OIL INDUSTRY, TIGHT SUPPLY POSE OBSTACLES

Japan has long way to go to catch up on ethanol

by Miwa Murphy

NEW YORK (Kyodo) Ethanol, a renewable fuel distilled from sugar cane, corn, wheat and other types of biomass, has recently drawn attention after Prime Minister Junichiro Koizumi told Economy, Trade and Industry Minister Toshihiro Nikai to redouble Japan’s efforts to boost its production.

Often dubbed the “green gasoline,” ethanol does not add to greenhouse gases in the atmosphere because when it is burned, the amount of carbon dioxide produced is equal to the amount the plants used to make it absorbed during their growth.

But replacing a significant amount of gasoline with ethanol takes time, money and effort, and Japan has just begun exploring how to do it.

Currently, Brazil is the world leader in ethanol, or “alcohol” as it is known there, accounting for 40 percent the country’s vehicle fuel.

To wean the country off oil imports following the 1973 oil crises, Brazil developed its own oil reserves and implemented a program to promote the use of ethanol. The program, and the country’s abundant sugar cane from which the fuel is derived, has allowed Brazil to drastically cut its oil import bill.

Today, all gasoline in Brazil is required by law to contain 20 percent to 25 percent ethanol, and many cars can run on pure ethanol, pure gasoline or any combination of the two, thanks to the introduction of so-called flex-fuel vehicles in 2003.

Brazil makes its ethanol from sugar cane and uses a byproduct, bagasse, to fuel steam boilers and distilleries.

Japan is experimenting with sugar cane-based ethanol production in Okinawa, one of the five prefectures where the government has been conducting ethanol experiments in recent years.

The government has announced plans to make Okinawa a “special ethanol zone,” and is aiming to introduce E3, or gasoline blended with 3 percent ethanol, for use in public vehicles there.

But the government has a long way to go. Recently, an environmental panel of the ruling Liberal Democratic Party found the number of alternative-fuel cars on the road has reached only about one-ninth of the 2.33 million-vehicle target set by the government. Environmentally friendly biomass fuels are rarely used for transportation in Japan.

To achieve its targets under the Kyoto Protocol on greenhouse gases, the government last April committed itself to replacing 500,000 kiloliters of oil with biomass fuel by 2010, of which about 40 percent is expected to be ethanol.

But the Petroleum Association of Japan is opposed to blending ethanol with gasoline, because it says the fuel corrodes engine parts and increases volatility.

The association has proposed that ethanol be combined with a petroleum product, isobutylene, to make oxygenated ethyl tertiary-butyl ether, or ETBE, which it says corrects these problems.

But the Environment Ministry said in a December report that long-term exposure to ETBE can be toxic to humans, although it does not accumulate in the body.

ETBE is used in France and Spain, the two largest ethanol producers in Europe. French oil company Total Corp. is strongly opposed to blending ethanol with gasoline because doing so would exceed the European Union’s fuel volatility norms.

Taizo Otani, a researcher at the Japan External Trade Organization’s New York office, says oil companies generally avoid blending because of the costs involved in maintaining uniform fuel quality in ethanol blends.

“Ethanol absorbs water and has to be carried by truck from refineries. Then it is blended with gasoline at oil refineries before it reaches gas stations, again, by truck,” Otani said, adding also that purity of ethanol varies from refinery to refinery.

The bio-based fuel has not come without growing pains. In 1989, Brazil was hit by a shortage of ethanol due to high sugar prices, and the popularity of ethanol-powered cars became less popular, particularly because of low gasoline prices in the early 1990s.

But drivers began giving ethanol a second look after flex-fuel vehicles were introduced to the Brazilian market in 2003 by Volkswagen AG, a move that won it many new customers.

Other automakers, including PSA Peugeot Citroen and Fiat S.p.A., followed suit and now General Motors Corp. Ford Motor Co., Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. are coming out with flex-fuel offerings of their own.

Analysts predict flex-fuel vehicles will dominate the Brazilian market in a few years, and automakers are already said to be eyeing the North American market after Brazil.

Lonnie Ingram, a professor at the University of Florida and an expert on ethanol, said in an e-mail interview that he has a “very positive view of the benefits of using ethanol, alone and in combination with gasoline as a fuel.”

The United States, which recently surpassed Brazil as the world’s largest ethanol producer, is trying to lessen its dependence on foreign oil, which U.S. President George W. Bush called an “addiction” in his State of the Union address in January.

So far, the United States has used ethanol primarily as a gasoline additive, which the Clean Air Act of 1990 defines as a “clean” alternative fuel.

U.S. demand for ethanol continues to grow. In 2005, President Bush signed the Energy Policy Act into law, which aims to double the use of ethanol and biodiesel by 2012. Ethanol prices recently reached record highs in the U.S. after production of the additive MTBE, or methyl tertiary-butyl ether, was banned over health concerns.

In the U.S., ethanol is more than just a “green gasoline.” U.S. automakers, which trail their Japanese competitors in hybrid technology, think they may be able to top them in the flex-fuel car market.

U.S. automakers have been working with major oil companies to increase the number of gas stations selling E85, or gasoline containing 85 percent ethanol, as part of their flex-fuel strategies.

But JETRO’s Otani says ethanol supplies remain scarce in the United States and will remain so until cellulostic ethanol — made from fibrous agricultural waste from corn, rice and forest products, for example — becomes commercially viable, regardless of whether the country develops the capacity to export the fuel.

The move toward ethanol has also drawn fire from critics who say production of flex-fuel cars has reduced the overall fuel efficiency of U.S. vehicles by allowing automakers to sell more gas-guzzlers based on “credits” they receive for building flex-fuel cars.