Analysis: Brazil pumps ethanol to Japan

By CARMEN GENTILE, UPI Energy Correspondent  |  Dec. 30, 2008 at 6:57 PM
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MIAMI, Dec. 30 (UPI) -- Brazilian state energy firm Petrobras is planning to open gas stations in Japan with the intent of distributing its sugar-based ethanol to the energy-hungry nation.

While gasoline will constitute the majority of sales at Petrobras stations in Japan for now, sugar-based ethanol produced in Brazil will also be a featured fuel.

Brazilian energy officials said they hope to establish a foothold for Petrobras stations in Japan, then expand to other part of Asia, including India.

The South American ethanol producer leads among nations exporting ethanol to Japan, followed by the United States. Nearly 80 percent of Japan's ethanol imports -- estimated at more than 100 million gallons per year -- come from Brazil.

Petrobras estimates that Japan's ethanol consumption could reach nearly 3 billion gallons annually following the passing of a projected law regulating emissions there, Brazil's Folha de Sao Paulo newspaper reported this week.

Japan's interest in Brazil's ethanol was piqued in 2004 when Prime Minister Junichiro Koizumi visited an ethanol production facility in Brazil and said his country was interested in the alternative fuel as a means of meeting the demands of the global environmental agreement known as the Kyoto Protocol.

The Brazil-Japan ethanol relationship has grown significantly since then with the announcement in 2005 of the formation of the Brazil-Japan Ethanol Co., a partnership between Petrobras and Japan's Nippon Alcohol Hanbai.

At the time, Petrobras proclaimed the union would "seek to identify technical and commercial solutions for inserting ethanol into the Japanese energy matrix in substitution for fossil fuels and in line with the objective of reducing greenhouse gases."

While environmental objectives for reducing Japan's greenhouse gases have yet to be met, the Brasilia-Tokyo ethanol connection has grown stronger, with Japan pledging some $8 billion last year to purchase minority stakes in 40 ethanol plants throughout Brazil.

The two nations have also discussed the creation of a new ethanol pipeline in Brazil to help facilitate the export of the alternative fuel to Japan for decades to come.

In 2006 the two countries said they would provide each other insights on how to improve ethanol production in the hopes that more of Japan's private-sector business would adopt the use of the alternative fuel.

While ties with Japan have certainly helped Brazil's ethanol producers increase output and profits over the last several years, the industry continues to face problems with its image, both at home and abroad, as some critics of the world's largest ethanol exporter contend that increasing Brazil's ethanol production will lead to greater deforestation of the Amazon.

Dilma Rousseff, the chief of staff for Brazilian President Luiz Inacio Lula da Silva, defended the Brazilian ethanol industry at an international energy conference in November, saying the industry was being unfairly maligned for causing deforestation in the world's largest rainforest, which in recent months has experienced an increase in the rate of destruction, according to satellite photos of part of the region.

Rousseff told officials Brazil must "destroy the myth that sugarcane fields are encroaching on the Amazon," noting that Brazil's cane production takes up less than 1 percent of the South American country's total land.

For years Brazilian energy experts have refuted claims that the ethanol sector was a contributor to Amazon destruction, noting that the climate of the forest region is not ideal for cane growth. Much of Brazil's ethanol production comes from the more temperate clime of Sao Paulo state in the country's southeast.

However, detractors contend that Brazilian cane growers are already pushing the boundaries of the Amazon and that the industry's expansion during the last several years because of rising oil prices is responsible for farmers switching to sugarcane in already established agricultural regions and prompting those growing other crops to encroach on the Amazon.

Alternative-fuel experts contend that the ethanol industry in Brazil will continue to grow as long as oil prices remain relatively high, a condition that could mean continued criticism of the Brazilian ethanol sector for years to come.

"Given the strong ethanol market, one would expect that in the medium term, production of ethanol will also increase as sugarcane production rises to meet both sugar and ethanol demand," noted Amani Elobeid, an ethanol analyst at the Food and Agricultural Policy Research Institute at Iowa State University.

Criticism of the ethanol sector in Brazil is nothing new, nor is its defense by the Lula administration and the Brazilian leader himself.

Earlier this year Lula said the world's oil companies were behind the bad press regarding his country's ethanol sector, denying claims by some that the industry uses slave labor and is responsible for deforestation in the Amazon.

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