Production of Ethanol from Sugarcane in Brazil

Volume 43 of the series Natural Resource Management and Policy pp 65-68


Price Supports for Fuel Ethanol, Sugarcane, and Freight Charges: Alterations Stemming from Deregulation

  • Márcia Azanha Ferraz Dias de MoraesAffiliated withLuiz de Queiroz College of Agriculture (ESALQ) Economics, Business and Sociology Department, University of São Paulo Email author 
  • , David ZilbermanAffiliated withAgricultural and Resource Economics, University of California

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Hydrous ethanol was not competitive with gasoline on strictly economic terms, because, at the time of the creation of the Programa Nacional do Álcool (Proálcool, National Ethanol Program), in 1979, the cost of its production was higher than that of gasoline. Until October 1999, there was a price support mechanism in place, designed to make the use of hydrous ethanol more feasible, that subsidized producer prices. The resources for that support came from the collection of an add-on to the price of petroleum-based fuels (including diesel, which was important, because diesel-powered vehicles move most of the freight in the country and almost all urban public transport is also diesel-powered). Since 1999 there is no more price support for ethanol in Brazil.