Incentives and Barriers for Liquid Biofuels in Brazil

Bioenergy has been an important share of the Brazilian energy matrix, supported by an ample basis of natural resources, an appropriate climate, large availability of land and water, and enough expertise on agriculture and forestry management. Currently, ethanol and biodiesel supply about 20% of road transport fuel in Brazil, with the major contribution of ethanol. Since the early 1900s, ethanol-blended gasoline has been used in Brazil, but a national program aimed at market development was only launched in the 1970s. Further, the production and use of biodiesel started just in 2005 with progressive blends with diesel. Gasoline has more than 20% anhydrous ethanol by volume, and hydrated ethanol is traded freely. In turn, biodiesel is blended with diesel at 7% by volume, with plans to increase to 10%. Both Brazilian biofuel programs demonstrate the relevance of adopting efficient agroindustrial strategies as well as the possibility of sound coexistence between bioenergy and other uses of agriculture. This chapter presents a summary of the evolution of ethanol and biodiesel programs in Brazil, focusing on the institutional aspects and the decisive role of public policies to foster the development of the biofuel market.