Brazil Wants OPEC for Biofuels, Sort Of

Available at just a fraction of American gas stations, ethanol has a long way to go before it can power the country’s love affair with the internal combustion engine. Meanwhile Brazil, which gets 30 percent of its automobile fuel from ethanol, is getting tired of waiting for the U.S. — and the rest of the world — to make the switch. Brazil recently signed on for a $10 million international campaign promoting the use of biofuel from sugarcane that’s aimed at the U.S. as well as at Canada, Europe and Asia.

The international biofuels market faces a variety of trade barriers. To encourage production, there are many subsidies, but to protect domestic sales, there are often import tariffs. More than a campaign, the international biofuels market needs a coordinating body. What will happen as the power of OPEC wanes? Will a veritable Organization of Biofuel Exporting Countries (OBEC?) emerge? Rather than acting as a cartel, such an organization could help establish environmental standards, smooth regional production variation, and share technology among members.

importsAccording to the Renewable Fuels Association, while U.S. imports of ethanol jumped by 519 million gallons between 2005 and 2006, domestic production jumped 591 million gallons. It was during that same one-year span that the U.S. overtook Brazil as the world’s largest producer of ethanol. America, therefore, has a huge incentive to take the lead in establishing an international biofuels market.

Fair trade for biofuels would mean examining the existing barriers. Brazil, as a member of the Caribbean Basin Initiative, can export its ethanol to the U.S. via third parties and avoid American tariffs. Preferential trade agreements still exist between many Latin American countries and their ex-colonial powers but are often exploited by opportunistic foreign corporations. A multinational body will be needed to help sort through the vestiges of imperial mercantilism to create a new global market for biofuels.

But the most important export for American biofuel startups will likely not be the fuels themselves but the advanced technology to brew better biofuels. Already the U.S. is exporting biofuel technology to China. The capital-rich U.S. biofuels startups need to start exporting their technologies to the fertile tropical climes, where biofuel feedstocks grow much better.

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