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Ethanol needed to meet growing auto numbers

Millions of viewers saw Brazilian race car driver Helio Castroneves cross the finish line first at the Indianapolis 500 a couple of weeks ago. But Castroneves wasn’t the real winner of this year’s race, according to Bob Dinneen, president and CEO of the Renewable Fuels Association.

“He might have finished first,” said Dinneen, who, ironically was speaking to a group largely made up of Brazilians at Ethanol Summit 2009 in Sao Paulo. “But the real winner of that historic race was ethanol.”

Dinneen said ethanol was in its third year as the official fuel of America’s biggest auto race, a demanding test considering that the race cars reach speeds averaging 220 miles per hour and have zero tolerance for engine failure. Because of its high-octane content, ethanol allows cars to attain and sustain great speeds.

“Because ethanol burns at a higher compression ratio, the engines resist deterioration. Because it has more energy content than methanol, cars can go further on a gallon of fuel, tanks can be designed smaller, and, because unlike methanol, ethanol burns with a flame, the racing is safer for drivers.”

While there were 33 cars at the Indy 500, Dinneen said there will soon be 3 billion cars on the road across the globe. “While we don’t want all those cars running at 220 mph, we do want them all running on renewable fuels like ethanol.

“Three billion cars will drive oil consumption from the 86 million barrels used today, to about 120 million barrels,” he said. “Mother Earth doesn’t have that much oil! We can’t drill our way out of this mess. And we couldn’t afford it even if we could. Consumption is continuing to grow. Known supplies are running out. New reserves are harder to find.”

Developing and drilling those reserves is becoming much more costly – environmentally and economically, he said. “So we can expect more roller-coaster rides on prices – which will shake up an already unstable global economy.”

The rub is that in a world economy dominated by oil, no country has been able to get an ethanol industry going without significant government assistance. Renewable fuels have only taken hold in countries such as the U.S. and Brazil that have created and sustained programs to encourage its production.

These incentives have included tax advantages, tariffs, export enhancement, debt forgiveness, infrastructure development and outright subsidies. It is important that countries be allowed to create similar programs, and grow their own biofuels industries, using whatever indigenous raw materials are available to them.

“No country should be hampered in developing its own industry by having to subsidize the ethanol production from somewhere else in the world. Now I know this is the one area where we in the U.S. have a bit of a different view than those of you in the Brazilian industry, and I don’t want to dwell on this one difference, particularly when we have so much that we need to be working on together. But I want to make sure you appreciate our perspective on this issue.

“The U.S. ethanol program is founded on a market-based tax incentive for refiners that blend ethanol, whether that ethanol is imported or produced at home. Without the secondary tariff to offset that tax incentive, U.S. taxpayers would be subsidizing ethanol produced elsewhere in the world that may have been produced as a consequence of that country’s incentive program. The secondary tariff is only intended to offset that tax benefit.”

Dinneen said an issue has arisen because when the U.S. Congress last restructured the tax incentive and reduced it slightly, they failed to similarly address the tariff. “But I can say with some measure of certainty that as long as there is a tax incentive available to refiners for their ethanol use, there will be an offsetting tariff.”

The U.S. ethanol industry’s efforts in Congress have been to build the market for ethanol in the U.S., such that all can benefit from a growing demand base. Brazilian ethanol will benefit from the 36 billion gallon requirement in the United States. Almost a half a billion gallons of ethanol has been imported to the U.S., competing quite effectively, he said.

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