The Evolution of the Brazilian Regulation of Ethanol and Possible Lessons for the United States

Abstract

The oil shocks of the 1970s propelled the search for alternative fuel sources by oil-dependent countries. The United States and Brazil–then the two largest producers and consumers of ethanol in the world – focused intensely on biofuels as a substitute for oil, while other countries – such as Japan and European Union members – focused more on nuclear energy and other methods of power generation. However, from the 1980s onward, climate change emerged as a significant concern. This new focus on climate change revived the discussion about the need for alternative energy sources. In addition, during the 2000s, oil prices spiked anew. Political and social instability in areas of oil abundance, combined with the widespread belief that oil extraction would peak in ten or twenty years and then decline, contributed to this price volatility.

Biofuels, emerged into this turbulent landscape, offering the promise of partially or completely supplanting fossil fuels. This article focuses on the Brazilian experience using ethanol as a substitute for gasoline for motor-vehicle fuel. Part I offers a brief discussion of the nature and role of biofuels. Part II details the development of ethanol regulation in Brazil, from its inception during the era of military dictatorship through the present. Part III discusses the environmental issues and criticisms concerning ethanol production and how they apply to the Brazilian model. Part IV analyzes the Brazilian experience and explains why it would be very difficult or impossible to replicate in the United States. Overall, this article portrays the difficulties and challenges the United States will face in trying to follow the Brazilian model.

Keywords: environmental law, environmental policy, biofuels, Brazil, United States, alternative energy, climate change, green energy, energy policy

JEL Classification: R48, R38, Q40, Q41, Q48, Q20, Q28, O38, N56, L91, L98, L71, K32, K23