Production and use of fuel ethanol in Brazil - BAFF

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The term of transactions, financial charges, guarantees, financial agents and other
financial conditions of the program are determined by the National Currency Board.
The specific legislation in force does not provide for any public source of financing
for any such measure as may be aimed at supporting or subsidizing the production
of sugar-cane for use as raw material for sugar, or even the sugar production itself.
The Brazilian sugar-cane, sugar and ethanol regime is perfectly compatible with the
World Trade Organization Agreements. However, baseless allegations can still be
heard against our regime. The most relevant ones are commented on below:
a) The mandatory fuel blend
Anhydrous ethanol is known to be added to the base gasoline in Brazil as a
requirement of the environmental legislation. The theme has be the subject of
accusations on the part of those who are not familiar with the WTO rules. Some
say that because the blend is mandatory, domestic producers are assured a market,
which is an illegal practice.
The production and use of ethanol as a fuel and partial substitute for gasoline in
Brazil contributes to reducing the harmful effects of environmental pollution.
Brazil’s environmental legislation sets the standards on vehicle emission limits and
the oxygenate levels required for the gasoline that is sold in the domestic market 9 .
On the other hand, technical knowledge confirms that the possible substitutes
for anhydrous ethanol lack the features that make ethanol an environmentally
sustainable fuel. MTBE, an additive broadly used in US gasoline in the 1990’s, is now
being banned from the US market because of water and soil contamination. ETBE,
an additive in use in some countries, especially in Europe, shows a much lower
greenhouse gas reduction potential than that of ethanol because its formulation is
mainly based on isobutylene, an oil byproduct. Furthermore, in order to achieve
the same oxygenation level as ethanol more than twice as much ETBE needs to be
used, and that has considerable economic impacts. MMT, another gasoline additive
that increases octane rating, is a manganese-based chemical that has also been in
use in some countries; however, the use of this additive has been associated with
a loss of efficiency of catalytic converters in controlling gas pollutant emissions. In
other words, ethanol is the onlycommercially available dditive known to achieve the
environmental protection and economic feasibility goals.
According to WTO rules, member countries must ensure that their technical
regulations are not prepared or enforced for the purpose of creating unnecessary
barriers to international trade. Technical regulations must not be more restrictive
8 Law no. 8,723/93 of October 28, 1993.
A. Fuel ethanol: Activities in Brazil and the world context