Brazilian Biofuels Programmes from the WEL Nexus Perspective

Brazil’s biofuel programmes viewed from the WEL-nexus perspectiveethanol production. Lower oil prices and the resulting lower ethanol retail prices, coupled withthe elimination of incentives, made ethanol production somewhat unattractive. However,demand for ethanol continued due to the number of existing ethanol-fuelled vehicles, which ledto an ethanol supply crisis (Nardon and Aten, 2008). The Proalcool programme lost credibility.By 1997–98, sales of pure ethanol vehicles had dropped to only 1,000 (Hira and Oliveira,2009). The period from 1985 to 2002 can be seen as its ‘downward slide’.The current phase, which started in 2003, and is not specifically a government programme, ismarked by the revitalisation of the use of ethanol as a fuel due to the introduction of flex-fuelvehicles (FFVs) in Brazil. In August 2002, the government gave this emerging market a majorspur when it re-classified FFVs as eligible for the same tax breaks as ethanol-fuelled vehicles.Government-supported R&D has been key to the growth in the number of FFVs in Brazil (Hiraand Oliveira, 2009).2.2 PNPBOver the years, Brazil has promoted the introduction of bio-diesel in the country’s energy mixthrough various socioeconomic, energy and environmental policies and measures (MAPA,2006). Although Brazil began to discuss the use of vegetable oils for fuel purposes as far backas the 1920s, it was not until 2002 that the country specified that bio-diesel should beobtained from oilseeds, under the aegis of the Brazilian Bio-diesel Network (PROBIO-DIESEL)(BRASIL, 2006). Then, in December 2004, PNPB was established, basically defining targets forblending bio-diesel with mineral diesel (MAPA, 2006). 4Its main objective was to guarantee the economic and technical viability of producing andusing bio-diesel. Its major goal was social inclusion and regional development via thepromotion of small family agricultural units and the encouragement of technological research(Pousa et al., 2007; Hall et al., 2009; Takahashi and Ortega, 2010).According to the Brazilian Federal Government, other reasons behind PNPB were (BRASIL,2005, 2007a; MAPA, 2006): Potential improvement in the country’s trade balance, since Brazil is a net importerof diesel Availability of many oilseed plants suitable for bio-diesel production withoutaffecting food security Perfect substitutability between bio-diesel and mineral diesel Greater energy efficiency associated with bio-diesel compared to diesel in order toreduce CO 2 emissions by 78% for the same consumption levelPNPB also created the Social Fuel Stamp. Bio-diesel industries must purchase part of thefeedstock from small farmers, sign commercial agreements with those farmers and providethem with technical assistance in order to receive the Social Fuel Stamp (MDA, 2007).The most important action from PNPB was the introduction of bio-diesel in Brazil’s energymatrix by means of Law (No. 11097) (BRASIL, 2005), which assigned the responsibility to theNational Council for Energy Policy (CNPE) to change the mandatory bio-diesel mixture. Asmentioned before, the current mandatory bio-diesel mixture is 5% by volume (MAPA, 2011).This ability to meet the 5% target earlier was largely due to the mobilisation of the country’sproductive base. Bio-diesel production reached 2.4 billion litres in 2010, while current capacityis 5.2 billion litres a year, from 67 authorised plants (ANP, 2011a).4 All the blend percentages referred to in this paper are by volume. Initially, 2% (B2) was voluntary from 2005 to2007, and became mandatory from 2008, rising to 5% in 2013 (B5). However, the CNPE made mixing 3% (B3)mandatory from 1 July 2008. This rose to 4% on 1 July 2009 and to 5% from 1 January 2010.10