National Fuel Alcohol Program (Proalcool)

The Brazilian national alcohol program does not constitute a single entity, but the country of Brazil can itself be thought of as the world's largest single producer of first generation biofuels, namely ethanol. The Brazilian government has supported private industry in the development of alcohol-based fuels by subsidizing research and development. The program for distributing these subsidies is known, in English, as the National Fuel Alcohol Program. It is called Proálcool in Brazil, which is an abbreviation of Programa Nacional do Álcool.

Sugarcane

Sugarcane is to Brazil what corn is to the United States or what potatoes are to Ireland. The crop has been cultivated in this South American country since the middle of the 16th century. Initially, ethanol was simply a byproduct of processing sugarcane to produce sugar and was used primarily for beverages or antiseptic production. It wasn't until the 1920's that ethanol was used as a fuel in Brazil.

War

Like many things in modern society, the impetus for switching to alcohol-based fuels came as a result of World War I. In 1919, Brazil was experiencing gasoline shortages and prices higher than most people could afford on imports. The Governor of Pernambuco, a Northern state in Brazil, mandated that all government vehicles run on ethanol. This was a cost saving measure, but it caught on. In 1931, the Brazilian national government mandated that all gasoline have a blend of 5% ethanol. By 1943, the mandatory blend ratio had reached 50% thanks to World War II oil shortages.

The Programa Nacional do Álcool (National Fuel Alcohol Program)

In 1973, some members of OPEC enacted an oil embargo that threw the world into a massive oil shortage. In response, the Brazilian government decided to enact the Proálcool program to phase out all automobile fuels derived from fossil fuels. The government decided to use sugarcane due to its low cost and existing experience with deriving alcohol from sugar.

In 1979, 16 stations began to supply 100% ethanol to a fleet of 2,000 vehicles that were developed by local subsidiaries of Volkswagen, General Motors, Ford, and Fiat. This was followed a few months later by the commercial availability of E100 vehicles (able to run on 100% ethanol).

The program itself provided three drivers for ethanol as a fuel. First, it guaranteed purchases from farmers by the state-owned oil company Petrobras. This allowed farmers to plant crops without fear of lost investment. Second, the government provided low-interest loans for firms producing ethanol from sugarcane or other agricultural products for fuel. Finally, the government ensured that ethanol would always fetch a price of at least 59% that of gasoline at the pump. With these incentives, Brazil had more than 4 million vehicles running on pure ethanol by the 1980's.

Since the 1980's, the supply of gasoline versus ethanol has varied as have prices. Today, most vehicles in Brazil are flex-fuel vehicles, which are capable of running on gasoline or 100% ethanol. The market remains volatile due to a number of factors such as high prices for sugar, financial problems that impact incentive, and harvest quality. Brazil is still the largest single consumer of biofuel in the world.