Adam Li Khan: A Hard Lesson From Brazil

Brazil is often pointed to as an example of a country that improved its energy security and its economy with a domestic ethanol industry. And what Brazil has accomplished is amazing. They have become independent of foreign oil in one generation. They started as an oil importer — importing eighty percent of their oil — and now they have excess oil. Brazil is now an oil exporter (and an ethanol exporter).

But they learned a hard lesson. And we should heed it.

Brazil started on its ethanol program after the 1973 oil embargo. They kept ramping up their ethanol program — building more ethanol-making facilities, encouraging more sugarcane cultivation with subsidies and guaranteed prices, and making sure every fuel station had an ethanol pump — until by the mid-1980s two thirds of the cars made in Brazil burned ethanol. But they burned only ethanol. At the time, everything seemed to be going according to plan. Ethanol was cheaper than gas. It extended the life of the car (because it burns cleaner), polluted less, and the money Brazilians spent for it stayed in Brazil and boosted their economy. Everything was looking good.

Then oil prices started dropping. And kept dropping into the 1990s — a drop that put over half the ethanol plants in the U.S. into bankruptcy. What happened in Brazil? Now those Brazilians driving ethanol-only cars were paying more for their fuel than the owners of old-fashioned gasoline-only cars. Ethanol cars quickly became unpopular. The whole country lost interest.

But with the rise of oil prices in the new millennium, Brazil has come back to ethanol, but with a big improvement. Now they're using flex fuel cars. And that's the real secret. The cars coming out of their factories can burn either gas or ethanol or both in any proportion, giving drivers a choice, and leaving their economy far less vulnerable to oil shocks.

The Open Fuel Standard bill takes Brazil's lesson and goes one better. The new bill includes methanol, a massive improvement. So the cars coming off our assembly lines will be able to burn gasoline or methanol or ethanol or any mixture of any of them. That will give us unprecedented flexibility, it will spread out the feedstock very broadly, and will make our economy far less vulnerable to anything the world can throw at us.

And the bill is not even limited to flex fuel vehicles. Any kind of car that doesn't burn exclusively gasoline is fine. Hydrogen, electric, natural gas, biodiesel, fuel cells, whatever. The beauty of this bill is the flexibility it gives us.

Open Fuel Standard bills have been tried before. But some weren't as good as this one. This is the bill we've been waiting for, and we should jump on it while we have it. There's no guarantee a bill this good will ever be proposed again.

Years ago, I remember reading a great book about how the Constitution of the United States was created. It is a fascinating story. The book contained many of the arguments (verbatim) made in the meetings while the Constitution was being created. But when all was said and done and it was time to sign the document, nobody wanted to sign it. Everyone involved had made painful compromises. Everyone had given something up — something important to them. Everyone had bent over backwards to make it happen, and now nobody liked it.

But then Benjamin Franklin spoke. He was a very old man, and by this time anything he said carried enormous moral weight. What he had accomplished with his life, and his personal conduct, had earned him supreme respect from everyone present.

He said, in essence, "It's possible that nobody will ever again gather together such a group of intelligent, accomplished, committed men as we have here now, or take all the time we've taken to hash this out. If we don't sign this document now, this opportunity may never come again."

They signed.

I feel the same way about the Open Fuel Standard bill because of its tremendous flexibility. It may never be proposed again. We should do everything we can to get this bill passed while we can.