LEAN, GREEN AND NOT MEAN

LEAN, GREEN AND NOT MEAN
Jun 26th 2008


The United States may drop a tariff on Brazilian ethanol. But the
industry is still the victim of much misplaced criticism

America's thirst for ethanol is set to grow in line with targets in
last year's Energy Independence and Security Act. Brazil would like to
sell more to Europe and Japan too. Yet just when it seems poised to
reduce the world's dependence on oil, its largely sugar-based ethanol
industry stands accused of being less wonderful than it looks.
Some media reports allege ill-treatment of farm workers. More
prosaically, some American officials question how much ethanol Brazil
can supply.

Take this last point first. Demand for ethanol is growing fast in
Brazil because 90% of new cars have flex-fuel engines that can run on
any mixture of petrol and ethanol. Even so, ethanol remains cheap. This
is because producers have invested in expanding capacity (see chart),
partly because they hope for export markets, but mainly because they
reckon they must sell at a 30% discount to petrol to keep the custom of
Brazilians. The price of petrol has not risen for three years because
the government has opted to hold it down.

Source: http://www.economist.com/world/la/displaystory.cfm?story_id=11632886