August 24, 2010 / 11:02 PM / 10 years ago

FACTBOX-Key facts about biofuels in Brazil

GETULIO VARGAS, Brazil, Aug 25 (Reuters) - Brazil is seeking to boost its production of biodiesel and create jobs in the countryside by encouraging biofuels companies to buy raw materials from small farmers. [ID:nN24164694]

The biodiesel push is meant to mirror a sugar-cane ethanol program that has vastly reduced Brazil’s reliance on fossil fuels for motor vehicle use.

The following are key facts about Brazil’s biofuels sector:

* Brazil began developing sugar cane ethanol during the global energy crisis more than 30 years ago to reduce its reliance on imported gasoline.

It is now the world’s second-largest ethanol producer and its largest exporter. Almost all new cars sold in Brazil can run on any combination of gasoline and ethanol.

* Brazil began producing biodiesel in 2005 to spur local economies and help reduce state oil company Petrobras’s imports of 78,000 barrels per day of diesel and distillate fuels.

In 2010 Brazil expects to produce 2.4 billion liters, the vast majority of which is made from soy. By law, all diesel sold in the country must have a 5 percent biodiesel mix.

* Biodiesel makers grind up soy beans to extract the oil, then sell the soy meal as protein for animal or human consumption. The oil is mixed with methanol and other chemicals to make the fuel. Glycerin, a byproduct of the process, is sold principally to the cosmetics industry.

* The government is seeking to create biodiesel from different crops, including ones that are not used for human consumption such as castor beans.

Critics say those efforts have wasted money on inefficient crops and made unrealistic promises that the plants could grow on degraded soil and use little water.

* The ethanol sector in Brazil is going through a process of consolidation that will likely leave a handful of producers controlling most of the production.

The industry’s profitability has brought massive investment from abroad, with foreign companies nearly doubling their stake in the sector between 2009 and the start of 2010.

* The ethanol industry has been harshly criticized for its labor practices, mostly notably its treatment of sugar cane cutters. Some companies have been accused of preventing workers from leaving, exposing them to dangerous cane fires, and not providing drinking water.

Industry leaders themselves have recognized that those labor conditions run counter to the idea that the fuel is “clean” and could boost trade barriers against it.

The increasing mechanization of the industry may help solve this problem, though there are also concerns about the unemployment it will create among sugar workers.

* Biofuels critics say they contribute to world hunger by spurring increases in food prices, a charge Brazilian industry leaders deny. They say extracting oil from soy, for example, does not reduce available protein because the soy meal is still consumed.

Critics respond that increasing prices of oil are ultimately reflected throughout the food chain because cooking oil is present in many types of food.

The U.S. Congressional Budget Office determined in a 2009 study that ethanol produced from corn, which is often used for cattle feed and artificial sweeteners, has caused food price increases for American consumers. (Reporting by Brian Ellsworth, Editing by Kieran Murray)

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