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ENERGY-LATIN AMERICA: The Time for Biofuel Is Now

Mario Osava

SAO PAULO, Apr 7 2006 (IPS) - Energy could be a factor in favour of competitiveness and development in Latin America, in a world in which the coming oil shortage has already caused a surge in energy prices, and biofuels are emerging as an economically viable alternative.

This was the message of several speeches given in different sessions of the World Economic Forum on Latin America, which drew around 300 business executives, government officials and experts to Sao Paulo on Wednesday and Thursday. Environmental requirements, as well as oil prices, are encouraging an increase in renewable energy sources, the speakers said.

In the near future the trend will be towards diversifying energy sources. This is also required for energy security, an issue which is becoming more complex by the day, according to Jed Bailey, research director for Latin America of the U.S.-based company Cambridge Energy Research Associates (CERA).

Oil, highly polluting coal, and nuclear plants with their radioactive waste products awaiting long-term disposal solutions, are still important energy sources. Then there is hydrogen, a potential source which still has many problems to be ironed out, he said. Among biofuels, ethanol is a good option, and the raw material varies depending on the countries and the technologies used.

Ethanol is a “fantastic” fuel for the next few decades, “but not for the next century,” said Henry Joseph Junior, head of the National Association of Vehicle Manufacturers of Brazil, commenting on the car industry’s intense search for alternatives, in order to reduce dependence on oil as well as urban pollution.

Seventeen million dollars worth of investment in technology and new energy sources are needed over the next 25 years, according to the International Energy Agency.

Latin America has plentiful and diverse energy resources. In addition to its immense hydroelectric potential, which in some countries covers almost all the electricity needs, the opportunities for harnessing biomass, while still undefined, are enormous.

At least six Latin American countries are oil exporters, noted William Kimble, director of energy and natural resources at KPMG, a U.S. consultancy firm. And Brazil, the foremost consumer in the region, will proclaim that it is self-sufficient in oil on Apr. 21, President Luiz Inácio Lula da Silva announced.

With the development of biofuels, led by Brazil, which started its Fuel Alcohol Programme to substitute ethanol for petrol and reduce oil imports three decades ago, the region could become something of a world power in energy resources.

Lula offered to “share” technology developed in Brazil for producing and using ethanol, for the benefit of developing regions such as Africa and the rest of Latin America. This was a particularly good opportunity for Central America, which has the advantage of tariff-free exports to the United States, he remarked.

But the strongest expression of interest came from Washington. The United States has embarked on a programme to diversify its energy sources, and would like to “work together” with Latin America, said Anthony Wayne, Assistant Secretary of State for Economic and Business Affairs. His interest list includes ethanol, and alternatives such as the compressed natural gas that Argentina is producing.

The world is experiencing profound changes in this field, largely due to increasing energy consumption by countries like China and India, with their huge populations of 1.3 and 1.1 billion, respectively, Wayne said.

Brazil also launched a national biodiesel programme last year, to add three percent biodiesel to petroleum diesel. But for now this is not a mandatory measure. The idea is to diversify fuel sources, which include castor oil, palm oil, soy oil and other oil-producing plants.

But physicist José Goldemberg, an energy expert who is currently Environment secretary for the state of Sao Paulo, is sceptical about the programme’s success. He told IPS that the initiative is better at promoting small family farming for social purposes, than as an energy programme, which would require large-scale production.

Given that Brazil is the world’s second largest producer and top exporter of soybeans, Goldemberg thinks the crop will become established as the raw material for biodiesel, and approves of Argentina’s policy of using surplus soybeans to make biofuel.

Ethanol made from sugarcane, on the other hand, has proved to be a success. Goldemberg gave a presentation about the enormous advantages of sugarcane over other sources of biofuel, due to the energy balance of the process – that is, the difference between the energy generated by the fuel and the energy used to produce it û and the lower amount of greenhouse gases emitted.

Based on the data available on land areas needed to increase production of sugarcane and other biofuel sources, and on technologies and consumption, global production of ethanol could be doubled in a few years. It would then be feasible to add 10 percent ethanol to all of the petrol used worldwide, the expert claimed.

Argentina, however, has not yet seen fit to enter this market by converting some of its sugarcane into ethanol. Brazil is offering to transfer the technology and to support the reconversion in Argentina, to help solve the trade dispute over sugar, a commodity so far excluded from the Southern Common Market (MERCOSUR), which links Argentina, Brazil, Paraguay and Uruguay.

In the field of biofuel, Argentina has chosen to make biodiesel from soybeans. “Every country uses their own surplus product,” Martín Redrado, president of Argentina’s Central Bank, told IPS, referring to sugarcane in Brazil and soybeans in his own country.

As for a “solution” with regard to sugar, imports of which from Brazil are heavily taxed in Argentina, he said the thing to do is to “maintain the status quo.”

Redrado explained that the production of ethanol would require subsidies that the Argentine government cannot presently afford.

Argentina points to the subsidies granted to the producers of fuel alcohol in Brazil to justify the high tariffs charged on sugar imports from Brazil.