chapter  1
2 Pages

Introduction

ByEDMUND AMANN , WERNER BAER AND DONALD V . COES

This book comes at a time of heightened concern about energy security and sustainability in the face of conflict in the Middle East, political uncertainty in Russia and the growing prominence of climate change/carbon agenda. Against this background, a number of developed and emerging economies are examining bio fuels. At the same time, more effort is being made to reduce reliance on imported hydrocarbons by increasing efforts to tap these conventional fuel sources domestically. Nowhere is this twin track approach being explored on such a large scale and with such wide-ranging consequences as in Brazil and the United States. This book focuses on these two critical country cases, examining the impacts of changing energy sources in economic, distributional and environmental terms. By comparing and contrasting the Brazilian and US experiences, not only can lessons be drawn for the western hemisphere’s two largest economies, but they can also be usefully gleaned for other developed and emerging nations. Until the 1970s, when OPEC quadrupled the price of oil, surprisingly few economists paid much attention to the role of energy in the development process. This neglect ended in the late 1970s, a period when Brazil became one of the first countries to delve into alternative sources of energy with the development of its alcohol-for-cars program, based on sugar cane. Though it was successful for a few years, the alcohol program was scaled back, if not abandoned, in the 1980s, when the price of oil declined again. Yet with the renewal of oil price rises in the second half of the 1990s, Brazil once more took the lead in the development of bio fuel energy based on sugar cane. The United States has followed hard on Brazil’s heels with an ambitious program to promote domesticallyproduced ethanol-based fuels. Over the last decade the two countries have become the world’s largest producers of ethanol. In the case of Brazil, the ethanol boom has been spearheaded by the domestic development of flex-fuel cars, a technology which the United States is keen to more widely adopt. Unlike the United States, the Brazilian quest for self-reliance in energy has been boosted by recent discoveries of vast offshore oil fields. The chapters contained in this volume were prepared for a conference on “Energy and Economic Growth and Development” which was held in November 2008 in Ilha Bela, Brazil. The conference was co-sponsored by the Lemann

Program of the Center for Latin American and Caribbean Studies of the University of Illinois,1 the Faculty of Economics of the University of São Paulo and Esalq of the University of São Paulo in Piracicaba. This collection examines the growth of the Brazilian energy sector – most especially its bio-fuel industry – from various angles. These include its impact on the country’s general economic growth, on government finance and price stability; on world food prices; on the distribution of income; on the distribution of land; on employment; on the environment, including climate change; on the agricultural sector, including the trade-off between bio fuels and food prices; and on the balance of payments. To provide comparative perspective, some of the chapters concentrate on the US experience, where the growth of ethanol was based on corn, which was much less efficient than ethanol based on sugar cane. The chapters that follow show the complexity and interdependence of the issues involved in moving a society reliant on non-renewable energy sources to one based on alternative sources of energy. A particular lesson to emerge from this collection is that Brazil, in pursuing a flexible mix of fossil fuels and bio fuels, has greatly diminished its dependence on exogenous energy shocks, thus setting an example for both rich and developing societies. The US experience has been more problematic. Nevertheless, as the discussion reveals, recent years have seen unprecedented progress in trying to reduce US reliance on fossil fuels.