Advocates of biofuel subsidies and mandates often cite Brazil’s experience with sugar cane-based ethanol as a success story and model for enhancing U.S. energy security and alleviating consumers’ pain at the pump. A new study by Brazilian economist Marcus Renata Xavier, commissioned by the Competitive Enterprise Institute, cautions against attempting to replicate Brazil’s biofuels program, for several reasons:

• Ethanol production is more economical in Brazil than in the United States due to the superiority of sugar cane to corn as a feedstock, Brazil’s large unskilled labor force, and a climate ideally suited to growing sugar cane.
• In absolute terms, Brazil and the United States produced almost the same quantity of ethanol in 2005. However, in market share, the difference is striking. In the U.S., ethanol supplied only 3% of the total motor fuel consumed in 2005, compared to 40% in Brazil. The difference is chiefly due to the larger overall size of the U.S. motor fuel market: Brazil has 23 million vehicles compared to 204 million in the U.S. The United States would not obtain 40% of its motor fuel from corn ethanol without severe impacts on fuel costs, food prices, and wildlife habitat.
• Brazil’s ethanol infrastructure required huge taxpayer subsidies over decades and still became uneconomical when petroleum prices fell in the late 1990s.
• Although Brazil is the world’s lowest-cost ethanol producer, ethanol is still more expensive than regular gasoline in Northern Brazil, due to the high cost of bringing the ethanol to market.