Flexible-fuel automobiles and CO2 emissions in Brazil: Parametric and semiparametric analysis using panel data

The replacement of fossil fuels by clean energy sources has emerged as a focus for those concerned with the creation of a less polluted urban environment. In this context, Brazil's use of ethanol as a vehicle fuel is unique, especially considering the country's successful adoption of flex-fuel technology first introduced in 2003. Currently, most of the fleet of vehicles circulating in Brazilian cities can use ethanol. The effect of this alternative fuel on the Brazilian urban environment is the focus of this study. In our study, the relationship between Brazil's fleet of flex-fuel vehicles and local CO2 equivalent emissions was investigated using parametric and semiparametric analysis based on modified Environmental Kuznets Curve (EKC) equations. The analyses employed an annual set of state-level panel data for the period from 1998 through 2013. Both analyses show that the Brazilian introduction of flex-fuel vehicles in 2003 contributed to a marginal reduction of passenger car CO2 emissions by 2013. Moreover, results also indicate that (1) there is evidence that flex-fuel vehicles can be a component in the generation of an EKC; and (2) there is a negative relationship between the area under sugarcane cultivation and CO2 emissions due to carbon sequestration. These results indicate that the substitution of ethanol for gasoline through the use of flex-fuel technology leads to fewer total greenhouse gas emissions, considering that greenhouse gas emissions from ethanol combustion and ethanol processing are outweighed by their sequestration during sugarcane growth in rural areas.