Abstract

The biofuel programme was started in 1975 and greatly enhanced in 1979/81 as
a reaction to the price hikes of oil and the simultaneous price drops of sugar. It never became
economically viable, but has always owed its existence to state support which, in tum was
vindicated by the powerful sugar interests. Since only Otto engine (not Diesel) motors can be
driven by alcohol, the individual passenger car traffic with its well-known waste of energy
turns out to be highly subsidized in Brazil, in spite of the country’s serious overall energy
shortage. Future prospects for biofuel are generally bleak, for even with steeply rising oil
prices energy in the form of food is bound to be more expensive than energy for heating and
transport so that mineral coal and wood are much more probable candidates as fuel sources
than sugarcane and edible oils, once the era of oil comes to its end.

JEL Classification: Q29; L72.