South Africa vs. Brazil

So what are the factors that have contributed to Brazil being the second largest producer of Bio-ethanol (they currently produce 30-35% of the world’s ethanol) after the USA. I mean they have a similar climate to us here in South Africa, they are also a third world country and have an economy that is similar to ours. And yet South Africa is far behind Brazil in terms of Bio-ethanol production.

The main reason for their success come during the oil crisis in 1973 when the Brazilian government implemented what was known as the “Proalcohol” or “National alcohol program”, which was hoped to move Brazil towards energy independance. This program was extremely effective in that today bio-ethanol accounts for around 50% of their gasoline/petrol consumption.

So what made this program so successful:
1. Tax incentives and government subsidies for bioethanol producers.
2. Mandatory mixing of ethanol with petrol, which today is set at 1:3 (E25)
3. Development of flexi-fuel vehicles which can run on any proportion of ethanol:petrol

Interestly enough I was reading the other day on the Department of Minerals and Energy’s website and was suprised to find that bio-ethanol producers in South Africa qualify for a 100% tax return on there bio-ethanol sales which works out to around R1.20 per litre of bio-ethanol sold. I was also interested to find out that in their white paper on renewable energy for 2013, they aim at making it mandatory for petrol to contain 8 – 10% bio-ethanol.

So where does that leave South Africa’s Bio-ethanol economy? Personally taking Brazil as an example, I think in a extremely promising situation and I am looking forward to seeing what happens. A move towards independance from fossil fuels and the price of oil is in my opinion a good one.

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2 Responses so far »

  1. 1

    Taryn McIntosh said,

    I wonder how the introduction of bio-ethanol will change the fuel price? Will petrol still be so expensive and will the price rise as often as it does now?

    • 2

      mcintoshsites said,

      At the moment, I think the introduction of Bio-ethanol will not really effect the petrol price as it will be sold as petrol-ethanol mixture which will be quite low (8-10% ethanol in petrol). The main reason why the price of petrol won’t change much is that the extra profit earned by substituting with ethanol will be used as an incentive for industry to produce bio-ethanol. This means that any profit earned off producing bio-ethanol will at the moment go straight back to the producers of bio-ethanol and not to motorists. This is obviously attractive for investers. Sorry motorists.

      In the future I would like to think that bio-ethanol will be a cheaper alternative to motorists but this depends largely on goverment policies and so on. It also depends on whether South Africa begins to import Flexi-fuel vehicles which can handle much higher concentration of ethanol (up to 95%) in their engines.


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