Every taxi in São Paulo runs on alcool
(ethanol), and it's got nothing to do with a government mandate
. In fact, taxi's are exempted from São Paulo's rodizio
- the city's weekly driving ban aimed at fighting congestion and pollution. The cabbies I've talked with have also dispelled any lofty notion about driving on ethanol for the sake of limiting environmental degradation. Their's are the same reasons why taxi drivers in Boston line up at midnight at the gas station on Memorial Drive near the MicroCenter in Cambridge: the fuel is cheap and available compared to other sources.
Ethanol in São Paulo (and all over Brazil) is roughly R$1 cheaper than gasoline and is available at every gas station. At some gas stations I've seen, ethanol pumps outnumber gas pumps by two to one. Ethanol here goes for roughly R$1.40 a litre, or close to -$0.30. By way of comparison, only one percent of gas stations in the U.S. sell ethanol
at a cost of around $2.70 a gallon (there are roughly 3.8 litres in a gallon)
. Perhaps even more telling is the fact that nearly every vehicle sold in Brazil is "dual flex" - it can run on either gas or ethanol. This includes almost all cars sold by American manufacturers like GM and Ford, as well those made by Fiat, Renault, Toyota and VW. So, the question remains, what's up with the U.S. ethanol industry?
Brazil's Programa Nacional do Alcool
was in initiated in 1975 in response to the 1973 oil crisis. Since then Brazil has cut its oil imports by more than $50 billion and expanded its ethanol-ready fleet to 40 percent of the market
. Even the gasoline sold here contains about 20 percent ethanol. And, unlike in the U.S., the Brazilian ethanol industry has operated largely without subsidies for the last 15 years. That's not to say it lacks total government support. Petrobras, the state run gas company, is required to buy fixed amounts of ethanol production on an annual basis.
Ethanol here is produced from sugarcane, which is more efficient in terms of energy conversion and density than corn and is also has lower emissions. It's also much cheaper to process - $0.15-$0.20 a litre for sugarcane versus $0.30 a litre for corn. Despite this, the U.S. maintains a $0.54 tariff on ethanol from Brazil, which was levied to protect domestic producers and refiners. Even with the benefit of trade protection a lot of these companies are starting to fail
The moral of this story is that a biofuel production/distribution/consumption industry is possible without large-scale government support. In fact, in the absence of government support companies tend to become more efficient and globally competitive
. So much so that even American car makers are getting in on the act. See below for examples.