The implementation of biofuels in Oil Firms; Unlocking a path dependency and steering towards a more sustainable trajectory?

Mr Nelson Mojarro Gonzalez, SPRU, University of Sussex

Biofuels can be used either as an additive or as a fuel substitute having different implications for oil firms. This paper focuses on the use of ethanol by oil firms and examines how and why ethanol has been employed by oil companies, and how this might lead to a (technological) shift in a historically path dependent technological system towards a potentially more sustainable trajectory. The article analyzes the case of the major Brazilian oil company, Petrobras and argues that after decades of complying the highest ethanol blending mandate in the world, the Brazilian oil firm, has until recently has until recently enter biofuel upstream activities, potentially unlocking its oil-only based path dependency.

Oil firms are almost the sole providers of motor fuels and “the infrastructure necessary to provide fuels can be identified as a path dependent large technological system. This system has since the early 20th century employed the same raw material (crude oil) to produce its main process refining output, motor gasoline. The vast majority of oil firms in this system have demonstrated a path dependency in its feedstock, and the technological advances in its refining processes. Thus, innovation in the production of fuels has been incremental rather than radical. The energy system and its oil firms have been locked in an oil path dependency which has as Unruh (2000) argues inhibited the diffusion of alternative fuels and technologies, despite their apparent environmental advantages. Ethanol is currently the most widely produced and used biofuel, which – apart from being a renewable source of energy – possesses also other potential environmental benefits (e.g. lower emissions of CO2 and some conventional air pollutants) compared to conventional fuels.

Despite constant innovative efforts in the oil industry, which led to a decrease in the level of contaminants in their products (e.g. through desulphurisation), governments wishing for faster action against climate change have helped re-direct attention of fuel production systems towards the usage of biofuels as alternative fuels. The Brazilian experience of large-scale ethanol programme, launched in 1975, has constituted an example that no other country has sought to imitate so far. Petrobras, the biggest oil company and Brazil has been part of the ethanol programme since its beginnings and has accumulated more than four decades of history and technological expertise.

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