Sugar Powers a Revolution on Brazil’s Roads

A silent revolution is taking place at the Ale Jatinho petrol station on Avenida Brasil, on the outskirts of Rio de Janeiro. "I'll be honest with you - it doesn't feel like a revolution," said Flavio Soares de Oliveira, the station's 33-year-old manager. "But nobody's complained yet."

It is hard to see why they would. Driven by soaring oil prices, petrol already costs 70% more at the pumps than "alcohol", the bio-ethanol fuel derived from sugar cane that Brazilians increasingly favour for their cars.

And, according to Brazil's President Luiz Inácio Lula da Silva, Ale Jatinho represents the front line of a new "revolucao energetica" or energy revolution led by Brazil in a world where dwindling oil reserves and growth in emerging economies such as China are making high petrol prices a permanent feature.

Fuels such as biodiesel are renewable and can be made from agricultural products, like palm oil or soya beans, which can then be mixed at up to 30% with petroleum-based products such as diesel. As with samba and football, it is an area in which Brazil leads.

"The truth is that nobody can compete with Brazil," President Lula said recently. "Biodiesel production is a way of making Brazil less dependent on oil, a fuel that may eventually come to an end. This is a vital project for ensuring more independence for Brazil, as we may become a large biodiesel exporter," he said on opening a new biodiesel plant.

But there is scepticism among European car manufacturers such as Peugeot Citroën which are pioneering clean diesel, whether the Brazilian model can be exported. "It makes no economic sense outside Brazil," Jean-Martin Folz, Peugeot's chief executive, told the Guardian.

Cow tallow

The prime reason is that the South American country boasts dozens of vegetable species which can be used to make bio fuels - and even cow tallow. Bertin, the country's largest beef exporter, is building a new plant to convert tallow into biodiesel, with an annual output of 100,000 tonnes. Brazil doesn't just have the land mass - it also produces half the globe's ethanol output of 21m tonnes.

Mr Folz insists that the sheer cost of mimicking the Brazilian model in Europe makes it prohibitive, pointing to the need to re-engineer the entire network of service stations and build far more plants to produce biofuels from products such as sugar and maize. It is the same argument that has set back by at least a decade plans to produce hydrogen-fuelled cars.

Biodiesel, on sale in nearly 100 "bio" stations around Brazil and powering Rio's buses and refuse trucks, contains just 2% of vegetable-sourced diesel. But the plan is to achieve 20% by 2020, slashing carbon emissions, and, more crucially, the $1.1bn (£650m) cost of importing 6bn litres of diesel each year.

Brazil has been here before. In the 80s the then military government reacted to the oil price shocks of 1973 and 1981 by offering tax advantages to run cars on ethanol - so much so that between 1983 and 1988 up to 90% of vehicles were powered by the fuel. The bottom fell out of the market when oil prices collapsed - and sugar cane producers jacked up ethanol prices more than 40%.

The difference now is that drivers have a much greater choice, being able to mix ethanol and petrol at will in "flex fuel" engines that Volkswagen introduced in 2003 and are being built by rivals such as Peugeot, which launches a 1.4-litre version next month to go with the 1.6 engine it already produces here. It is developing a biodiesel model.

As many as 80% of new Brazilian-built cars are powered by "flex fuel" engines, up from 17% last year, and, says Serge Habib, Citroën's managing director in the country, "it will be at 100% in two years". Like hybrids, flex-fuel cars retain a greater second-hand value, adding to their attractiveness.

Mr Habib says producing ethanol from sugar is profitable as long as oil costs more than $37 a barrel - well below its present price. The lower price for bio fuel offsets the 25% higher consumption that consumers report. But its overriding advantage is macro-economic. "The Brazilian economy has saved $400bn in imports since the creation of the National Alcohol Program, and that's without mentioning interest," Luiz Custodio Martins, president of the Sugar and Alcohol union in Minas Gerais, Brazil's second largest sugar-producing state, told the Guardian.

Brazil's government also views bio fuel as a way of helping to haul rural parts of the country out of grinding poverty. The use in biodiesel of castor beans, from Brazil's arid north-eastern sertao, for example, is expected to create thousands of jobs in the impoverished region where tax breaks are being given to families producing the raw products used in biodiesel production.

Mr Martins believes the creation of jobs in rural Brazil by the sugar cane trade will reduce the strain on its overcrowded cities, many of which are dominated by tracts of shanty town housing.

"The ethanol industry brings employment and income, principally to the interior of the country," he said. "And because of this it is stopping migration to the big cities, since employment is growing so much in these places."

Alvaro Barreto, of the National Institute of Technology, who is devising a project to put biodiesel factories in the Cidade de Deus [City of God] favela in Rio de Janeiro made famous by the award-winning film of the same name, agrees that bio fuel can play a crucial role in this crusade against poverty.

"As well as generating jobs in deprived communities you also have a very high profit margin to invest back in the [biodiesel] factory," he said. "The idea is fantastic in terms of social inclusion, giving people in communities like Cidade de Deus, who have never been given any chances in life, work."