The United States and Brazil are useful illustrations for how economics, technology and policy can produce different outcomes in the face of the same problem.  In this case, the problem was unreliable oil supplies during the oil crises in the 1970s. The responses of these two countries in the decades that followed differed greatly.

Brazil’s response has allowed them to become an energy-independent nation, exporting oil to other nations. Contrastingly, the United States imports over two-thirds of its oil.  The United States can learn from Brazil’s experiences in the ethanol industry to create a more sustainable and environmentally responsible transportation fuel industry within its own borders.

Following the 1970s oil crises, Brazil implemented the ProAlcool program to establish an ethanol industry using one of the nation’s most valuable resources: sugarcane. Today, ethanol supplies over half of fuel consumed in Brazil.  Last summer I had the opportunity to visit São Paulo, Brazil to learn about Brazil’s continued work in biofuels programs and research, including comparisons to similar work being done in the United States. This two week program included visits to sugarcane plantations, mills and research laboratories throughout Brazil.

The United States has been slower to adopt biofuels than Brazil, but there appears to be a rising effort to produce home-grown, sustainable biofuels fuels in the face of environmental and national security concerns. So what can the United States learn from Brazil in order to improve its own biofuels industry and therefore decrease dependence on foreign oil?

Step 1: Give biofuels a dependable market.

In Brazil, flex-fuel vehicles provide a ready-made market for ethanol. Flex-fuel vehicles now account for over 90 percent of light-duty vehicle sales in Brazil (the remainder is comprised of diesels and gasoline-only imports). And the benefit ultimately falls to the consumer because he or she can choose whether or not to fill up with gasoline or ethanol based on price at the pump.

The United States should start by ensuring that there is a market for biofuels. If we’re talking about ethanol, we’ll need engines that can combust alcohol in higher concentrations than the 10 to 15 percent mixture that is the maximum that can be tolerated by today’s gasoline engines. Flex-fuel vehicles in the United States that can handle higher concentrations of ethanol are more of an obligatory afterthought to satisfy CAFE requirements than for love of alternative fuels and desire to create a more sustainable transportation fuels market.

The Energy Independence and Security Act of 2007 was an important start toward establishing this dependable biofuels market, but more certainty will be required.

Step 2: Stabilize R&D funding for biofuels research.

The Brazilian ethanol industry almost died off with low oil prices in the early 2000s, but was kept alive because the same plants used to produce ethanol also produced sugar, a flexibility developed through concerted R&D efforts in Brazil. A Brazilian sugar mill is able to make the decision to produce ethanol (or not) through simple a economic cost/benefit analysis. When the market conditions are right, plants switch production to ethanol. This flexibility was created through effective Brazilian R&D to maximize the flexibility and competitiveness of ethanol producers.

The United States should also insulate R&D funding and research efforts against fluctuation in energy prices in order to create intelligent design like the flexible Brazilian sugar mill. We’ve lost decades of valuable research because oil prices made biofuels research uneconomical.

For example, important programs researching advanced biofuels from algae were discontinued in the 1990s to help balance the budget when energy prices were low. As oil prices and interest in these algal biofuels have increased in recent years, the detrimental affect of this break in funding has become apparent.

Step 1 will create a dependable market for ethanol in the United States. Step 2 will ensure that businesses will be able to respond to this market via flexible and innovative technologies.

The United States and Brazil both responded differently to the oil crises of the 1970s.  By learning from Brazil’s response, the United States can develop a robust domestic supply of biofuels that will support a more sustainable and environmentally responsible transportation fuel industry.