Brazil is the second largest producer of biofuels in the world. In March 2008, Brazil’s bioethanol has replaced 50% of the country’s gasoline, and it is the only country in the world that does not supply pure gasoline nationwide. Brazil mainly develops fuel ethanol production with sugarcane as raw material, and the output of fuel ethanol ranks second in the world. In 1973, the oil crisis broke out, and sugar prices fell on the international market, Brazil takes advantage of its high sugarcane output and low cost raw materials, encourages the use of sugarcane to produce ethanol to replace gasoline, promotes the use of fuel ethanol through economic subsidies, and gradually reduces its dependence on petrochemical energy. In November 1975, the Brazilian government promulgated the “National Ethanol Plan” decree, and the fuel ethanol industry began large-scale production. At the same time, the federal government established a special agency to start manufacturing vehicles fueled by ethanol, and in the 1980s, the Brazilian ethanol industry reached its peak. In the late 1980s, international oil prices fell and sugar prices rose again. The government gradually removed subsidies, and the growth momentum of fuel ethanol production gradually slowed down.
Since 1999, the Brazilian government has deregulated the retail price of fuel ethanol, completely liberalized the price of fuel ethanol in 2002, and began to introduce flexible fuel vehicles in 2003, further increasing the market demand for fuel ethanol. At the beginning of the 21st century, the development of Brazil’s fuel ethanol industry once again entered the fast lane. At present, more than 33,000 gas stations in Brazil provide ethanol fuel, and nearly 4 million vehicles use fuel ethanol. As of 2013, Brazil’s bioethanol production was about 18.801 million tons, accounting for 26.75% of the global total.
Combining the characteristics of its own resources, Brazil chooses fuel ethanol as the development focus of alternative energy, and provides a lot of policy support in the production and consumption of fuel ethanol.
In the production process, Brazil provides low-interest loans to fuel ethanol producers, and the national policy bank has set up a special fund for biofuels, providing up to 90% of the financing credit. In 1980-1985, the Brazilian government provided more than $2 billion in low-interest loans to bioethanol companies, accounting for about 29% of the total investment. In order to ensure the smooth supply of raw materials for biomass fuel production, the government has also set up special credit funds for farmers who are directly engaged in the cultivation of energy crops. At the same time, the Brazilian government has also made farmers get a lot of loans from international financial institutions by attracting foreign capital.
In terms of consumption, Brazil stipulates that different ratios of fuel tax policies are implemented for automobiles. According to the different blending ratios of ethanol and gasoline used in automobiles, the tax rates levied are different to encourage the development of fuel ethanol. Since 1982, the government reduces the industrial product tax by 5% on the production of fuel ethanol vehicles, and the state government reduces the value-added tax by 1% on fuel ethanol vehicles on the basis of the federal tax reduction, or even reduces or exempts the entire value-added tax. Brazil’s “Federal Act 11727” stipulates that the total tax paid by producers and sellers of biofuel ethanol shall not exceed 9.25%. The government has a tax reduction policy for all products in the biofuel ethanol industry chain, and gives tax incentives to fuel ethanol producers and ethanol gas stations. In addition, Petrobras purchased fuel ethanol at a price set by the government, keeping the market retail price of fuel ethanol at a level lower than that of gasoline, and restrict the import of bioethanol in the early stage of development to ensure that there is market demand for domestically produced fuel ethanol products. In order to expand the consumption of fuel ethanol, the government mandates that fossil fuels should be blended with biofuels. Brazil is currently the country with the highest proportion of fuel ethanol gasoline in the world. At the same time, the Brazilian federal law expressly stipulates that when purchasing or replacing light-duty public vehicles, government-level units must purchase vehicles with renewable fuel-using equipment containing ethanol fuel.
If you want to know what is the current status of bioenergy development in the EU, or the current status of bioenergy development in the US, check out the previous article.