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Farming for Fuel

Aired June 14, 2006 - 18:00:00   ET


JONATHAN MANN, CNN HOST: Growing your gasoline. Wouldn't it be great to have a limitless, powerful clean fuel that would be available everywhere on the planet? Brazil does, and much of the world is catching up, turning sugarcane, corn, even plant waste into a way to power your car.
Hello and welcome.

In one form or another, if you can grow it and distill it, chances are you can give it to your car and drive away. Take sugar, for example. You can make it into candy or rum or you can follow Brazil's example and make it into ethyl alcohol, also known as ethanol.

Ethanol is an environmentally friendly fuel that dramatically reduces the need for oil. Brazil started its ethanol program during the energy crunch of the Seventies. Along the way, it has hit some bumps in the road, but flex fuel cars, cars that can run on gas or ethanol, now make up the vast majority there. And this year Brazil could become energy independent.

On our program today, farming for fuel.

Helena Cavendish De Mora takes a look at Brazil's 30-year investment in ethanol.


HELENA CAVANDISH DE MOURA, CNN CORRESPONDENT (voice-over): Sao Paulo, population, 10.8 million, one of the world's largest cities, crowded, polluted. It is the commercial engine of Brazil's surging economy, a metropolis to match any in the world, but with a difference: with every passing day, Sao Paulo is less and less reliant on imported oil. The city is increasingly powered by what's harvested in the emerald fields that spread across the hillsides less 100 kilometers away; sugarcane.

There is a new demand for the crop that grows by the millions of hectares across Brazil. A sweet deal for drivers, automakers and farmers who are seeing their product become the commodity of choice in world markets.

Less than half of the cane that's grown in this area is converted into sugar. The rest ends up at distilleries, such as this one, Viewzina Zonswon (ph), where it's converted into ethanol, the fuel that helps power Brazil's new industrial revolution.

Over the past two decades, Brazil has pioneered the use of ethanol in the process of becoming the largest producer and exporter in the world.

Dr. Edgar Beauclair of Sao Paulo University is one of the world's leading sugarcane scientists and an advocate for ethanol as a viable and environmentally preferable alternative to fossil fuels.

EDGAR BEAUCLAIR, SAO PAULO UNIV. (through translator): Sugarcane is a highly productive and recyclable plant. It has the most highly efficient forms of photosynthesis. It captures CO2 more than any other cultivated plant. In addition, it doesn't require a lot of land. We do not need to destroy anymore forests to plant cane. Brazil only needs about 10 to 15 percent of our agricultural lands to supply the world market until 2015.

DE MOURA: Even so, it is forecast that a further 20 million hectares of Brazil's land will be planted with sugarcane in the next five years. Much of the additional ethanol produced will end up back in Sao Paulo and other Brazilian cities, in motorists' gas tanks in place of gasoline.

UNIDENTIFIED MALE (through translator): It's great to have the option of either fuel to save money and to preserve our environment.

UNIDENTIFIED FEMALE (through translator): It saves me a lot of money. I'm able to drive twice as much with ethanol than with gasoline.

DE MOURA: Every time the price of oil rises above $37 a barrel, it becomes cheaper for Brazilians to fill up with ethanol than gasoline.

Many new cars sold here offer flex fuel technology. They'll run on any combination of gasoline and ethanol.

Once cool toward ethanol, the major car manufacturers in Brazil are now converts, and are promising a new generation of flex fuel vehicles.

BARRY ENGLE, FORD BRAZIL: This vehicle is our new Ecosport, and roughly 80 percent of all of our sales for this vehicle are for flex fuel engines.

I've never seen in any market anywhere in the world an automotive technology that was so quickly adopted in the marketplace. We believe what we're doing here in Brazil with flex technology is a model that we can use in any market in the world that is interested in flex-fuel. We have an expertise here. We've mastered the technology.

DE MOURA: There is a similar optimism at the nearby Volkswagen plant.

UNIDENTIFIED MALE (through translator): The technology is very simple and I truly believe that from now on this is the future of car motors in Brazil. Right now, about 95 percent of all the cars made here by Volkswagen are total flex, and I believe that from now on there will only be these types of motors made here. No others.

DE MOURA: This year, for the first time, the number of flex fuel cars out numbered the sales of conventional gasoline vehicles.

(on camera): With oil prices at a record high, several countries are looking to Brazil's ethanol program as a model. However, a growing need for sugarcane fields also raises both environmental and economic challenges.

(voice-over): Ethanol may be less polluting than oil, but it doesn't come with an altogether clean bill of health.

Dr. Paulo Alfonso is internationally known for his role as an environmental attorney in Brazil. In the past, he's taken sugar and ethanol refineries to court for poisoning rivers with toxic waste.

PAULO ALFONSO, ATTORNEY (through translator): The great problem I see in the expansion of sugar fields is that the authorities are not doing comprehensive surveys on how these plantations will affect the biodiversity, local indigenous tribes and the water quality. I don't think farmers have paid attention to these adjacent areas we call areas of permanent preservation, the ones responsible for keeping our rivers clean.

DE MOURA: Scientists in Brazil are working to perfect the art of ethanol production, while looking for new ways to use this versatile crop.

BEAUCLAIR (through translator): Sugarcane also has the most highly recyclable organic matter of most crops. Its waste can be reused for several purposes, including as fertilizer, natural pesticides and for fuel.

Recycling is good business for producers because you don't pollute the environment and produce more sugarcane at lower cost.

DE MOURA: And for Brazil's labor force, recycling means more jobs in a country where opportunity is limited while resources are abundant.

Helena Cavandish de Moura, Sao Paulo, Brazil.


MANN: A postscript to that, we heard Volkswagen say that 95 percent of its cars were flex fuel. In fact, it announced that effective this month it will no longer produce any conventionally fueled cars in Brazil. It will be flex fuel across the board, the first manufacturer to make that break with the past.

We take a break now, in fact. When we come back, more on a brilliant idea and how Brazil beat the rest of the world to it.

Stay with us.



MANN (voice-over): This week, when most people hear Brazil they think football. In a country know for football and fun, sugarcane is serious stuff.

BEAUCLAIR (through translator): Today Brazil is know worldwide not only as the No. 1 in football and samba, but in the sugarcane industry. Sugarcane is our No. 2 source of export revenue.

MANN: Brazil hopes to use its position of strength as a producer of sugar and ethanol. It wants to convince other nations to open up their agricultural and energy markets if they want to sell industrial goods to Brazil.


Welcome back.

Turning to alcohol wasn't an obvious step in the days when Brazil took it, and Brazil wasn't the obvious place to go that route.

Joining us now to talk about that decision and the results, we're joined by Susanne Hunt, biofuels project manager with the World Watch Institute. I think it is fair to say she is a student and admirer of what they have achieved in Brazil.

Thanks so much for being with us.

Why Brazil? How did they get ahead on this?


I think the reason that Brazil is ahead of us is that about 30 years ago, the government made a decision and made a strong commitment to developing their ethanol industry and they've been working towards it ever since.

MANN: Was it an obvious country to start? Was it because they already had a lot of sugarcane or not very much oil? Why them?

HUNT: I think one of the main factors was that they were so -- they were heavily dependent on important oil, so there was strong motivation. And the other factor is that they, as a tropical country with a large and strong agricultural base and abundant rainfall and agricultural resources, they had the ability physically to develop this industry.

MANN: How hard did it turn out to be?

HUNT: How hard? Well, there were certainly roadblocks. There were certainly problems, as we've heard already on this segment. There were problems with pollution initially, with dumping some of the waste water in rivers. There were problems -- there were conflicts over land with small holders. There were problems when gas prices plunged and sugar prices increased in the Nineties.

So, there have been a number of problems, but any emerging industry is going to face problems and they have been dealing with them and improving for about 30 years.

MANN: Did they lose money much of the time? Part of the time? All of the time? Or did they break even at some point? Was there an economic reason to do it after the government made a political choice?

HUNT: Absolutely.

The estimates vary, but most all of the numbers that I've seen show that Brazil has actually saved more money and avoided oil imports than they've spent subsidizing this industry.

MANN: So, it pays for itself.

Let me ask you about the environmental cost. You have to make the ethanol and then you have to burn it. What does it cost the environment on the front end? What does it cost the environment on the back end?

HUNT: Well, there is certainly going to be with any crop impact on water and soil and air, you know, both from the cultivation all the way through the chain to the eventual use in the automobile, but one of the interesting things with the Brazilian ethanol industry is that there are actually a lot of benefits to the environment in terms of displaced petroleum used and also the greenhouse gas benefit.

One of the interesting innovations that the Brazilian ethanol industry has developed is that they actually use the waste from their production, the leftover cane waste, to generate electricity to run their plants. So, they're actually not using coal or natural gas to produce their ethanol. So, they actually have a fantastic greenhouse gas balance and a very positive energy balance.

MANN: When alcohol gets burned and goes up into the sky, what actually ends up there? We all know about the kinds of things that petroleum leaves in the air. Does alcohol burn entirely cleanly? What are the products that result?

HUNT: Some of the products are similar and some of them are not there. For instance, ethanol does not have the sulfur in it that fossil fuels have.

One of the factors is whether or not the ethanol is burned in its pure form or as a blend. Some of the pollutants can actually increase at low ethanol blends. But in general, pure ethanol in the higher concentrations, E85, for example, that we're all aware of in this country, burn much cleaner than pure gasoline.

MANN: OK. We're talking about ethanol as a fuel. Let me go back to sugarcane as a crop. When any country turns to one crop in particular and starts growing it at an industrial scale, not just to feed people and animals but to feed cars as well, what does that do to the environment?

HUNT: Well, the impacts are really going to depend on government policies and how well those policies are implemented.

One of the things that the sugarcane industry has done in Brazil is in the Sao Paulo region, they're requiring that sugarcane growers set aside 20 percent of their land and keep that in natural habitat. So, there are certainly concerns with the expansion of one crop over a more diversified landscape, and that's going to continue to be a concern, and the government is going to need to put this kind of policy in place to avoid risking diverse ecosystems and valuable ecosystems.

MANN: What about the food people need? Is there a fear, is there a possibility, is it already happening, where farmers are making more money feeding cars than they are feeding people and people end up lacking for food as a result?

HUNT: This is one of the big concerns that we have, and so far we've not seen this. And, actually, many of the world's poorest people are farmers. So, if they can -- if the laws are put in place, if they can -- they can actually benefit from, you know, increased investment in agricultural sector, there is a possibility that the poor will actually benefit.

One of the reasons for supporting this industry initially was actually to increase the prices that farmers were getting for food because the low prices were becoming such a problem, especially in some of the developing countries. And so it's a little bit counterintuitive, but increased prices for food can actually benefit a number of people. I think that the benefits and costs are going to be mixed and, ultimately, the governments are going to have to step in to make sure that the most -- the benefits are maximized for society.

MANN: Suzanne Hunt, of the World Watch Institute, thanks so much for talking with us.

HUNT: Thank you, Jonathan.

MANN: We take a break. When we come back, what do country singer Willie Nelson and U.S. President Bush have in common? Well, one thing is an interest in biofuels.

Coming up, we'll explore interest in ethanol in the United States and other nations.

Stay with us.


MANN: Some of the most famous cars in the United States run on ethanol. They're also some of the fastest. The Indy Racing Series already uses 10 percent ethanol in its fuel mix and it plans to switch to 100 percent next season. There have been no problems and efficiency has even improved so that the cars can race further on every tank of gas.

Welcome back.

In the United States and some other countries, ethanol isn't made from sugarcane. It's made from corn, a different process but the same principle, and it could be applied to all kinds of things that people grow or the things they just get rid of.

Daniel Sieberg has this look.


DANIEL SIEBERG, CNN TECHNOLOGY CORRESPONDENT (voice-over): Maybe you scratched your head when Willie Nelson talked about biodiesel.

WILLIE NELSON, MUSICIAN: My wife told me -- this is a couple of years ago -- said, you know, I'm going to buy this car that runs on vegetable oil. I said, OK. So, I bought a Mercedes and it's never had anything in it except vegetable oil.

SIEBERG: Perhaps did you a double take when President Bush said grass could power your car.

GEORGE W. BUSH, U.S. PRESIDENT: We'll also fund additional research in cutting edge methods of producing ethanol, not just for corn, but from wood chips and stalks or switch grass.

SIEBERG: But when two very different people are talking about a very different way to run your vehicle, there must just be something to it.

NATHANIEL GREENE, NATURAL RESOURCES DEFENSE COUNCIL: There's a lot of interesting, new bedfellows coming together to fight for this and we want to see more of that.

SIEBERG: The idea of using plants powering your car isn't new. Using ethanol as a viable fuel source has been discussed since Henry Ford's days but it's never reached its potential.

Recent efforts to use corn for ethanol production have met with some resistance by critics since fossil fuels are needed to process the corn, which sort of defeats the purpose and because it's using an otherwise valuable crop. The key, many experts say, is making something called cellulosic ethanol.

BRIAN FOODY, CEO, IOGEN INC.: Almost any kind of source of natural fiber could be used, so we're standing in front of straw. America has great resources of corn stalks and corn stovers that are now just plowed under. But beyond that, we could go to rice hulls in California, we could go to wood wastes all over the United States, or even municipal wastes.

SIEBERG: Iogen is a Canadian biotech firm, and the first to tap into making gas from grass on a bigger scale, as much as one million gallons a year. That's just a drop in the tank compared to what's required by all the vehicles in North America.

FOODY: People have to take a real risk to get the first facilities up. They have to move that forward. There's new things to be worked out. And these won't come without bugs and problems.

SIEBERG: Iogen is considering construction of a giant facility in Idaho in 2007. Company reps routinely travel to Washington for more money and support. To date, they say the enthusiasm there is overflowing but the funding remains a trickle. It's getting over that bump that will make ethanol cost effective to produce. The manufacturing process involves taking plant material, like wheat straw, and separating the necessary ingredients.

(on camera): So, I can't help but notice the smell up here.

FOODY: Not bad, is it? That's the fermentation and it's like the brewing process. In fact, we call this first batch that comes off beer, which is about five to seven percent alcohol.

SIEBERG (voice-over): Part of the reason environmentalists like it so much is that even the discarded material, called lignin, can be recycled back into the process to power the machinery. There's virtually no waste.

FOODY: When you produce cellulose ethanol, you actually don't use any fossil fuels in the processing. And that means overall there's no net greenhouse gas emissions.

SIEBERG: With oil hovering at $70 a barrel, average prices at the pump approaching $3 a gallon, the answer may lie in the ground. Just not that far in the ground.

Daniel Sieberg, CNN, Ottawa, Ontario.


MANN: Joining us now to talk about all the countries and all the crops that could be moving us away from oil is David Sandalow, director of the environment and energy project at the Brookings Institution in Washington.

Thanks so much for being with us.

If this is such a good and obvious idea, why isn't everyone doing it?

DAVID SANDALOW, BROOKINGS INSTITUTION: Well, Jonathan, almost everybody is. In the United States, ethanol is hot. There are 97 plants operating at almost full capacity and another 33 under construction as we speak.

Venture capitalists are throwing tens of millions of dollars at new ethanol projects right now, and in the United States politicians from President George W. Bush on the one hand to Democratic National Committee Chair Howard Dean are all embracing this fuel.

MANN: A sudden surge of interest, but couldn't this have happened 10 years ago, 20 years ago, 30 years ago, when Brazil was doing it?

SANDALOW: Well, it could have, and I hope we learn some lessons from what Brazil has done. Brazil pointed the way with a couple of things, including I think the basic lesson that consistency counts.

One thing that is hard in the United States is that our energy policy has tended to fluctuate, up and down, with different types of incentives. The Brazilians have stuck with some core incentives for ethanol, and it's paying great dividends.

MANN: Now, you're talking about incentives. Are the economics not there? Isn't it cheap enough already to get consumers to switch without the government paying companies to generate it or paying off consumers to try?

SANDALOW: Today, as your segment said earlier, the basic economics are there, given the price of oil, particularly for corn-based ethanol. For ethanol that comes from switch grass and other sources, there is still some more investment that is needed to make this commercially competitive.

President Bush said in his State of the Union Address he wanted to see that happen in five or six years, and there is a lot of effort going into that right now.

MANN: Now, it is just a fraction of the total energy market. It's just a fraction in countries like China and India that are also turning into rapacious consumers of energy. Is the whole world just going to switch? Are we at the beginning of an energy revolution now?

SANDALOW: Well, we are at the beginning of an energy revolution now, and the world is going to switch, but it's going to take a while. Petroleum infuses the global economy. We have trillions of dollars of infrastructure invested in petroleum today. But there are very good reasons, from an economic standpoint, from a national security standpoint, from an environmental standpoint, for countries to switch towards ethanol and other biofuels, and that is happening. And it is going to happen, it's relentless. Over the next several decades we're going to see enormous growth in these biofuels.

MANN: People who know about this and who are big ethanol boosters, well, some of them speak darkly about an oil company conspiracy that's kept this from happening. Have the oil companies been dragging their feet and keeping the rest of us from an obvious cheaper and cleaner kind of energy?

SANDALOW: Well, you know, I think really today what matters is focusing on the opportunities for all companies, including oil companies, and there is a number of oil companies that see the profit potential from this technology. They see that as the world has an incentive to move in this direction, there is going to be millions and millions of dollars, billions of dollars, to be made from investing, and some of the leading oil companies are already doing that.

MANN: Now, clearly, there is going to be a need for an enormous amount of new infrastructure. Just even putting a new pump in the familiar corner gas station costs money. But most of us don't have gas stations. We have cars. For a person who is driving a car who is hearing this conversation thinking this is a brilliant idea, but what happens to me, are an entire generation -- are generations, are fleets of automobiles going to be unusable? Do we have to wait for a new generation of cars the same way we had to wait for hydrogen cars or hybrid cars?

SANDALOW: Well, no. First, if you're in the United States, you may well have a vehicle that can take almost 100 percent ethanol. There are millions of flex fuel cars on the road today and people don't even know they have them. But as your segment pointed out earlier, it is really easy for the auto companies to ramp up their production of these cars called flex fuel. That means that they'll take either gasoline or ethanol, and the big companies in the United States are doing that today. Ford and GM are converting their production lines to produce cars that will take either one. And, by the way, the cost is small. It cost about an extra $100 to produce a car that will take either regular oil or ethanol.

MANN: It is the future and it's on a farm near you.

David Sandalow, of the Brookings Institution, thanks so much for talking with us.

SANDALOW: Thank you, Jonathan.

MANN: And that's INSIGHT. I'm Jonathan Mann. The news continues.



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