The brazilian alcohol program in the national energy context

The new national as well as international energy context demands revision of the Brazilian Alcohol Program. This revision should aim at the preservation of alcohol as an energy source while reducing subsidies. To this end a moratorium on new distilleries should be enforced till the middle of the next decade, accompanied by a policy focusing on cost reductions and improvements in productivity aimed at making alcohol competitive in the middle term, as well as a motor fuel policy which acts on demand and makes this moratorium viable while preserving the existing production structure. Concrete mechanisms to implement such a policy are proposed which segment the market for new vehicles and preserve the stability of alcohol and gasoline markets for existing vehicles. The effects of this policy were analyzed through simulation of 7 scenarios through the year 2005, which showed its feasibility; the continuation of the present policy, on the other hand, implies heavy additional subsidies. (author)