China appears to want a trade deal that would allow it to sample - and perhaps help ultimately reproduce - Brazil's success with alcool, as ethanol is called in Portuguese. With an economy booming at a 10% growth rate, transforming the world's most populated country from a nation of peasants into one of middle-class consumers, China's dependency on oil and gasoline is growing untenable.
China gets energized over ethanol
By Matt Young
SAO PAULO - Even knowing that Brazil heavily uses ethanol in transportation doesn't prepare one for the startling sight of roadside vendors selling beer to motorists during a recent rush hour traffic jam in Sao Paulo.
But the fact remains that many of the cerveja-swilling drivers had more ethanol in their tanks than in their bellies. The highway was full of vehicles required by the Brazilian government to operate on at least 20% ethanol, causing less pollution and likely less economic instability than their gasoline-fueled counterparts. Many cars were "flex-fuel" vehicles, which can be filled with either gasoline or ethanol at any one of 29,000 Brazilian fueling stations (flex-fuel engines are designed to run on arbitrary combinations of
gasoline and ethanol, provided at least 20% ethanol is present).
Now China appears to want a trade deal that would allow it to sample - and perhaps help ultimately reproduce - Brazil's success with alcool, as ethanol is called in Portuguese. With an economy booming at a 10% growth rate, transforming the world's most populated country from a nation of peasants into one of middle-class consumers, China's dependency on oil and gasoline is growing untenable.
With the price of oil hovering at record levels, China is looking seriously at alternative fuel sources, and Brazil's experience with ethanol is attracting serious notice in Beijing.
"I just came back from Brazil last Friday," said Dehua Liu, one of China's foremost experts on ethanol, who was appointed by the National Development and Reform Commission to investigate its potential viability as a fuel source. "I guided some people from the Ministry of Science and Technology. In July, another team including ... China ethanol producers and central government [officials] want to visit Brazil again.
"I think in the coming trip, we will travel to Brazil and maybe talk about the possibility [of buying] some ethanol from Brazil for China," said Liu, adding that it would probably be a modest amount to start with.
Until now, China's relationship with fuel-grade ethanol, particularly Brazilian ethanol, hasn't developed beyond flirtation. While China has been aware of the ethanol alternative for some time - experimentation with ethanol was under way in nine provinces by the end of last year - the country has had virtually no relationship with Brazil's ethanol industry, which has developed into an empire over the past 30 years. That has begun to change as Chinese and Brazilian ethanol experts appear to be on their way to a committed trade relationship.
"Many Chinese companies and also the central and local governments are very interested in the Brazilian experience to use ethanol and produce ethanol," said Liu, a professor in the department of chemical engineering at Beijing's Tsinghua University.
Only a couple of months earlier, Alfred Szwarc, a consultant for Unica, which represents Sao Paulo's enormous sugar-cane and alcohol industries and fights to open foreign markets to them, had been concerned that China was ignoring Brazil's offers to establish trade in fuel-grade ethanol.
"I think they were more interested in developing their domestic industry than importing [refined ethanol] from Brazil," said Szwarc, one of his country's foremost authorities on the bio-fuel. "We said, okay, we don't want to compete with your farmers or ethanol companies; however, we would like to be considered preferential partners. We had people going there and people coming here just on exploratory missions ... but as far as I know we didn't make much progress in practical terms."
Actually, Liu said, the more tepid response was coming from the Brazilians. He said he tried to make trade headway by contacting Brazilian ethanol trade officials last year on behalf of Henan Tianguan Group, one of the biggest Chinese producers of the bio-fuel. He said he got nowhere.
"They were waiting for a [price] quotation," Liu said. "Then I didn't get any response."
But whichever country was ignoring the other in the past, it appears now that the two are set for a collision course resulting in a real ethanol deal. "Whenever it's needed, Brazil could become a preferential supplier of ethanol to China if China needs to import," Szwarc said.
Emulating Brazil's ethanol success
Indeed, China will need to import ethanol - at least initially - if it plans on fueling its automotive needs with anything other than a trickle of the bio-fuel. From 2000-05, courtesy of about a dozen plants, China developed a million tons per year of ethanol production capacity, which it plans to double by 2010, Liu said. But China's gasoline consumption already is in the tens of millions of tons annually.
Liu estimated that by 2020, power generation by renewable energy will make up 10% of the total, with biomass fuels such as ethanol being only a portion of that.
"This is why China's government and many ethanol producers are interested in the Brazilian experience," Liu said.
And the Laotian experience. Already, Henan Tianguan Group has entered into a contract with the government of Laos to lease 15 square kilometers of land for the production of cassava-based ethanol, Liu said.
Ultimately, however, if China were to emulate Brazil's ethanol success liter-for-liter, it would have to develop self-sufficiency, which takes dedicated farming space.
"My city is a big producer of cana," or sugar cane, said Felipe Fischer, a 23-year-old Brazilian university student from Minas Gerais. "You need to have this space. It's not like oil where you drill the ground and the oil comes up. You need to plant, so you need enormous [land] areas. But China is a big country ..."
And it's a big country with a variety of crops other than sugar cane, several of which, including corn, cassava and rice, can be used to produce ethanol. In fact, 80% of China's current ethanol production is derived from these three crops, Liu said.
While China has some logistical advantages in producing ethanol - and other drawbacks (such as needing to feed the world's most populated sovereign state, first and foremost) - the country could be ripe to become another world bio-fuel leader, based on historical similarities between the two nations.
In 1975, Brazil imported about 85% of its oil needs and was hurt badly by that decade's oil shocks. At that time, a strong centralized military government was in power, and acted decisively to help develop the technology for vehicles to run on 100% ethanol or gasoline-ethanol blends.
"China has a central government that defines policies in a similar way [to what] we had back in 1975 in Brazil," Szwarc said. "It centralized decisions in terms of energy. China already has started an ethanol program and is benefiting from it. The situation is not exactly like Brazil, but to some extent I think [Brazil's experience] could be replicated in China."
The saying "be careful what you wish for" may apply here. With oil prices remaining sky-high, China's leadership may well decide to grow its own ethanol supply or just import the alternative fuel extensively. And while Brazil's ethanol experience has largely been a pleasant one, surprisingly, that isn't particularly the case at the moment.
"Today, the price of alcool is higher than when the flex system started," said Renato Astur, a salesman with Caoa Ford, a car dealership in Sao Paulo. "Now, the people who buy [flex-fuel cars] don't see a big advantage."
Partly, this is because ethanol has a lower energy content per liter than gasoline does. Drivers can travel about 10 kilometers per liter of gasoline in Brazil, compared with only 7 per liter of ethanol, Astur said. So the price of alcool has to be 70% of the price of gasoline, or less, for consumers to see a financial advantage; of late, it has been greater than this.
And while for the most part the environmental benefits of ethanol are clear, including the fact that it is a minimally toxic fuel, improves air quality where it is widely used, and biodegrades rapidly, Fischer notes that large-scale ethanol production can harm soil because of the need to plant the same crops again and again, depleting ground nutrients.
Fischer acknowledged, though, that ultimately people aren't motivated by the environment to invest in ethanol. It's money that makes the world's wheels go around, and convenience.
Astur said: "If tomorrow we don't have gas, we can put in alcohol. If we don't have alcohol, we can put in gas." For a man who struggled to speak English, Astur flawlessly described why Brazil's success with ethanol has become the envy of nations worldwide. China's envy, at least, is now morphing into action.
Matt Young is a Washington, DC-based freelancer and a staff writer for EyeWorld Magazine and EyeWorld Asia-Pacific Magazine.
(Copyright 2006 Matt Young. Used by permission.) |
