PublicationsThe Economics
In Brazil and the US there is an increasing movement toward the use of ethanol as an additive or total substitute for gasoline to power the fleet of passenger cars in both countries. The introduction of ethanol as a motor fuel in Brazil in the 1970's put the auto industry through some development difficulties but today the technology is mature and stable. The flex-fuel cars on the road today, in Brazil and the US, are efficient at any level of fuel mixture. In the state of São Paulo, where the bulk of Brazilian ethanol is produced, ethanol costs less than 60% of gasoline, making it a very attractive alternative, if your car will burn it.
If on the consumption side the case is clear, the energy efficiency of the production side is less so. The latest reliable studies indicate that the energy balance of the production of ethanol from corn is marginally positive: the process produces more energy than it consumes. If you consider only the liquid fuels used, gasoline and diesel, Vs. the ethanol produced, the balance is very positive, something like 7 for 1. Additionally, considering the result of the phasing in of cellulosic ethanol, it can be said with a fair degree of certainty that the use of ethanol as a substitute for gasoline, fully or partially, is energetically, if not economically, justified.
The purely economic justification depends on two further factors, neither of which will be discussed here: the price of petroleum and the level of subsidies allocated to ethanol. In any case, when you consider that petroleum is finite, whereas the production of ethanol is sustainable (?), there seems no choice but to support the use of ethanol as a motor fuel.
Based on the economics, and current levels of subsidies, it is safe to say that ethanol will play an increasing role as a motor fuel., but there is a negative side, and that needs to be understood and minimized if a disaster is not to be created.
