RENEWABLE ENERGY: A FRAMEWORK TO MODEL A BRAZILIAN CASE OF SUCCESS (PART I)

In 1973, the first oil crisis leaded most countries to experience economic problems due to sudden unbalance in their trade balance. This leads to reactions, limited at the beginning due to short term inelasticity of petroleum demand, but relevant in long term. Brazil started the Proalcool program, which extended from 1979 to 1990, with the use of ethanol cars (E-100). In 1990 this program was ended, due to economic problems. A decline in international petroleum prices and an increase in international sugar prices, leaded to shortage of ethanol. This shortage made the users confidence to decline. From that point on, ethanol cars acquisitions almost dropped to zero. In 2003 a technological innovation, the flex-fuel electronic injection, was launched and was a huge success. In approximately three years, about 85 % of all cars sold in Brazil were using this technology. It caused a boom in ethanol industry which competes in terms of resources with sugar industry. This paper presents a framework to simulate the first period of the overall program which lasts from 1970 to 2003. 1