Sugar Cane 2 x 0 Corn

ETHANOL MADE FROM CORN IN CHECK – the first is the document Biofuels: Potential Effects and Challenges of Required Increases in Pro duction and Use, GAO, produced by the Government Accountability Office (GAO), the government “watchdog” do (see box). According to the analysis carried out by the entity, the fiscal credit of US$0.45 per gallon passed through to the mixture of gasoline and alcohol fuel extracted from corn should be reexamined. This subsidy was first implemented in 2005 to support the U.S. ethanol producing industry – currently the largest in the world. “The report is important because it compares the different types of ethanol”, explains Joel Vasconcelos, the chief U.S. representative of the Sugar Cane Industry Union (UNICA), which defends the interests of Brazilian producers. “The U.S. government has several policies for the biofuels’ sector, and the GAO shows that it is helping a type of ethanol that is not as good as it appears far too much”, said Vasconcelos, referring to corn ethanol, which is criticized in the report. The U.S. is expected to spend approximately US$6 billion this year on direct subsidies to the sector.

FEW WINNERS, A PLETHORA OF LOSERS

An analysis by the International Trade Commission (Comissão de Comércio Internacional), also linked to Congress, has arrived at an estimate of the cost of the complex system of subsidies and tariffs that benefit U.S. ethanol producers. According to The Economic Ef fects of Significant U.S. Import Restraints, ITC**, removing the protectionist trade barriers in place for ethanol would generate US$356 million of annual revenue for the U.S. economy (ethanol imported into the U.S., including from Brazil, is subject to a tariff
of US$0.54 per gallon – 3.78 liters – and a tax equivalent to 2.5% of its market value). The tariff expires in 2010, when it will be reevaluated by Congress. Critics are saying that it inflates the price of corn grown in the U.S., this distorting prices in the food and energy markets thus adding to inflationary pressure. Accord-
ing to UNICA, Brazil has already paid approximately US$500 million in tariffs to the United States Treasury. case.

The U.S. rural lobby also had its say in the Climate Change Law, passed in June 2009. “The method adopted was, in fact, a cover-up to serve the interests of ethanol producers, who succeeded in postponing the decision on the criteria defining the type of “clean” ethanol, according to Adriana. Due to this scenario of persistent rejection of free competition, which was worsened by the global crisis, Adriana believes that “the time has now come for the Brazilian private sector to take an even more aggressive stance”.

 

CONTRARY TO GLOBAL TREND

the consumption of oil in the world is likely to rise in the next few years, with the emerging countries driving this expansion. However, as reported by the consultancy firm Cambridge Energy Research Associates (IHS CERA), Brazil is more than likely to buck this trend – one of the reasons being the growing use of alcohol fuel in the country, which has led to halving gasoline consumption. Approximately 54% of the current level of demand for oil is accounted for by in dustrialized countries. However, these reached a peak of consumption in 2005, which is not expected to be attained ever again. The projection made by CERA is that 83% of the expected growth in global demand for oil between 2009 and 2014 will come from emerging countries.

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