Ethanol Pacts: A Domino Effect?

A week after signing an ethanol pact with the U.S., Brazil signed a similar agreement with Indonesia in hope of catalyzing ethanol production.

Brazil will provide technical help in terms of boosting Indonesia's sugarcane industry, as the Asian nation has dedicated 5.4 million acres for sugarcane ethanol production. Indonesia is also dedicating $1.42 billion in subsidies towards local farmers, and has already signed agreements with Indonesian and foreign companies to pump $12.4 billion into the ethanol industry. This will have a gargantuan impact on Indonesia's current output of 45 million gallons of ethanol per year.

It is good to see countries helping other countries as this will be essential in maximizing ethanol production. With the U.S. helping Brazil, Brazil helping Indonesia...will we see a domino effect?

Comments

[lotco]

Ethanol has many cheerleaders who avoid the issues that increasing ethanol production is causing even faster deforestation around the world and exacerbating the water shortage problem. The growing shortage of water is even being talked about by the likes of Boone Pickens as the next great commodity investment after oil.

The rain forest of Brazil "causes" the tropical rains there. Cut it down and there will be less rain and also the world's oxygen supply will continue to suffer destruction of its feedstock - the rainforests around the world.

It's possible that ethanol production is a stupid idea. Maybe it isn't. But, until we and our policy makers exercise prudence and conduct the due dilligence necessary no sound decision can be made. Investing in ethanol as a meaningful replacement for our energy needs could be great but it couild also be a very bad investment both economically and environmentally speaking.

Who in their right mind wants to trade an energy suppy problem for a shortage of breathable air and water?

[Howard Roark]

The comment posted by lotco is tremendously inaccurate regarding the effects of sugar cane based ethanol on the environment. Sugar cane is not grown in the Amazon or the Panthanal regions. In fact, the vast majority of sugar cane is grown in the southern state of Sao Paulo and surrounding areas. Deforestation is caused by smaller groups or impoverished farmers in the north and is outlawed by the Brazilian government which they enforce. Sugar cane is virtually non-existent in these "rain forest" zones.

You might be suprised to find where the rumors of deforestation from sugar cane is actually deriving from. I'll give you a hint: petroleum.

Sugar Cane based ethanol is 33% cheaper to produce than that derived from corn and emits 10% of the greenhouse gases. Even with the 2.5% tax and 54 cent tariff around 60 million gallons of ethanol from brazil were imported directly into the states from Brazil in 2004.

Water supply is a rising concern, but not because of the Brazilian sugar cane and ethanol industries.