced varieties adapted to different soil and climate conditions. Genetic modification technologies enabled the development of straits such as tolerance to water scarcity and pests. New improvements come from sugar cane producing more biomass than the varieties currently in use. The bagasse (biomass remaining after extraction of sugar) was so far considered as a waste and caused large disposal problem due to the large amounts generated by the mills. With new technologies in cellulosic ethanol and improved processes to produce power in steam turbines for electricity generation could result in a new interest of using these new high biomass yield varieties.


Market access

The incentives and subsidies for PROALCOOL in the beginning were meant to be transitory because high oil prices would make the ethanol competitive in the long run. Decreasing marginal costs for renewable fuel were expected and achieved. However, when international oil prices decreased in 1986 to level lower then before the oil crisis, it became a major problem for successive governments to reduce subsidies while not affecting the competitiveness and economy.

The subsidy to cover the difference between alcohol costs and prices was kept with declining proportions until the end of 1998, when major changes in fuel pricing policy place. Gasoline prices, until then regulated, were freed to be set by the market. Alcohol subsidies were also gradually extinguished and alcohol prices were also allowed to fluctuate with the market.