A clutch of billionaires has joined a high-stakes game to turn Brazilian farmland into a green fuel factory for the world.

The tycoons, who include George Soros, the currency speculator, Steve Case, the founder of AOL, and Vinod Khosla, who established Sun Microsystems, are investing billions of dollars buying sugar cane plantations and mills in the expectation that Brazilian ethanol will be the best bet for producing low-carbon road fuels.

Mr Soros, speaking at an ethanol summit in São Paulo this week, said that he would invest “significant amounts of money in Brazilian ethanol”, but he said that the sugar cane-based fuel would not succeed unless the United States and Europe brought down their tariff walls. “I am a speculator in ethanol,” he said. “There are a lot of problems that we need to solve to make investment in ethanol really viable.”

The money ploughed into Brazil’s sugar crop and invested in new mills is reckoned to be almost $15 billion (£7.6 billion), which is powerful ammunition in the emerging commercial battle between biofuels.

America and Europe are ratcheting up road fuel standards, stipulating ever higher renewable fuel content in petrol and diesel, but protectionism remains at the top of the agenda. A massive expansion of American ethanol production from corn with multibillion-dollar tax breaks is cloaked in a protective embrace, benefiting from a 54 cent per gallon import tariff on Brazilian ethanol. The European Union has imposed a 19 cent tariff.

Mr Soros, who is best known for his duel with the Bank of England when he bet successfully against sterling, has become the main shareholder in Adeco Agropecuaria, which is building three ethanol distilleries in Matto Grosso state in Brazil at a cost of $900 million. The three mills are expected to produce a billion litres per year.

Brazilian Renewable Energy Company (Brenco), backed by Mr Khosla and Mr Case, has signalled plans to invest $200 million in Brazilian ethanol. Infinity Bioenergy, an AIM-listed company with backing from Merrill Lynch and Kidd & Co, has acquired four ethanol mills in Brazil and is building another two.

Energy forecasters, such as Daniel Yergin, of Cambridge Energy Research Associates, predict that a fifth of the transport fuel market could be supplied from biofuels by 2030. However, Mr Soros said that the sudden investment surge could leave the world with a short-term ethanol glut if tariffs are not removed. “Unless the markets in the rest of the world are opened up, you probably have overproduction coming online,” he said.

Brazil’s farmers will harvest a record 528 million tonnes of sugar cane this year, up 11 per cent from 2006. Its mills will distill 20 billion litres of ethanol.

Even more economic muscle is joining the dash to turn sugar into motor spirit as oil majors and agribusiness companies join the dash to Brazil. Archer Daniel Midlands, the biggest US ethanol manufacturer, is scouting Brazil for investments.

Filling up

15% annual growth in global demand for ethanol

3.6bn litres of ethanol exported by Brazil in 2006

16bn litres expected to be used worldwide by 2013

54 cents a litre tariff levied on Brazilian ethanol by the US

528m tonnes of sugar cane to be harvested in Brazil this year

Source: Times archives

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