Biofuel in Brazil

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Ethanol fuel in Brazil

Brazil is the world's second largest producer of ethanol and the world's largest exporter, and it is considered to have the world's first sustainable biofuels economy and the biofuel industry leader. Together, Brazil and the United States lead the industrial world in global ethanol production, accounting together for 70% of the world's production and nearly 90% of ethanol used for fuel. In 2006 Brazil produced 16.3 billion litres (4.3 billion U.S. liquid gallons), which represents 33.3% of the world's total ethanol production and 42% of the world's ethanol used as fuel. Total production is predicted to reach at least 26.4 billion litres (6.97 billion U.S. liquid gallons) for 2008. Brazil’s 30-year-old ethanol fuel program uses modern equipment and cheap sugar cane as feedstock, the residual cane-waste (bagasse) is used to process heat and power, which results in a very competitive price and also in a high energy balance (output energy/input energy), which varies from 8.3 for average conditions to 10.2 for best practice production.The Brazilian ethanol program provided nearly one million jobs in 2007, and cut 1975–2002 oil imports by a cumulative undiscounted total of US$50 billion. The production of ethanol is concentrated in the Central and Southeast regions of the country, which includes the main producer, São Paulo State. These two regions were responsible for almost 90% of Brazil's ethanol production in 2004.

There are no longer light vehicles in Brazil running on pure gasoline. Since 1977 the government made it mandatory to blend 20% of ethanol with gasoline (common ethanol fuel mixtures#E20, E25), requiring just a minor adjustment on regular gasoline motors. Since 1991 the mandatory blend is allowed to vary nationwide between 20% to 25% of anhydrous ethanol, and since July 2007 the blend was set at common ethanol fuel mixtures#E20, E25. By the end of 2006 there were 33,000 filling stations throughout the country with at least one ethanol pump. The Brazilian car manufacturing industry developed flexible-fuel vehicles that can run on any proportion of gasoline (common ethanol fuel mixtures#E20, E25) and hydrous ethanol (E100). Introduced in the market in 2003, the flex-fuel vehicles became a commercial success, and by August 2008, the fleet of "flex" cars and light commercial vehicles had reached 6.2 million new vehicles sold, which represents around 23% of Brazil's light-duty motor vehicle fleet. The success of "flex" vehicles, as they are popularly known, together with the mandatory use of E25 blend of gasoline throughout the country, have allowed ethanol fuel to achieve a 50% market share of the gasoline-powered fleet by April 2008. When trucks and other diesel-powered vehicles are considered, sugar cane based ethanol represented 18% of the country's total fuel consumption in 2006.

Historical background

Ethanol Car Manufacturing in Brazil 1979-2007
(Selected years)
Year	Alcohol E100 Manufactured	Flex fuel Cars Manufactured	Total Cars Manufactured Including exports	% Ethanol Cars
1979	3,328	-	912,018	0.4
1980	239,251	-	933,152	25.6
1986	619,854	-	815,152	76.0
1990	71,523	-	663,084	10.8
1998	1,188	-	1,254,016	0.1
2000	9,428	-	1,361,361	0.7
2002	48,022	-	1,521,431	3.2
2003	31.728	39.853	1,361,361	4.8
2004	49.796	282.706	1,862,780	17,8
2005	43.278	776.164	2,011,817	40.7
2006	758	1.249.062	2.092,003	59.7
2007	3	1,716,716	2,388,402	71.9
Source: Brazilian Automakers Association (ANFAVEA), 2007 and 2008. Data shown for FFs does not included light commercial vehicles.

Since the second half of the 70's, and as a result of the 1973 oil crisis, the Brazil government has been promoting ethanol as a fuel. The National Alcohol Program -Pró-Álcool- (Portuguese: "Programa Nacional do Álcool") was a nation-wide program financed by the government to phase out all automobile fuels derived from fossil fuels (such as gasoline) in favour of ethanol. It began with the anhydrous alcohol to blend with the gasoline. This mixture has been used since then and is now done with 25% of alcohol and 75% gasoline (commonly known as gasohol or Common ethanol fuel mixtures#E25. In July 1979, and as a response to the second oil crisis, the first vehicle moved by pure ethanol was built, the Fiat 147..

The Brazilian government provided three important initial drivers for the ethanol industry: guaranteed purchases by the state-owned oil company Petrobras, low-interest loans for agro-industrial ethanol firms, and fixed gasoline and ethanol prices where hydrous ethanol sold for 59% of the government-set gasoline price at the pump. These pump-primers have made ethanol production competitive yet unsubsidized. In recent years, the Brazilian untaxed retail price of hydrous ethanol has been lower than that of gasoline per gallon. Approximately US$50 million has recently been allocated for research and projects focused on advancing the obtention of ethanol from sugarcane in São Paulo.

Since the beginning of the Pró-Álcool program until mid-2008, Brazil has successfully reduced by 10 million the number of cars running just on gasoline, thereby reducing the country's dependence on oil imports. The decision to produce ethanol from fermented sugarcane was based on the low cost of sugar at the time. Other sources of fermentable carbohydrates were tested such as the manioc. By 1988 vehicles running on 100% ethanol (E100) held almost 90% of the Brazilian‘s market, but a crisis in ethanol supply in early 1990 left thousands of vehicles out of fuel in their garages. Sales of alcohol-only cars tumbled after this shortage coupled with low gas prices in the late 1980s to early 1990s. In 1990, production of E100 vehicles fell to 10,9% of the total car production.

In May 2003 Volkswagen began commercial production of the first ethanol flexible fuel car, the Gol 1.6 Total Flex. Chevrolet followed two months later with the Corsa 1.8 Flexpower, using an engine developed by a joint-venture with Fiat called PowerTrain. That year production of full flex-fuel reached 39.853 automobiles and 9.411 light commercial vehicles. By 2008, popular manufacturers that build flexible fuel vehicles are Chevrolet, Fiat, Ford, Peugeot, Renault ,Volkswagen, Honda, Mitsubishi, Toyota and Citröen. Flexible fuel cars were 22% of the car sales in 2004, 73% in 2005, and reached 87.6% in July 2008.

Electricity from sugarcane bagasse

Sucrose accounts for little more than 30% of the chemical energy stored in the mature plant; 35% is in the leaves and stem tips, which are left in the fields during harvest, and 35% are in the fibrous material (bagasse) left over from pressing.

Part of the bagasse is currently burned at the mill to provide heat for distillation and electricity to run the machinery. This allows ethanol plants to be energetically self-sufficient and even sell surplus electricity to utilities; current production is 600 MW for self-use and 100 MW for sale. This secondary activity is expected to boom now that utilities have been induced to pay "fair price "(about US$10/GJ or US$0.036/kWh) for 10 year contracts. This is approximately half of what the World Bank considers the reference price for investing in similar projects (see below). The energy is especially valuable to utilities because it is produced mainly in the dry season when hydroelectric dams are running low. Estimates of potential power generation from bagasse range from 1,000 to 9,000 MW, depending on technology. Higher estimates assume gasification of biomass, replacement of current low-pressure steam boilers and turbines by high-pressure ones, and use of harvest trash currently left behind in the fields. For comparison, Brazil's Angra I nuclear plant generates 657 MW.

Presently, it is economically viable to extract about 288 MJ of electricity from the residues of one tonne of sugarcane, of which about 180 MJ are used in the plant itself. Thus a medium-size distillery processing 1 million tonnes of sugarcane per year could sell about 5 MW of surplus electricity. At current prices, it would earn US$ 18 million from sugar and ethanol sales, and about US$ 1 million from surplus electricity sales. With advanced boiler and turbine technology, the electricity yield could be increased to 648 MJ per tonne of sugarcane, but current electricity prices do not justify the necessary investment. (According to one report, the World Bank would only finance investments in bagasse power generation if the price were at least US$19/GJ or US$0.068/kWh.)

Bagasse burning is environmentally friendly compared to other fuels like oil and coal. Its ash content is only 2.5% (against 30-50% of coal), and it contains no sulfur. Since it burns at relatively low temperatures, it produces little nitrous oxides. Moreover, bagasse is being sold for use as a fuel (replacing heavy fuel oil) in various industries, including citrus juice concentrate, vegetable oil, ceramics, and tyre recycling. The state of São Paulo alone used 2 million tonnes, saving about US$ 35 million in fuel oil imports.

Researchers working with cellulosic ethanol are trying to make the extraction of ethanol from sugarcane bagasse and other plants viable on an industrial scale.

Economic and production indicators

Brazilian ethanol production^(a) (2004-2007) (Millions of U.S. gallons)
2004	2005	2006	2007
3,989	4,227	4,491	5,019
Note: (a) Ethanol all grades. 2007 is for fuel ethanol only.

The following are the key economic and production indicators of the ethanol industry in Brazil. Except where indicated, the following data apply to the 2003/2004 season. The labor figures are industry estimates, and do not take into account the loss of jobs due to replacement of other crops by sugarcane.

Land use: 45,000 km² in 2000
Labour: 1 million jobs (50% farming, 50% processing)
Sugarcane: 344 million metric tonnes (50% sugar, 50% alcohol)
Sugar: 23 million tonnes (30% is exported)
Ethanol: 14 million m³ (7.5 anhydrous, 6.5 hydrated; 2.4% is exported)
Dry bagasse: 50 million tonnes
Electricity: 1350 MW (1200 for self use, 150 sold to utilities) in 2001

Exports

Brazilian ethanol exports by selected country and region (2005-2007) (Millions of liters)
Country/Region⁽¹⁾	2007	%	2006	%	2005	%
⁽²⁾	932.75	26.4	1,777.43	51.9	270.97	10.5
CBI countries⁽³⁾	910.29	25.8	530.55	15.5	554.15	21.4
	308.97		131.54		133.39
	224.40		181.14		157.85
	170.37		91.26		126.69
	158.87		71.58		36.12
	42.21		50.24		100.10
	1,004.17	28.4	587.31	17.1	530.73	20.5
	808.56		346.61		259.40
	116.47		204.61		245.89
	364.00	10.3	225.40	6.6	315.39	12.2
	122.88		42.68		118.44
	66.69		92.27		216.36
	0		10.07		410.76	15.8
Total world exports	3,532.67	100	3,426.86	100	2,592.29	100
Notes: ⁽¹⁾Only countries with more than 100,000 liters imports on a given year are shown. ⁽²⁾It includes exports to Puerto Rico and U.S.Virgin Islands. ⁽³⁾ Including Mexico that trades with the U.S. under the North American Free Trade Agreement (NAFTA).

Brazil is the world's largest exporter of ethanol, in 2007 exported 933.4 million gallons (3,532.7 million liters), representing almost 20% of its production, and accounts for almost 50% of the global exports. Since 2004 Brazilian exporters have as their main customers the United States, Netherlands, Japan, Sweden, Jamaica, El Salvador, Costa Rica, Trinidad & Tobago, Nigeria, Mexico, India, and South Korea.

The countries in the Caribbean Basin import relative high quantities of Brazilian ethanol, but not much is destined for domestic consumption. These countries reprocess the product, usually converting Brazilian hydrated ethanol into anhydrous ethanol, and then re-export to the United States, gaining value-added and avoiding the 2.5 percent duty and the USD 0,54 per gallon tariff, thanks to the trade agreements and benefits granted by Caribbean Basin Initiative (CBI). This process is limited by a quota, set as 7% of U.S. ethanol consumption. Although direct U.S. exports fell in 2007, imports from four CBI countries almost doubled, increasing from 15.5% in 2006 to 25.8% in 2007, reflecting increasing re-exports to the U.S., thus partially compensating the loss Brazilian direct exports to the U.S. This situation has caused some concerns in the United States, as this country and Brazil are trying to build a partnership to increase ethanol production in Latin American and the Caribbean. as the U.S. is encouraging "new ethanol production in other countries, production that could directly compete with U.S.-produced ethanol".

The U.S., potentially the largest market for the Brazilian ethanol, currently imposes trade restrictions on Brazilian ethanol of $USD 0.54 per gallon, in order to encourage domestic ethanol production, most of which has so far been based on processing corn instead of sugar cane or soybeans, which is much less efficient. There is concern that allowing the Brazilian ethanol to enter the U.S. market without taxation will undercut the budding ethanol industry in the United States. One of the arguments for that is that Brazil currently subsidises its ethanol production, which is false, as the subsidies program finished in the 1990s. Others argue that rather than impose trade restrictions on the import of the Brazilian product, that the U.S. should make subsidies of its own available to support its fledgling domestic producers. Exports of Brazilian ethanol to the U.S. reached a total of US$ 1 billion in 2006, an increase of 1,020% over 2005 (US$ 98 millions), but fell significantly in 2007 due to sharp increases in American ethanol production from maize.

As shown in the table, together, the United States, the European Union, the CBI countries with Mexico, and Japan, were the destination of 91% of Brazilian ethanol exports, both in 2007 and 2006. As of 2007, the European Union region, led by the Netherlands, is the main importer of Brazilian ethanol, with 265.3 million gallons (1,004.2 million liters). However, and despite of reduced direct imports, the United States continues to be the single one country where Brazilian ethanol is exported, reaching 228.96 million gallons (866.6 million liters) to the continental U.S., 13.78 million gallons (52.1 million liters) shipped to the U.S. Virgin Islands, and 3.68 million gallons (14.0 million litters) shipped to Puerto Rico, for a total export for the U.S. in 2007 of 246.4 million gallons (932.75 million liters), down from 469.6 million gallons (1.77 billion liters) in 2006.

Effect on oil consumption

Most automobiles in Brazil run either on alcohol (E100) or on gasohol (E25) since the government made mandatory the use of 24% ethanol in the blend sold in the entire country. Since 2003, dual-fuel ("Flex-Fuel") or full flex-fuel vehicles that run on any proportion of ethanol and gasoline have been gaining popularity, reaching 6 million new cars and light commercial vehicles by August 2008, and 72% of car manufacturing production is dual-flex without additional cost for buyers. Customers have 49 models available to chose from. Brazilian full flex-fuel vehicles have electronic sensors that automatically detect the type of fuel and the blend mix, and accordingly adjust the engine combustion. Users have the freedom to choose depending on the free market prices of each fuel.

Due to the lower energy content of ethanol fuel, full flex-fuel vehicles get fewer miles per gallon. Ethanol price has to be between 25-30% cheaper per gallon to reach the break even point. Since 2005, ethanol prices have been very competitive without any subsidies, even with gasoline prices kept constant in local currency since mid-2005, at a time when oil was just approaching USD 60 a barrel. The price ratio between gasoline and ethanol fuel has been well above 30% during this period, except during low sugar cane supply between harvests. According to Brazilian producers, ethanol can remain competitive if the price of oil does not fall below USD 30 a barrel.

Presently the use of ethanol as fuel by Brazilian cars - as pure ethanol and in gasohol - replaces gasoline at the rate of about 27,000 cubic metres per day, and by April 2008 surpassed 50% of the fuel that would be needed to run the light vehicle fleet on gasoline alone. In 2006 ethanol represented almost 20% of total fuel consumption in the road transport sector when trucks and other diesel-powered vehicles are considered.

However, the effect on the country's overall oil use was much smaller than that: domestic oil consumption still far outweighs ethanol consumption. In 2005, Brazil consumed of oil per day, versus of ethanol. Although Brazil is a major oil producer and now exports gasoline (19,000 m³/day), it still must import oil because of internal demand for other oil byproducts, chiefly diesel fuel (which cannot be easily replaced by ethanol).

According to government statistics Brazil produced 17.471 billion litres of ethanol in 2006, 23 billion litres in 2007 and in 2008, the Companhia Nacional de Abastecimento (Conab), expects a production growth around 14.97% and 19.46%, bringing the total ethanol production ranging from 26.45 to 27.9 billion litres.

Comparison with the United States

Brazil's sugar cane-based industry is far more efficient than the U.S. corn-based industry. Sugar cane ethanol has an energy balance 7 times greater than ethanol produced from corn. Brazilian distillers are able to produce ethanol for 22 cents per liter, compared with the 30 cents per liter for corn-based ethanol. Sugarcane cultivation requires a tropical or subtropical climate, with a minimum of 600 mm (24 in) of annual rainfall. Sugarcane is one of the most efficient photosynthesizers in the plant kingdom, able to convert up to 2% of incident solar energy into biomass. Sugarcane production in the United States occurs in Florida, Louisiana, Hawaii, and Texas. The first three plants to produce sugarcane-based ethanol are expected to go online in Louisiana by mid 2009. Sugar mill plants in Lacassine, St. James and Bunkie were converted to sugar cane-based ethanol production using Colombian technology in order to make possible a profitable ethanol production. These three plants will produce 100 million gallons of ethanol within five years.

U.S. corn-derived ethanol costs 30% more because the corn starch must first be converted to sugar before being distilled into alcohol. Despite this cost differential in production, the U.S. does not import more Brazilian ethanol because of U.S. trade barriers corresponding to a tariff of 54-cent per gallon – a levy designed to offset the 51-cent per gallon blender's federal tax credit that is applied to ethanol no matter its country of origin. One advantage U.S. corn-derived ethanol offers is the ability to return 1/3 of the feedstock back into the market as a replacement for the corn used in the form of Distillers Dried Grain.

Comparison of key characteristics between the ethanol industries in the United States and Brazil
Characteristic			Units/comments
Feedstock	Sugar cane	Maize	Main cash crop for ethanol production, the US has less than 2% from other crops.
Total ethanol production (2007)	5,019.2	6,498.6	Million U.S. liquid gallons
Total arable land	355	270⁽¹⁾	Million hectares.
Total area used for ethanol crop (2006)	3.6 (1%)	10 (3.7%)	Million hectares (% total arable)
Productivity per hectare	6,800-8,000	3,800-4,000	Liters of ethanol per hectare. Brazil is 727 to 870 gal/acre (2006), US is 321 to 424 gal/acre (2003-05)
Energy balance (input energy productivity)	8.3 to 10.2 times	1.3 to 1.6 times	Ratio of the energy obtained from ethanol/energy expended in its production
Estimated greenhouse gas emission reduction	86-90%⁽²⁾	10-30%⁽²⁾	% GHGs avoided by using ethanol instead of gasoline, using existing crop land.
Estimated payback time for greenhouse gas emission	17 years⁽³⁾	93 years⁽³⁾	Brazilian cerrado for sugar cane and US grassland for corn. Land use change scenarios by Fargione et al.
Flexible-fuel vehicle fleet (autos and light trucks)	6.2 million	7.3 million	As of August 2008 for both Brazil (FFVs use any blend up to E100); and the US (FFVs use E85 only).
Ethanol fueling stations in the counrty	33,000 (100%)	1,700 (1%)	As % of total fueling gas stations in the country. Brazil for 2006, U.S. as July 2008 and total of 170,000
Ethanol's share within the gasoline market	50%⁽⁴⁾	4%	As % of total consumption on a volumetric basis. Brazil as of April 2008. US as of December 2006.
Cost of production (USD/gallon)	0.83	1.14	2006/2007 for Brazil (22¢/liter), 2004 for U.S. (35¢/liter)
Government subsidy (in USD)	0 ⁽⁵⁾	0.51/gallon	U.S. as of 2008-04-30. Brazilian ethanol production is no longer subsidized.⁽⁵⁾
Import tariffs (in USD)	0	0.54/gallon	As of April 2008, Brazil does not import ethanol, the U.S. does
Notes: (1) Only contiguous U.S., excludes Alaska. (2) Assuming no land use change. (3) Assuming direct land use change. (4) Including diesel-powered vehicles, ethanol represented 18% of the road sector fuel consumption in 2006. (5) Brazilian ethanol production is no longer subsidized, but gasoline is heavily taxed favoring ethanol fuel consumption (~54% tax). By the end of July 2008, the average gasoline retail price at the pump in Brazil was USD 6.00 per gallon, while the average US price was USD 3.98 per gallon. The latest gas retail price increase in Brazil occurred in late 2005, when oil price was at USD 60 per barrel.

Ethanol diplomacy

In March 2007, "ethanol diplomacy" was the focus of President George W. Bush's Latin American tour, in which he and Brazil's president, Luiz Inacio Lula da Silva, were seeking to promote the production and use of sugar cane based ethanol throughout Latin America and the Caribbean. The two countries also agreed to share technology and set international standards for biofuels. The Brazilian sugar cane technology transfer will permit various Central American, such as Honduras, Nicaragua, Costa Rica and Panama, several Caribbean countries, and various Andean Countries tariff-free trade with the U.S. thanks to existing concessionary trade agreements. Even though the U.S. imposes a USD 0.54 tariff on every gallon of imported ethanol, the Caribbean nations and countries in the Central American Free Trade Agreement are exempt from such duties if they produce ethanol from crops grown in their own countries. The expectation is that using Brazilian technology for refining sugar cane based ethanol, such countries could become exporters to the United States in the short-term. In August 2007, Brazil's President toured Mexico and several countries in Central America and the Caribbean to promote Brazilian ethanol technology.

The Memorandum of Understanding (MOU) that the American and Brazilian presidents signed in March 2007 has been described as a success for foreign policy, bringing Brazil and the United States closer especially on energy policy. Nevertheless, policy makers have cited a lack of "substantive progress" implementing the three pillars found in that agreement and have called for an expansion of international engagement beyond the executive branches.

Environmental and social impacts

Environmental effects

The ethanol program has raised many environmental and social issues. Advancements in fertilizers and natural pesticides have all but eliminated the need to burn fields, however chemical pollution from runoff may turn out to be just as harmful to the environment as the smoke.

Sugarcane fields are traditionally burned just before harvest to avoid harm to the workers, by removing the sharp leaves and killing snakes and other harmful animals, and also to fertilize the fields with ash. There has been less burning due to pressure from the public and health authorities, and as a result of the recent development of effective harvesting machines. A 2001 state law banned burning in sugarcane fields in São Paulo state by 2021, and machines will gradually replace human labor as the means of harvesting cane, except where the abrupt terrain does not allow for mechanical harvesting. However, 150 out of 170 of São Paulo's sugar cane processing plants signed in 2007 a voluntary agreement with the state government to comply by 2014. Independent growers signed in 2008 the voluntary agreement to comply, and the deadline was extended to 2017 for sugar cane fields located in more abrupt terrain. By the 2008 harvest season, around 47% of the cane was collected with harvesting machines. Mechanization will reduce pollution from burning fields and have higher productivity than people, but also will create unemployment for these seasonal workers, many of them coming from the poorest regions of Brazil.

Other criticism focused on the potential for clearing rain forests and other environmentally valuable land for sugarcane production, such as the Amazonia, the Pantanal or the Cerrado. Brazil's president, Luiz Inácio Lula da Silva claims this will not happen. According to him "The Portuguese discovered a long time ago that the Amazon isn't a place to plant cane. In order to guarantee a sustainable development of ethanol production, the government is working on a countrywide zoning plan to restrict sugar cane growth in or near environmentally sensitive areas, allowing only the eight existing plants to remain operating in these sensitive areas, but without further extension of their sugar cane fields. The proposed restricted area has 4.6 million square kilometers, almost half of the Brazilian territory.

Social implications

Sugarcane has an important social contribution to the poorest people in Brazil. Although it still improves little the life conditions of this segment of Brazilian society, especially in comparison to industrialized countries living standards, having a temporary work at sugarcane harvest fields is, for many, the only option to survive.

There has been a great amount of harvest mechanization though, especially in the richest and more mature sugarcane producers of São Paulo state, thus dismissing hundreds of labor workers in place of air-conditioned sugarcane harvesting trucks. As production sparks in other states in Brazil, mainly in the Northeast Region, where lack of job positions and social issues amount much further, to give incentives to coming sugarcane producers as long as they employ harvest workers instead of implementing less labor intensive and more modern techniques.

Some question the viability of biofuels like ethanol as total replacements for gasoline/crude oil. One concern is that sugarcane cultivation will displace other crops, thus causing food shortages. However, these concerns do not correspond to the current situation in Brazil. Despite having the world's largest sugarcane crop, the 45,000 km², Brazil currently devotes to sugarcane production amount to only about one percent of its total land area of some 8.5 million km². In addition, the country has more unused potential cropland than any other nation.

Effect on food prices

Some environmentalists, such as George Monbiot, have expressed fears that the marketplace will convert crops to fuel for the rich, while the poor starve and biofuels cause environmental problems. Environmental groups have raised concerns about this trade-off for several years. The food vs fuel debate reached a global scale in 2008 as a result of the international community's concerns regarding the steep increase in food prices. On April 2008, Jean Ziegler, back then United Nations Special Rapporteur on the Right to Food, called biofuels a "crime against humanity", a claim he had previously made in October 2007, when he called for a 5-year ban for the conversion of land for the production of biofuels. Also on April 2008, the World Bank's President, Robert Zoellick, stated that "While many worry about filling their gas tanks, many others around the world are struggling to fill their stomachs. And it's getting more and more difficult every day.

Luiz Inácio Lula da Silva gave a strong rebuttal, calling these claims "fallacies resulting from commercial interests", and putting the blame instead on U.S. and European agricultural subsidies, and a problem restricted to U.S. ethanol produced from maize. The Brazilian President has also claimed in several ocassions that his country's sugar cane based ethanol industry has not contributed to the food price crises.

A report released by Oxfam in June 2008 criticized biofuel policies of rich countries as neither a solution to the climate crisis nor the oil crisis, while contributing to the food price crisis. The report concluded that from all biofuels available in the market, Brazilian sugarcane ethanol is "far from perfect" but it is the most favorable biofuel in the world in term of cost and GHG balance. The report discusses some existing problems and potential risks, and asks the Brazilian government for caution to avoid jeopardazing its environmental and social sustainability. The report also says that: “Rich countries spent up to $15 billion last year supporting biofuels while blocking cheaper Brazilian ethanol, which is far less damaging for global food security."

A World Bank research report published on July 2008 found that from June 2002 to June 2008 "biofuels and the related consequences of low grain stocks, large land use shifts, speculative activity and export bans" pushed prices up by 70 percent to 75 percent . The study found that higher oil prices and a weak dollar explain 25-30% of total price rise. The study said that "...large increases in biofuels production in the United States and Europe are the main reason behind the steep rise in global food prices" and also stated that "Brazil's sugar-based ethanol did not push food prices appreciably higher". The report argues that increased production of biofuels in these developed regions were supported by subsidies and tariffs on imports, and considers that without such policies, price increases worldwide would have been smaller. This research paper also concluded that Brazil's sugar cane based ethanol has not raised sugar prices significantly, and recommends removing tariffs on ethanol imports by both the U.S. and E.U., to allow more efficient producers such as Brazil and other developing countries, including many African countries, to produce ethanol profitably for export to meet the mandates in the E.U. and U.S.

An economic assessment report also published in July 2008 by the OECD agrees with the World Bank report regarding the negative effects of subsidies and trade restrictions, but found that the impact of biofuels on food prices are much smaller. The OECD study is also critical of the limited reduction of GHG emissions achieved from from biofuels produced in Europe and North America, concluding that the current biofuel support policies would reduce greenhouse gas emissions from transport fuel by no more than 0.8 percent by 2015, while Brazilian ethanol from sugar cane reduces greenhouse gas emissions by at least 80 percent compared to fossil fuels. The assessment calls on governments for more open markets in biofuels and feedstocks in order to improve efficiency and lower costs.