During the early 80’s, the government was giving tax incentives to buy E100 vehicles, keeping ethanol prices lower than gasoline, and subsidizing the infrastructure for E100 gas stations. However, ethanol production leveled off in the mid to late 80’s, causing a shortage of ethanol, and even imports of ethanol. Ethanol prices rose above gasoline prices and many consumers who had bought the E100 vehicles couldn’t get fuel. Worried that another ethanol shortage could happen again, E100 vehicles sales dropped sharply as did the sale of neat ethanol. For the next decade, the majority of the vehicles sold in Brazil ran on the standard E20-E25 blends.
The solution came in 2003 with the creation of the flexible-fuel vehicle (FFV), which can run on any combination of ethanol or gasoline (E0 to E100). This gave the consumer the ability to choose which fuel they thought was more economical. This is especially helpful to the consumer, since the price of ethanol can vary greatly from year to year depending on the success of that years harvest. In general, E100 gets about 30% less mileage than the standard gasoline, thus it is only advantageous to choose E100 when ethanol prices are 30% less than gasoline. The graph below shows the evolution of ethanol vehicles and ethanol consumption in Brazil.
Andre Tosi Furtado, Mirna Ivonne Gaya Scandiffio, & Luis Augusto Barbosa Cortez. “The Brazilian Sugarcane Innovation System”. Energy Policy 39 (2011) 156-166.
The success of flex-fuel vehicles was possible only because of the infrastructure set up decades earlier with the support of the Brazilian government. As of December 2011, over 15 million flex-fuel vehicles have been sold, with dozens of FFV’s to choose from. In 2009, the first flex-fuel motorcycle was introduced into Brazil and already accounted for 18% of the motorcycle market in Brazil by the end of 2010.
In order for flex-fuel vehicles to become popular in the United States, the government would have to support a similar program to finance ethanol storage tanks at gas stations. Flex-fuel vehicles are currently available in the United States, however they can only run up to E85 fuel. So far, over 8 million E85 flex-fuel vehicles have been sold in the U.S. but most people don’t even know they own one. This is because they are not marked on the exterior of the car and there are only about 3,000 gas stations that sell E85 fuel, most of which are located in the Midwest. The Obama Administration hopes to increase this number to 10,000 gas stations by 2015 by providing financial incentives for gas station to install an E85 tank and pumps.