A Sweeter Way to Go Green

"Alternative Energy"

08/19/2007

By Mac Margolis
Newsweek


August 19, 2007 - It takes steady nerves, and maybe a touch of folly, to walk willingly into a global financial storm. So when Brazilian agrimogul Rubens Ometto went ahead this past Thursday with the initial public offering of his giant ethanol company, Cosan, on the New York Stock Exchange, a few financial critics understandably scratched their heads. After all, Banco Itaú, one of Latin America's hottest properties, took one look at the crumbling bourses of August and summarily canceled its own long awaited public offering, scheduled for the same day. But when the trading floor fell quiet, Ometto's empire was not only intact, but it was $1 billion richer. Cosan closed its first day at a respectable $10.50 a share, a bullish moment in a bear market.

Ometto and Cosan can thank the weather for its successful debut. Now that climate change is the worry du jour, the search for clean, renewable energy has sent scientists and companies to the far corners of the map. In France, beets are being turned into ethanol. In the United States, it's corn that's king. Sweet potatoes, compost and swtichgrass (a weed-like variety of grass found in prairies) are all being transformed into biofuels for the future.

But it's Brazil's sugar cane-derived ethanol that really has researchers, investors and the markets excited. "The world is searching for efficiency," says Sérgio Thompson Flores, head of Infinity Bioenergy, a U.K.-based renewable-energy company. "In terms of technology, genetic engineering, climate and soil, Brazil has a monumental comparative advantage in ethanol." That may explain why in addition to Cosan, some 350 Brazilian companies are currently brewing ethanol from sugar cane with the number of producers set to rise to 412 by 2012.

According to its advocates, sugar cane ethanol is the next best thing to hotwiring the sun. Relatively speaking, they say, it's also easy on the atmosphere, releasing a fraction of the carbon dioxide and other heat-trapping gases that add to the world's steamy greenhouse. Also, because plant waste can be used as fertilizer or as fuel to fire the distillery furnaces, making sugar ethanol requires only a fifth of the gasoline and diesel it typically takes to make fuel from crops like corn. And Brazil's sweet brand of ethanol is efficient, brewed without the official price props or government handouts that are common in Europe and the United States. At least that's the pitch Brazilian President Luiz Inácio Lula da Silva made on his tour in early August of Central America and the Caribbean, chatting up clients about sugar cane ethanol from Tegucigalpa to Kingston. Biofuels like "ethanol and biodiesel offer a genuine energy option for sustainable development," Lula said.

But environmental groups aren't so juiced. Trailing Lula was a chorus of jeers from world environmentalists and civic groups, such as Conservation International, the Brazilian labor organization CUT, and even the United Nations Environment Program. They have portrayed sugar cane as the steamroller of agriculture, flattening forests and untold species of wildlife in its path, and decried ethanol as a serious polluter crossdressing as green fuel. Though fuel alcohol burns cleaner than fossil fuels, the doubters predict the biofuel boom will push sugar cane deep into the backlands, all the way to the Amazon basin, so destroying precious biodiversity. Naysayers also claim that turning over farmland to energy crops will crowd out conventional crops, sending the price of food and animal feed soaring.

Ironically, the hype that ethanol's advocates have generated is hurting the industry's cause. Take the breathless claims that ethanol will free the world from fossil fuels and reduce reliance on oil from the Mideast. Neither promise will be fulfilled anytime soon. Between them, Brazil and the United States turn out some 72 percent of the world's ethanol on a total of 15 million hectares. That amounts to around 2 percent of all the gasoline consumed on the planet every year. To replace just 1 percent of U.S. gasoline consumption would require a staggering additional 8 billion liters of ethanol. "That is fully half of Brazil's yearly output," writes Marcos Jank, who presides over the Brazilian sugar and alcohol producers association, Única.

The drive to turn sugar into fuel began as a whim by Brazil's ruling generals of the 1970s who dreamed of sowing their way out of the world energy crisis. Thanks to that stubborn obsession, Brazil now boasts the world's only cost-effective bioenergy industry. Brazilian ethanol distillers make alcohol from sugar at 22 cents a liter, against 30 cents a liter for corn ethanol and 53 cents for beet-based alcohol. Unlike their European and U.S. counterparts, they no longer draw official subsidies. Today, nearly eight of every 10 new cars hitting the road in Brazil are flex-fuel, burning gasoline or ethanol or any combination of the two.

Despite ethanol's success, there's been a nagging concern that the Brazilian government and companies like Cosan will supplant precious rainforest with fields of sugar cane. But that's not likely. Most of the Amazon basin is too hot and too wet for sugar cane, which flourishes in alternating bouts of hot and cold as well as wet and dry weather. Little wonder that of the 87 new distilleries planned for the next decade, none is targeted for areas in the tropical rainforest. But because sugar can thrive just south of the Amazon basin, green groups such as Conservation International counter that ethanol means double jeopardy: directly threatening untold plants and animals in the Brazilian cerrados (savannahs) and indirectly threatening Amazonia by pushing low-tech cattle ranchers into the rainforest, where they gobble up one hectare for every head of cattle.

But that argument rests on a blind spot. If the United States decided to thwart its farm lobby and import Brazilian sugar cane-based ethanol to meet President Bush's ambitious biofuel plan (substituting 15 percent of the country's gasoline by 2017), Brazil would need to sow cane on 20 million additional hectacres. That's just 7 percent of the nation's available farmland. José Goldemberg, environmental secretary for São Paulo, reckons that his state could triple sugar cane planting without toppling a single tree.