Efficiency for producing alcohol for energy in Brazil: comment

Referring to a 1982 paper by Barzelay and Pearson which concluded that ethanol fuel was economically infeasible unless petroleum prices rise dramatically, the authors identify some problems in the data. They recalculate ethanol costs and benefits using broader considerations that include beneficial externalities to show that ethanol acts beneficially as a small insurance policy for promoting continued industrial and rural development. Barzelay and Pearson reply by noting that the Brazilian National Alcohol Program has become less flexible during the three years since they made their calculations. They conclude that Brazil's large investment in sugarcane and alcohol-fueled automobiles at a time when world oil prices are low makes the country's commitment irreversible. 5 tables.