Decree 76,593 and its consequences were adopted purely for economic reasons. Only in 1978 it become evident through work of university groups [2] that ethanol for sugarcane was very close of being a renewable energy source (except for the minor ingredients of pesticides, fertilizers, and some diesel oil needed for its pro­duction). All the energy for the process of crushing the sugarcane, fermenting and distillation originated in the bagasse of the sugarcane. The ratio of the energy con­tained in a 1 L of ethanol to the energy of fossil origin used in the process was approximately 4.53 to 1 when the first evaluation was carried out [3]. Today, evalu­ations are showing that the rate is even better (8 to 1) due to the significant agricul­tural and industrial efficiency improvements [4, 5]. Impressive productivity gains of 3% per year over 30 years have been achieved. As an example, Fig. 4 gives the growth of sugarcane agriculture productivity in different regions of Brazil, from 1977 to 2009, indicating an increase of 51% in the period.

The second oil shock in 1979 led the Government to the drastic move to introduce cars with motors designed to operate exclusively with hydrated ethanol in order to increase ethanol consumption [2] .

A few years earlier President Ernesto Geisel had visited the Air Force Technological Center in Sao Jose dos Campos, Sao Paulo, and was very impressed by the work being done there by engineers, led by Urbano Ernesto Stumpf, on ethanol-fueled cars using hydrated ethanol (95.5% pure ethanol and 4.5% water). Important changes in the engine were needed to use that fuel, which required a compression ratio of 12:1, compared to 8:1 for regular gasoline. The higher com­pression ratio meant higher efficiency, which partly compensated for ethanol’s lower energy content. Combining all these factors, 199 L of pure (anhydrous) eth­anol replace one barrel of gasoline (159 L). This change to engines meant a drastic change in auto manufacture, but under Government pressure, local carmakers adapted and nationalistic elements in the Government saw ethanol as an instru­ment of national independence. In addition to that Brazilian auto manufacturers could no longer export their cars since hydrated ethanol was not available in other countries. It was also a problem to drive Brazilian cars in neighboring countries (and even some states in Brazil) that did not have service stations selling hydrated ethanol. Despite that the production of these cars began in earnest at the end of the decade; between 1979 and 1985, they accounted for 85% of all new car sales [2]. Over this same period, the percentage of ethanol in gasoline reached approxi­mately 20% [1].

Two fleets of automobiles were circulating in the country: some running on gasoline, using a blend of up to 20% anhydrous ethanol and 80% gasoline, and others running on hydrated ethanol. In 1985, the scenario changed dramatically, as petroleum prices fell and sugar prices recovered on the international market. Subsidies were reduced and ethanol production could not keep up with demand. The production of ethanol leveled off but the total amount being used remained more or less constant because the blend was increased to 25% and more cars were using the blend. Thus, by 1990 a serious supply crises occurred and due to a shortage of the appropriate fuel. The government tried to mitigate the shortage importing ethanol and methanol. Methanol was blended with gasoline and ethanol yielding another fuel that could be used in gasoline cars, freeing more ethanol for the neat ethanol powered ones. But, the shortage crisis lasting 1 year scared consumers and the sales of neat ethanol cars dropped rapidly: by the year 2000, it was lower than 1% of total new cars sold.

Then, after 2003, ethanol consumption rose again, as flexible-fuel engines were introduced in the cars produced in Brazil. These cars are built to use pure ethanol with a high compression ratio (approximately 12:1) but can run with any proportion of ethanol and gasoline, from zero to 100%, as they have sensors that can detect the proportion and adjust the ignition electronically. Flex-fuel cars were an immediate hit; today, they represent more than 95% of all new cars sold because they allow drivers to choose the cheapest blend on any given day. Approximately 50% of the gasoline that would otherwise be used in Brazil today was replaced by ethanol. The production of pure ethanol driven cars is being discontinued because of the success with the flexible-fuel engines.

In the 30 years since 1976 ethanol substituted 1.51 billion barrels of gasoline which correspond to savings of US$ 75 billion (in dollars of 2006) taking into account the amount of gasoline saved each year at the world market price [6] .