Ethanol from Sugarcane in Brazil: Economic Perspectives

Abstract Since 1931 the gasoline sold in all Brazilian gas stations has been mandatorily blended with ethanol from sugarcane, adopting in average 7.5% of this biofuel. As a reaction to the oil shock in the 1970s, from 1975 the production and use of ethanol in Brazil registered a strongexpansion due to government incentives to increase ethanol blending to 25% and introducevehicles able to use pure hydrous ethanol. In this period, a considerable reduction in production costs and productivity gainswereobserved. In the 2000s, with the advent of flex-fuel cars and the growing concern about sustainability of energy systems, the ethanol industry returned to growth. However, inrecent years government hasintroduced gasoline subsidies, reducing ethanol consumption and inhibiting investments in greenfield ethanol production units. In this paper, the development of ethanol production and use in Brazil are commented, presenting the evolution of ethanol costs and prices.