Trailblazing Brazil Runs Cars on Sugar Cane

On the first day of his South American tour, President Bush sealed a deal with Brazil to promote international production of ethanol.

The agreement follows Bush's pledge to curb America's appetite for gasoline. It also attempts to reduce the influence of Hugo Chavez, the leftist president of Venezuela. That country is the world's fifth-largest producer of petroleum.

Standing side by side with his Brazilian counterpart, Bush said, "It makes sense for us to collaborate for the sake of mankind."

Brazilian President Luis Inacio Lula da Silva called it "a new moment for fuel in the world and possibly a new moment for humanity."

When it comes to ethanol production, Brazil has blazed the trail.

The South American country is the world's largest exporter of ethanol, and nearly eight out of every 10 vehicles on Brazilian roadways run on the fuel made from sugar cane.

Both presidents heralded the pact they claim will reduce emissions that contribute to global warming, generate more jobs, and provide freedom from the fickle oil market.

But environmentalists and others warn this so-called answer to America's fuel problems could cause more problems than it solves.

"It sounds good, but in point of fact the benefits at best are very marginal," said energy analyst Bill Paul, author of the new book "Future Energy: How the New Oil Industry Will Change People, Politics and Portfolios."

For one, the cost of producing ethanol from corn, as done in the United States, is high and incompatible with America's gasoline infrastructure. Ethanol cannot be piped along with gasoline. It must be trucked and mixed in later as an additive.

That fact has environmental groups steaming.

The production of ethanol has also been linked to large-scale air and water pollution, and deforestation of the Amazon and parts of Brazil's savannah country for the planting of sugar cane.

The ripple effect is also being felt in food and agriculture.

With gasoline prices soaring, last year's jump in U.S. demand consumed 20 percent of the America's. corn crop and essentially doubled the price of feed for cattle pigs and chickens.

In Mexico, the price of corn tortillas also jumped by 60 percent.

"We are setting up an epic competition like we've never seen before," said Lester Brown of the Earth Policy Institute, "between the 800 million people who own automobiles versus the 2 billion poorest people in the world who spend half or more of their income on food and are just trying to survive."

America produces 40 percent of the world's corn crop, and the homegrown ethanol industry is booming -- sparked by a presidential push. In January, Bush called on Congress to mandate the annual use of 35 billion gallons of ethanol and other alternative fuels by the year 2017.

It is an ambitious goal. Last year, an estimated 112 U.S. plants produced 5 billion gallons of ethanol. And almost half of the gasoline sold in this country now contains 10 percent ethanol.

There are also efforts under way to produce the biofuel from saw grass and wood chips. But large scale commercial production is still years away.

The growing ethanol industry was less than optimistic in its response to today's U.S.-Brazilian partnership.

"I don't know that our country wants to be any more dependent on imported ethanol than we are on imported petroleum," said Phil Lampert, executive director of the national Ethanol Vehicle Coalition.

Whether this new deal with Brazil will have significant impact on America's fuel mix is uncertain.

"The fact of the matter is, Brazil is hoping to increase ethanol exports to the U.S., but it isn't sure if it can," said Paul.

One speed bump in this much-heralded deal -- the United States will not lift the 54 cent tariff imposed on every gallon of ethanol exported from that country, an issue Bush has called non-negotiable.