Ethanol and ethanol-petrol blends are not new as fuels for the internal combustion engine, since these fuels were proposed in the late 1800s by early car manufacturers. Henry Ford once described ethanol as the ‘fuel for the future’. During the First and Second World Wars, ethanol was mixed with petrol in order to preserve oil stocks. After the First World War, petrol dominated the fuel market although ethanol still continued to be used as an octane enhancer (anti-knock) in the 1920s but this was superseded by tetra-ethyl lead. The use of ethanol as a fuel re-emerged in the 1930s in the USA, where ethanol produced from maize was sufficiently cheap to be used in blends. It was used in concentrations of 5-17.5% to produce a blend called ‘gasohol’ and marketed as ‘Agrol’. In the UK, gasohol was marketed by the Cleveland Oil Company under the name of ‘Discol’ in the 1930s, a blend which continued to be sold until the 1960s. In the USA, gasohol was dropped by 1945 due to the availability of cheaper petrol.

In 1975 Brazil introduced the ‘Proalcool’ Programme to produce ethanol from sugarcane as a fuel to replace petrol as a response to oil price rises from 1973. The rise in oil prices was due to an Organization of the Petroleum Exporting Countries (OPEC) oil embargo as a consequence of the Arab-Israeli War in 1973. The reasons for the development of ethanol as a fuel in Brazil were to reduce the imports of petrol as Brazil had few oil fields, to open up areas of the country for cultivation, to provide employment, to increase the industrial base, and to develop ethanol exports of plant and expertise. In addition, Brazil is one of the largest producers of sugar from sugar­cane so that a good substrate for ethanol production was readily available which did not require processing. The production of ethanol was encouraged by grants and subsidies to make ethanol cheaper than petrol. By the late 1980s about 50% of the cars used 95% (E95) ethanol as a fuel. However, price rises and a sugar shortage have reduced ethanol use to about 20% of vehicles, although 40% of the total fuel used is ethanol. One unforeseen outcome of the development of a large ethanol industry in Brazil producing 16.97 x 109 l in 2006 (4.49 billion gallons) is a flourishing export market for ethanol. In 2005 Brazil exported 100 million gallons to India, USA and Europe.

The USA initiated the production of fuel ethanol in 1978 with an Energy Tax Act where gasohol was defined as a blend of petrol containing more than 10% ethanol. The Act exempted ethanol from the US$0.40/gallon tax on petrol. Apart from the tax changes, support for the ethanol industry was in the form of agricultural subsidies and tax credits awarded to blenders. The driving factors for the development of an ethanol industry were similar to those in Brazil. In the case of the USA, ethanol was produced from maize starch rather than from sugarcane. In addition, the price of chemi cally produced ethanol in the USA increased which made biologically produced ethanol more economic. In the 1970s chemically produced ethanol was selling at US$0.145/l but in the 1980s the increase in the feedstock increased ethanol prices to US$0.53/l, which was the same price as biologically produced ethanol. The tax exemption rose to US$0.60/gallon in the mid-1980s but was reduced in 2005 to US$0.51/gallon. An additional reason for the production of alcohol as a fuel was the low prices that the farmers were getting for their maize. At present, fuel ethanol accounts for 7% of the maize crop, boosting farm incomes by US$4.5 billion and is responsible for 200,000 jobs. In the 1980s, lead in petrol was removed and ethanol was of interest to increase the octane value. The first replacement for lead in petrol was MTBE made from methanol but concerns over its toxicity has seen a change to ETBE. After considerable debate in the USA, the Renewable Fuel Standard (RFS) was signed in 2005 which required both biodiesel and bioethanol to be blended in petrol and diesel to the value of 7.5 billion gallons (US) a year by the year 2012. At the present the replacement of petrol with ethanol is also driven by the need to reduce carbon dioxide emissions, as ethanol is a carbon-dioxide-neutral sustainable product.