(By Daniel Howden in Sao Paolo) - George Bush says that ethanol will save the world. But there is evidence that biofuels may bring new problems for the planet.

The ethanol boom is coming. The twin threats of climate change and energy security are creating an unprecedented thirst for alternative energy with ethanol leading the way.

That process is set to reach a landmark on Thursday when the US President, George Bush, arrives in Brazil to kick-start the creation of an international market for ethanol that could one day rival oil as a global commodity. The expected creation of an “Opec for ethanol” replicating the cartel of major oil producers has spurred frenzied investment in biofuels across the Americas.

But a growing number of economists, scientists and environmentalists are calling for a “time out” and warning that the headlong rush into massive ethanol production is creating more problems than it is solving.

To its advocates, ethanol, which can be made from corn, barley, wheat, sugar cane or beet is a green panacea - a clean-burning, renewable energy source that will see us switch from dwindling oil wells to boundless fields of crops to satisfy our energy needs.

Dr Plinio Mario Nastari, one of Brazil’s leading economists and an expert in biofuels, sees a bright future for an energy sector in which his country is the acknowledged world leader: “We are on the brink of a new era, ethanol is changing a lot of things but in a positive sense.”

In its first major acknowledgment of the dangers of climate change, the White House this year committed itself to substituting 20 per cent of the petroleum it uses for ethanol by 2017.

In Brazil, that switch is more advanced than anywhere in the world and it has already substituted 40 per cent of its gasoline usage.

Ethanol is nothing new in Brazil. It has been used as fuel since 1925. But the real boom came after the oil crisis of 1973 spurred the military dictatorship to lessen the country’s reliance on foreign imports of fossil fuels. The generals poured public subsidies and incentives into the sugar industry to produce ethanol.

Today, the congested streets of Sao Paolo are packed with flex-fuel cars that run off a growing menu of bio and fossil fuel mixtures, and all filling stations offer “alcohol” and “gas” at the pump, with the latter at roughly twice the price by volume.

But there is a darker side to this green revolution, which argues for a cautious assessment of how big a role ethanol can play in filling the developed world’s fuel tank. The prospect of a sudden surge in demand for ethanol is causing serious concerns even in Brazil.

The ethanol industry has been linked with air and water pollution on an epic scale, along with deforestation in both the Amazon and Atlantic rainforests, as well as the wholesale destruction of Brazil’s unique savannah land.

Fabio Feldman, a leading Brazilian environmentalist and former member of Congress who helped to pass the law mandating a 23 per cent mix of ethanol to be added to all petroleum supplies in the country, believes that Brazil’s trailblazing switch has had serious side effects.

“Some of the cane plantations are the size of European states, these vast monocultures have replaced important eco-systems,” he said. “If you see the size of the plantations in the state of Sao Paolo they are oceans of sugar cane. In order to harvest you must burn the plantations which creates a serious air pollution problem in the city.”

Despite its leading role in biofuels, Brazil remains the fourth largest producer of carbon emissions in the world due to deforestation. Dr Nastarti rejects any linkage between deforestation and ethanol and argues that cane production accounts for little more than 10 per cent of Brazil’s farmland.

However, Dr Nastari is calling for new legislation in Brazil to ensure that mushrooming sugar plantations do not directly or indirectly contribute to the destruction of vital forest preserves.

Sceptics, however, point out that existing legislation is unenforceable and agri-business from banned GM cotton to soy beans has been able to ignore legislation.

“In large areas of Brazil there is a total absence of the state and no respect for environmental legislation,” said Mr Feldman.

“Ethanol can be a good alternative in the fight against global warming but at the same time we must make sure we are not creating a worse problem than the one we are trying to solve.”

The conditions for a true nightmare scenario are being created not in Brazil, despite its environment concerns, but in the US’s own domestic ethanol industry.

While Brazil’s tropical climate allows it to source alcohol from its sugar crop, the US has turned to its industrialised corn belt for the raw material to substitute oil. The American economist Lester R Brown, from the Earth Policy Institute, is leading the warning voices: “The competition for grain between the world’s 800 million motorists who want to maintain their mobility and its two billion poorest people who are simply trying to stay alive is emerging as an epic issue.”

Speaking in Sao Paolo, where the ethanol boom is expected to take off with a US-Brazil trade deal this Thursday, Fabio Feldman, said: “We must stop and take a breath and consider the consequences.”

Biofuel costs

When Rudolph Diesel unveiled his new engine at the 1900 World’s Fair, he made a point of demonstrating that it could be run on peanut oil. “Such oils may become, in the course of time, as important as petroleum and the coal tar products of the present time,” he said.

And so it has come to pass that US President George Bush has decreed that America must wean itself off oil with the help of biofuels made from corn, sugar cane and other suitable crops.

At its simplest, the argument for biofuels is this: By growing crops to produce organic compounds that can be burnt in an engine, you are not adding to the overall levels of carbon dioxide in the atmosphere.

The amount of CO2 that the fuel produces when burnt should balance the amount absorbed during the growth of the plants.

However, many biofuel crops, such as corn, are grown with the help of fossil fuels in the form of fertilisers, pesticides and the petrol for farm equipment.

One estimate is that corn needs 30 per cent more energy than the finished fuel it produces.

Another problem is the land required to produce it. One estimate is that the grain needed to fill the petrol tank of a 4X4 with ethanol is sufficient to feed a person for a year.