Brazil's ethanol push could eat away at Amazon

updated 1:56 p.m. ET March 7, 2007

SAO PAULO, Brazil - Just an hour's drive outside this traffic-choked metropolis where President Bush kicks off a Latin American tour Thursday, sugar cane fields stretch for hundreds of miles, providing the ethanol that fuels eight out of every 10 new Brazilian cars.

In only a few years, Brazil has turned itself into the planet's undisputed renewable energy leader, and the highlight of Bush's visit is expected to be a new ethanol "alliance" he will forge with Brazilian President Luiz Inacio Lula da Silva.

But a top U.N. environmental official is warning that while such an alliance offers opportunities it also poses risks to Brazil's Amazon rain forest.

The deal is still being negotiated, but the two leaders are expected to sign an accord Friday to develop standards to help turn ethanol into an internationally traded commodity, and to promote sugar cane-based ethanol production in Central America and the Caribbean to meet rising international demand.

Across Latin America's largest nation, Brazilian media are billing the Bush-Silva meeting as a bid to create a new two-nation "OPEC of Ethanol," despite efforts by Brazilian and American officials to downplay the label amid concerns that whatever emerges would be viewed as a price-fixing cartel.

The Amazon angle
On Monday, Achim Steiner, head of the U.N. Environment Program, added his voice, saying that growing international demand for ethanol threatens the Amazon if safeguards are not put in place because the world's largest remaining tropical wilderness is a target area for agriculture.

Brazil's ethanol is made from sugarcane. And while sugarcane cultivation is minimal now in the Amazon, some environmentalists fear growing demand for the fuel could push cane growers there.

"I think at the end of the day ... it's a question of whether the Amazon is sufficiently protected and whether the expansion of the ethanol production happens in the context of government policies that try and direct that growth potential in a sustainable base," Steiner said after meeting with Brazil's ministers of environment, energy and foreign relations.

Steiner praised Brazil for reducing Amazon deforestation by 11 percent last year and said he was hopeful the government would develop sufficient safeguards to protect the wilderness.

But many environmentalists say much of the reduction in deforestation was due to an overvalued currency and stagnant prices for soybeans on the international market, which made it far less lucrative to cut down remote forest plots to grow soybeans.

Slide show   Help for the Amazon Click to see images of rain forest and animals within a new protected area in Brazil more photos

In the near term, soybean growers likely will continue to expand into the Amazon as farmland in the Brazil's south and central regions moved to sugarcane, which requires greater infrastructure.

"While the whole process of alcohol fuel is less damaging to the climate than fuel from gasoline or oil, what can be positive for the environment can turn negative depending on the extension of the plantations," said Paulo Adario, director of the Greenpeace's Amazon Campaign.

The Amazon region, which covers nearly 60 percent of Brazil, has lost 20 percent of its forest — 1.6 million square miles — to development, logging and farming.

Ethanol's influence
At every gas station in this city of 18 million, drivers can fill up with gasoline or ethanol. Ethanol came courtesy of a 1970s decision by Brazil's former military dictators to subsidize production and require distribution at the pumps.

A 1980s Brazilian fad with cars that ran only on ethanol petered out when oil prices fell in the early 1990s. But the fuel came back into vogue in 2003 when automakers started rolling out "flex-fuel" cars that run on gasoline, ethanol or any combination of the two.

With international oil prices reaching record highs, Brazilian drivers turned to the cars; most chose ethanol because it costs about half the price of gas.

The ethanol industry is now making profits like never before amid heavy foreign investment. Recently, Brazil's state-run oil firm, Japan's Mitsui & Co. and a Brazilian construction firm signed a memorandum of interest to study the construction of a pipeline in Brazil that would be used to help export ethanol to Japan.

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