Archive for January, 2013

If, When, And How To Avoid Hiring A CEO

Vinod Khosla

Editor’s note: This is Part I of a two-part guest column written by legendary Silicon Valley investor Vinod Khosla, the founder of Khosla Ventures. In Part II, he will examine the signs that it might be time to hire a CEO. You can follow him on Twitter at @vkhosla.

Though debated among some venture investors, in my view, it is always better for a founder to grow into being a CEO. When there’s a choice, the founder’s vision, culture, and approach are usually more important than “good management” alone. While I’ll offer some insights for investors, this piece is primarily addressed to the founders themselves. I’ll start with some suggestions for buying time to learn and grow into the CEO role.


Being supported by a strong, operating-type team will allow you to focus on leading your company’s vision, culture, and performance standards while your team executes. You don’t have to be good at everything if you build the right team and have the self confidence to learn from it. Be willing to hire people who are better than you and who have skills or experience in areas that you don’t. Of course, this advice doesn’t work in every situation, as it depends on your own strengths and weaknesses. From my experience, here are a few team-builder examples:

John Hering (CEO/Co-founder of Lookout). When we invested in a Series A round for the smartphone security company, John was an unlikely candidate to grow fast enough to continue successfully as CEO. But he was able to because he built an exceptionally strong and complementary team and was very open-minded about learning from them. Of course, the company’s needs will change, and his hires over the next few years will determine the future of Lookout and his own career path.

Jack Dorsey (CEO/Founder of Square): Jack learned a lot from founding and running Twitter, and he started Square with those lessons in mind. He built it differently from the ground up in late 2009 (KV led the Series A). Keith Rabois joined as COO less than a year later in August 2010 and has proven to be an excellent complement while Square has grown explosively. Jack pushes the vision, culture, and design, while Keith ensures executional excellence.

Danielle Fong/Steve Crane (LightSail Energy): Steve and Danielle are another complementary pair. Danielle is a brilliant scientist who drives the vision and more, while Steve manages the team in the CEO role. Their initial market is electric grid energy storage, and they have many technical and market risks to sort out. According to Steve, Danielle’s most important role is to make sure that everyone’s working on the right things. “Her role is far from being only technical, as managing priorities is a big part of driving the vision,” he says. “She’s the best pure entrepreneur in the company.” To ensure continued success, the company will likely benefit from expanding the leadership team to include deeper market knowledge and product commercialization expertise.


Honest and informed self-assessment is critical. An experienced inner-circle/kitchen cabinet may be the most helpful tool for assessing your skills and what the company needs. Foster an open culture that challenges your own view and destroys any tendency toward group-think. If you have read Daniel Kahneman’s Thinking Fast and Slow, you realize how easy it is for any of us to fool ourselves. Our minds are not as rational as we believe while being quite good at rationalizing what we believe.

You should also get advice from the outside: disinterested, objective help that is tough and critical but doesn’t include any governance (think “CEO coach” or “trusted critic” — anyone who’s experienced and will be honest with you). It could be an entrepreneur who has seen CEO transitions from the perspective of a board member, with both positive and negative outcomes. Khosla Ventures does its part by favoring brutal honesty over hypocritical politeness in our feedback, while supporting entrepreneurs in their growth objectives. This isn’t always the most comfortable, but it is very valuable if you as founder want your company pushed to greater heights and bigger things or to avoid risks that could be anticipated.

David Friedberg, CEO of The Climate Corp., views assessment as a mindset issue that is symptomatic of failure and success:

The skill of being self-assessing/self-critical goes hand-in-hand with getting your company to a point of success – ask yourself: Are you the entrepreneur that always responds to the question ‘How are things going with your company?’ with ‘It’s great! We’re the best.’ or ‘We are facing some meaningful challenges, but I think we have a plan that gets us over them.’ So many entrepreneurs answer in the former tone, and they are typically the least self-aware and self-critical. I think being self-critical is a great skill that goes along with being objective about your business’s shortcomings and working constantly to improve.

John Hering adds that he has found it very constructive to do regular 360 self-reviews, where he will personally review his performance and collect feedback on strengths and weaknesses from the team. Reward constructive criticism by your team; this is tangible evidence of an open and intelligent culture. Constantly ask them “What can I do better?” and assess whether you’re getting honest and constructively critical feedback. It’s very hard for a CEO to get good feedback, since for employees who depend on you, it’s so easy to say “the right thing” vs. the brutally honest truth – it’s often necessary to dig it out by asking the right questions and building relationships.

It’s important to think about not only your skills and abilities, but also your interests. As a founder, how do you want to spend your time? As the company grows, the tasks of the CEO include not only setting the vision, but also guiding the execution, ensuring necessary funding is in place, building the team, and managing resources. Day-to-day administration, such as conducting personnel reviews, can take an inordinate amount of time, so augmenting your team with a CEO, president or COO is something you may consider in order to maximize your contribution to your enterprise.


Open discussion with your board is necessary. If you can’t discuss the company’s needs and risks with them, try to get a new board (or at least try to replace some of them). If you can’t get a new board, you can often change its bias by adding an influential person with the right perspective. When facing challenges with board members, sometimes spending time one-on-one to openly discuss their concerns and reservations is your best route to building a stronger personal relationship and reaching mutual understanding free from the political dynamics of a formal board setting.

Lookout’s John Hering says:

I strongly believe that choosing your investors/board members is a function of recruiting, especially for a first-time CEO. Bringing on board investors that have operating experience can be invaluable to helping a founder/CEO scale – from direct CEO coaching to recruiting key executives.

In my view, other than hiring or firing a CEO, a board should not make any decisions. In private entrepreneurial companies, the board’s role is only to assist the founders by giving tough and honest advice (this is why we call our business “venture assistance” and never refer to Khosla Ventures as investors). Our ideal is often to get a sitting or recently retired CEO on the board who relates well with you, so you have an operator who gets it. Too many boards think they are in the governance business or the decision-making/voting business, which causes management to set up an information wall that blocks honest discourse.

I feel a board shouldn’t have to vote on anything except their confidence (or not) in management. In 25-plus years of being on boards, I have never once voted against a management team except on the question of whether the CEO should be changed. I feel free to argue informally, to have real, sometimes uncomfortable discussions, and to leave the final decision to the team that will execute it. It is hard for a team to execute well when it does not agree with what a board voted to do, or conversely to be fully honest, open and objective about all its alternatives if they believe the board is going to make the final decision on an issue.

The founder of Excite, Joe Kraus, felt I was pretty tough on him at times, but he once told me he gauged how important I thought it was to make the right decision (some decisions are more critical than others) by observing how hard I pushed a point of view. That is exactly my modus operandi, but I always leave the final decisions to the team. My role is to make teams think about things they are ignoring and to push them to greatness without ever making a decision for them. I often take positions I don’t believe in just because I think the team is not considering a certain perspective enough. I have now mostly stopped sitting on boards so I can focus more on exercising influence without authority. In companies where we have majority ownership, we will often avoid having any KV partner/employee board members if the company has a good board so we can give the team truly independent input.


Trust and openness are key to good dynamics within a company, while negative energies start a vicious cycle (like passive aggressive behavior vs. open discussion, excessive politics vs. meritocracy, undermining co-workers/leaders vs. constructive criticism and support, assigning blame vs. taking ownership). Address these dynamics early and avoid the downward spiral caused by increasing bad blood and lack of mutual understanding. This is relatively easy when things are going well, but founders and board members alike must be vigilant as the organization goes through challenging times.

Being constructive but honest about concerns early may avoid cycles of distrust and a degradation of working relationships. A focus on brutal but constructive honesty is critical to avoid these sorts of challenges. Remember, you don’t know what you don’t know, so you want to be very critical about your own perspective as well, instead of reacting defensively to critiques. Sometimes, but only after all else fails, it is necessary to cut out the source of the sore, which is often a specific individual that is causing too much of this negative cycle.

With respect to team relationships, The Climate Corp.’s David Friedberg shared some of his experience:

I think part of avoiding negative cycles may be forming the ability to dialogue openly with your direct reports and broader team. For example, after something as simple as going out to dinner with members of my team several times, we could much more comfortably have heated disagreements without causing long-term harm to our relationships, and without losing respect for one another. Prior to those dinners, I was just the CEO and my word was final, so they weren’t sure if stepping on my toes would cause irreparable distrust/discontent/etc. Building personal bonds enables stronger professional critique and progress.

Personally, I most want to engage with teams when I know I can challenge them, have difficult debates and arguments, and push them to sometimes uncomfortable limits, yet have them remain totally comfortable that I am looking out for their best interests. This reminds me very much of my parenting duties: My children never doubt that my goals and motives are to help them, but they don’t always agree with what I am saying. In the end, my children also know they will get to make the final decision and I will support their decision. Boards should push and challenge management teams without ever making the team feel like they cannot make the final calls or that a board member’s interests diverge from that of the team.


Simply put, the success of a company often hinges on its execution of the founder’s vision. I prefer great vision and bad execution to bad vision and great execution. Companies are not “fire and forget.” In most cases, founders need to be continually involved to ensure that the vision is pursued relentlessly and updated incrementally as the team gains more experience. Every tactical decision a company makes should be tested for its consistency with its vision or the ship will drift toward convenience and short-term actions instead of staying true.

I firmly believe that staying true to a vision is best achieved by having a founder as CEO. It is almost always preferable over “hired guns” that can help you execute on the vision but seldom understand it as well and are often too pragmatic. That said, a management hire can be very much a champion of the vision and a true partner with the founder. Good managers are seldom unreasonable, and it takes “unreasonable people” to do the sorts of great things that normal reasonable people wouldn’t consider until you showed them enough proof that it can be done. For that reason among others, boards should try as hard as possible to keep the founder in the No. 1 slot with a good president/COO or an otherwise strong execution team under him or her. This will preserve their instinctive feel for the new space and the new rules.

Keep in mind, however, that these are generalizations and can of course be wrong. The specifics of a circumstance matter, and can change the optimal course of action, so understanding this is one of the larger contributions a board can make as a company grows beyond about 30 to 50 people. There are many other considerations regarding which roles to fill with manager types. Finally, it is important to remember that the best talent may not join without a CEO title, so a founder sometimes must balance between the vanity/utility/clout of a title and getting the best talent on the team. In the end, industry dynamics and rate of change often influence the best course for a founder to follow.

There’s also an intangible aspect to it. Friedberg remarks:

I think I am always a lot more willing to push/instigate dramatic/radical change than anyone else around me. I just know very clearly why we did what we did before and why we need to change it now, as we learn more about the market, etc. I think people that are hired to a company tend to lean towards doing what we’re doing now and not mess things up, because that’s what they joined up to do. I guess you could say that because I had a strong hand in building the sandcastle in the first place, I’m perfectly happy to knock it down and rebuild a better one 10 feet away, if need be.

Regardless of your management team structure, founders should drive their strategy/vision as long as possible to preserve company values. This is important because intuition about the markets is essential in my view. Usually, good managers/leaders who make good hired CEOs are not great at this “feel it out” approach – founders often have a better sense of what a minimum viable product ought to be, how to iterate quickly, when to pivot, and when conventional wisdom needs to be thrown out the window and reinvented. That’s another reason that I prefer founders as CEOs with a hired manager/leader as president. But either mix can work (founder as president or CEO); it just depends on the founder’s personality. At the end of the day, it’s critical to hire a CEO/COO/president who has passion for the company’s vision and truly believes in and has respect for the founder.

A traditional manager becomes important when the critical questions are things that have been seen before, like: “How sales people work” or “What constitutes a good VP of sales?” or “What sales cycle or sales economics really are in an existing area?” A board needs to differentiate between serving existing markets with better product vs. creating new markets or channels or “new wisdom” on how to do what well. Is it important to know customers or to “re-educate” them? All of these questions and the constituency of the current team determine how best a founder/CEO role should be configured if the interest of the company is what is being optimized.

For example, Scott Cook founded Intuit in 1983. Bill Campbell served as CEO from 1994-1998 and has since served as chair of the Intuit Board of Directors. Bill essentially executed on the company’s vision for which Scott was the “keeper” before, during, and after Bill’s CEO tenure. This partnership was based on trust and mutual respect. When Scott was looking for a CEO to help lead Intuit, finding someone with shared values was critical to him. He knew Bill had the operational skills to lead the organization forward, but his focus in the interview and reference process was “Do we share the same values about how to run the business and lead its people?” Coming into Intuit as the new CEO, Bill believed it was critical to keep Scott engaged and active in guiding the company’s evolution. He believed in honoring and respecting the past as you move toward the future. It was not always easy, but the two worked hard to craft roles that played to each other’s strengths and leveraged their partnership. They didn’t always agree but they always acted with respect and trust.

Though it rarely happens, the best situation may be similar to Google’s Larry Page and Eric Schmidt, where Eric helped as an interim CEO and close partner for a few years, and then handed the job back to Larry. Pulling this off really depends on having a board and lead investors who truly understand this process and do not feel that an experienced CEO is always better.

Friedberg said:

I think that I and a lot of founders try to become great managers as the business scales, but too often we revert to our standard state and just disappoint. While we can aim to become better managers, at the end of the day, we need a team of folks that are good managers of people and know how to coordinate them to help us achieve our goals/vision. I think that being a good manager is one skill that is almost universally learned. A (young) entrepreneur can be great at science, tech, negotiations, sales, etc. but generally doesn’t start early in their career as a great people manager – it is simply not an innate talent. As a result, this is the one key trait to look for in your direct hires, and I think it’s also the one thing I’ve seen folks fail at doing well – generally, they want to hire “young and smart” (mimicking themselves) and in so doing, hire first-time managers who may be great at particular functional skills (writing software, negotiating, design etc.), but lack the experience of managing/organizing/aligning people.

In general, founders do better when path-to-market is very exploratory and rules need to be broken and “new wisdom” needs to be created. Managers/leaders do well when the path is clear, the industry is entrenched, and the product is an “expected service.” In old markets, it’s critical to have a laser-focused VP of sales who knows how to incentivize and motivate the sales team to go further than they would on their own. The playbook differs depending on whether you need to simply know your customers well, as any good salesperson does, or if you have to re-educate them and evangelize a totally new solution to problems the customers may not know they have.

Of course, nothing prevents the founder from being or becoming a good manager (again, it is almost always ideal and it’s often important to employ tactics that buy the founder more time) with time to learn management and leadership skills. Taking the plunge and jumping without a parachute is especially valuable when there’s little to lose beyond investor money, but a lot to gain. However, as a company becomes more valuable, you need to worry as much about preserving the value that has been built as about building new value through new initiatives. This delicate balancing act moves a company from a “startup” to “traditional company building,” and should change the approach of the founders and the board. Suddenly there is more to lose and more to preserve! There is a time in a company’s history when there is value to preserve as well as to create.

Friedberg comments:

I agree with the wisdom that as the business scales, we need to be more cautious in business-building/changing. Sometimes I am too quick to react and push for change, and I need to be surrounded by folks who can help temper this with more thoughtfulness about the course of action.

LightSail’s Steve Crane cautions, however:

My sense is that failure to drive a successful product line to the next level due to concern about hurting its value happens far more often than the reverse. It’s a situation that’s more likely to occur when “professional” management is running the show in my experience. There’s a key balance to be struck between overly reckless founders and overly conservative managers.



The 1973 oil crisis
forced countries around the world to examine and
revise their energy policies and explore ways to reduce their dependence
on oil and other foreign energy sources.
Following this crisis, the United
and Brazil
both worked at decreasing their energy dependence on
foreign oil.
The divergent policy decisions of the United States and Brazil
have produced vastly different results.

1. In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) (the
predecessor of today’s Organization of Petroleum Exporting Countries (OPEC)) issued an oil embargo
against the United States, Canada, and the Netherlands in response to the U.S. resupply of Israel with
weapons during the second Arab-Israeli War. VITO A. STAGLIANO, A POLICY OF DISCONTENT: THE
2. During the 1973 oil crisis, oil prices quadrupled. Id.; The Price of Oil: Marching to $100?,
CBC NEWS, Apr. 18, 2006, In response, countries, especially
the United States and those in Western Europe and industrialized Asia, took measures to “mitigate the
foreign policy and economic consequences of over reliance on oil from the Persian Gulf.” STAGLIANO,
supra note 1, at xiii.
3. Americans were affected in their everyday lives by the oil crisis. Not only did the high oil
prices affect American consumers at the gas pump, but they also experienced brown-outs and rapidly
rising prices on other necessities. ENERGY INFO. ADMIN., DEP’T OF ENERGY, 25TH ANNIVERSARY OF
THE 1973 OIL EMBARGO (1998),
In the first State of the Union Address following the 1973 oil crisis, President Richard Nixon
focused his address on U.S. energy policy and declared, “[l]et this be our national goal: At the end of
this decade, in the year 1980, the United States will not be dependent on any other country for the
energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
President Richard Nixon, Address on the State of the Union Delivered Before a Joint Session of the
Congress (Jan. 30, 1974), available at
4. Brazil’s motivation in searching for ways to reduce its dependence on foreign oil imports
stemmed from the economic recession it experienced as a result of the 1973 oil crisis. The oil crisis hit
Brazil particularly hard since Brazil imported eighty percent of its fuel at the time. David Luhnow &
Geraldo Samor, Bumper Crop: As Brazil Fills Up on Ethanol, It Weans Off Energy Imports, WALL ST.
J., Jan. 9, 2006, at A8. Since, in 1973, domestic oil production supplied only twenty percent of Brazil’s
petroleum needs, Brazil was “highly dependent on petroleum imports to satisfy its energy needs.”
5. Oil is not only the largest source of energy in the United States, it is also the source that
greatly affects and is most known to consumers. Meeting Energy Demand in the 21
Century: Many
Challenges and Key Questions: Hearing Before the Subcomm. on Energy and Resources of the H.
Comm. on Government Reform, 109th Cong. 8 (2005) [hereinafter Energy Hearings] (statement of Jim
Wells, Director, Natural Resources and Environment, Government Accountability Office). High oil
prices directly affect consumers because two of oil’s most known uses are to provide fuel to heat 332 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 7:331
In analyzing the strategies, resources, and policy decisions of these two
nations, this Note explores why, although both the United States and
Brazil began in similar positions with similar goals, the two countries have
achieved essentially opposite results with regard to energy independence.
In doing so, this Note places particular emphasis on the transportation

First, this Note provides an overview of each nation’s dependence upon
foreign oil as it existed in 1973 and their respective energy situations
today. Next, this Note discusses the policy decisions, their implementation
and subsequent impact on energy independence or dependence.
Ultimately, this Note finds that while Brazil’s energy policy has been far
more successful than that of the United States, Brazil’s particular
resources and type of government played a substantial role in its success,
making some of the steps taken by Brazil impractical for the United States.
However, this Note argues that the U.S. complacency, indecisiveness, and
lack of vision in developing an alternative energy policy resulted in its
current state of energy dependence, and that it is particularly in these areas
that the United States should look toward Brazil’s example.
homes and for vehicles. ENERGY INFO. ADMIN., DEP’T OF ENERGY, PETROLEUM PRODUCTS (2007),
6. Brazil was set to be energy independent by the end of 2006. David J. Lynch, Brazil Hopes to
Build on Its Ethanol Success, USA TODAY, Mar. 28, 2006, at 1B, available at http://www.usatoday.
com/money/world/2006-03-28-brazil-ethanol-cover_x.htm; see also Luiz Inacio Lula da Silva, Join
Brazil in Planting Oil, GUARDIAN UNLIMITED, Mar. 7, 2006, at 33, available at,,1725203,00.htm. The United States, on the other hand, is far from energy
independence and imported sixty-five percent of its petroleum supply in 2005. RENEWABLE FUELS
ASS’N, FROM NICHE TO NATION: ETHANOL INDUSTRY OUTLOOK 2006 12 (2006), available at According to the Energy Information
Administration, the United States imported sixty percent of the petroleum it consumed in 2005.
available at Future predictions of U.S. oil
consumption indicate that foreign sources will continue to make up a large portion of U.S. oil
consumption, and by 2025 the government expects foreign oil imports to continue to constitute sixty
2006 8 (2006), available at
7. The transportation sector accounted for sixty-seven percent of U.S. petroleum use in 2004.
PETROLEUM PRODUCTS, supra note 5. See also infra note 65 and accompanying text. While electricity
can be generated from coal or nuclear plants, no similar alternative source of energy exists for the
transportation sector. Ariel Cohen, Increasing the Global Transportation Fuel Supply, EXECUTIVE
MEMORANDUM (The Heritage Found., Wash., D.C.), Oct. 25, 2005, at 1, available at http://www. 2008] BRAZIL’S ENERGY INDEPENDENCE 333
Although beginning in a position economically disadvantaged as
compared to the United States,
Brazilian attempts to lessen its
dependence on oil imports has been largely successful and has greatly
outpaced that of the United States.
As a result of a “three-decade long
alternative energy campaign,”
by the end of 2006, “Brazil [was expected
to] achieve energy independence—a goal that the United States has been
chasing without success since the energy crises of the 1970s.”

In contrast, solutions implemented by the United States to lessen its
dependence on foreign oil have been limited to times of crisis, with the
policy measures adopted proving largely unsuccessful.
today the United States imports a much larger percentage of its petroleum
supply than it did in 1973 and has made little progress in utilizing
alternative, renewable fuels.

While previous energy crises have usually abated in relatively short
periods of time, the current state of the energy sector seems permanent,
making Brazil’s policy choices all the more enviable to the United States.
8. As a result of the oil crisis during the 1970s and the resultant strain on its foreign exchange
used to pay the high oil prices, Brazil’s economy slid into a deep recession. Jaclyn Fichera & Jeff
Kueter, Considering Brazil’s Energy Independence, POL’Y OUTLOOK (George C. Marshall Inst.,
Wash., D.C.), Sept. 2006, at 1, available at
9. Today, Brazil is close to achieving energy independence and was expected to be energy
independent by the end of 2006. Luhnow & Samor, supra note 4, at A1. See also FROM NICHE TO
NATION, supra note 6. In 2006, Brazil consumed 2.3 million barrels of oil per day. Estimates for 2007
predict that Brazil will produce 2.32 million barrels of oil per day. ENERGY INFO. ADMIN., DEP’T OF
10. See Lynch, supra note 6. The energy campaign included a focus on ethanol and on equipping
filling stations across Brazil with ethanol pumps. Id. at 2B. See also infra notes 21–25 and
accompanying text.
11. Id.
13. In 1973, the United States imported 36.1 percent of its petroleum from foreign sources. In
2005, the United States imported 65.9 percent of its petroleum from foreign sources. ENERGY INFO.
ADMIN., DEP’T OF ENERGY, MONTHLY ENERGY REVIEW 17 (Dec. 2007), available at http://www.eia. The United States doubled the amount of petroleum it imports from
6,256 thousand barrels per day in 1973 to 13,714 thousand barrels per day in 2005. ENERGY INFO.
ADMIN., DEP’T OF ENERGY, ANNUAL ENERGY REVIEW 2006 129 (2007), available at http://www.eia. During the same time period, renewable energy consumption only
increased from 4.43 Quadrillion Btu (British thermal unit) to 6.84 Quadrillion Btu. Id. at 9.
14. Paul Salopek, Oil Crisis: It’s Only Just Begun, SEATTLE TIMES, Aug. 13, 2006, at A16,
available at Oil prices
have more than tripled over the past four years from $20 to nearly $70 a barrel, and some analysts
predict prices rising as high as $100 a barrel. Lester R. Brown, Starving the People to Feed the Cars,
A. Brazil
Brazil’s success in the utilization of alternative energy has significantly
outpaced nearly all other countries, including wealthier, more developed
nations. Today more than forty percent of Brazil’s energy comes from
renewable, alternative sources; in most richer nations, renewable energy
accounts for only seven percent of the energy supply.
In the
transportation industry alone, ethanol, an alternative to gasoline that Brazil
manufactures from sugarcane, accounts for twenty percent of the
industry’s energy supply—far greater than most other nations.

Despite a common misperception, Brazil did not become energy
independent solely due to the government mandating ethanol use,
encouraging ethanol production, or building an infrastructure to support
Instead, following the 1973 oil crisis,
Brazil adhered to a twoprong strategy of increasing domestic oil production through the stateowned oil company Petrobras
and decreasing petroleum demand by
developing sugarcane-based ethanol as a viable alternative.

General Ernesto Geisel, Brazil’s military leader, set out to develop
ethanol into a domestically-produced alternative to gasoline.
General Geisel, Brazil focused on utilizing ethanol produced from
sugarcane by offering subsidized loans to build ethanol plants,
guaranteeing prices for ethanol production, funding research on ethanol-
15. Lula da Silva, supra note 6. In the United States, the number is even less; renewable energy
accounts for seven percent of the energy supply. ENERGY INFO. ADMIN., DEP’T OF ENERGY,
// [hereinafter RENEWABLE ENERGY
TRENDS 2005]; Energy Hearings, supra note 5.
16. Luhnow & Samor, supra note 4, at A1. Ethanol accounts for one percent of the transportation
industry’s fuel in the rest of the world. Id. Another source estimated that in 2005, Brazil’s ethanol use
accounted for 13.6 percent of Brazil’s transportation fuel needs. Fichera & Kueter, supra note 8, at 3.
18. In 1973, Brazil imported eighty percent of its fuel from foreign sources, and as a result the
energy crisis hit Brazil particularly hard, producing an economic depression and forcing Brazil to use
approximately forty percent of its foreign-exchange income to import oil. Luhnow & Samor, supra
note 4.
19. Fichera & Kueter, supra note 8, at 4. Since 1980, Brazil’s domestic oil production has
increased approximately nine percent per year. Id. By 1982, Brazil had increased investment in oil
exploration and production by more than five times its 1973 level. BATISTA, supra note 4, at 34.
20. COUNTRY ANALYSIS BRIEFS: BRAZIL, supra note 9. See also Fichera & Kueter, supra note 8.
21. Brazil’s Second National Development Plan (II NDP), as it related to energy, focused on
developing a transportation infrastructure and on investing in energy to reduce oil imports. BATISTA,
supra note 4, at 31. In 1975, Brazil named its program, which encouraged the use of ethanol, the
“National Alcohol Programme.” Id. at 89.2008] BRAZIL’S ENERGY INDEPENDENCE 335
based automobile technology, and requiring state-owned companies to test
ethanol in their fleets.

Ethanol was well on its way to becoming a viable alternative energy
source when the 1979 oil crisis provided Brazil with an additional
incentive to increase and hasten its ethanol conversion efforts.
Joao Bastista Figueiredo, the new military leader, like his predecessor,
focused on sugarcane-based ethanol and ordered sugar companies to
increase production, required Petrobras to make ethanol available at
fueling stations across the country, and provided tax breaks to companies
producing ethanol-powered vehicles.
In addition, the government
mandated the blending of ethanol into all gasoline.

By 1980, Brazil was close to reaching its goal of using ethanol to meet
twenty percent of fuel needs.
The successful use of ethanol continued,
and in the decade that followed, Brazil quadrupled its ethanol production
as a result of new policies promoting sugarcane-based ethanol production
and use.
By 1985, ninety percent of the new cars in Brazil ran solely on

However, during the late 1980s and early 1990s, ethanol and Brazil’s
ethanol industry experienced significant setbacks.
Due in part to
dramatic decreases in oil prices, the government was unable to sufficiently
subsidize ethanol to make it competitive with gasoline.
Further, the
government was experiencing economic and political issues
that forced it
to cut spending and reduce ethanol subsidies.
Consequently, ethanol
22. Luhnow & Samor, supra note 4. See also HOWARD GELLER, ENERGY REVOLUTION:
23. BATISTA, supra note 4, at 89. The 1979 oil crisis occurred as a result of the Iranian
revolution. The Iranian revolution resulted in oil exports from Iran being greatly reduced, which in
turn disrupted global oil supplies and dramatically increased world oil prices. STAGLIANO, supra note
1, at 39.
24. Luhnow & Samor, supra note 4. The government also lowered the sales tax on ethanol-only
vehicles and priced pure (neat) ethanol below gasoline. GELLER, supra note 22, at 117.
25. Trish Regan, In Brazil, The Driving Is Sweeter, CBS NEWS, Mar. 29, 2006, http://www.
26. GELLER, supra note 22, at 118.
27. Id.
28. Critical Issues in Brazil’s Energy Sector, BAKER INST. STUDY (The James A. Baker III Inst.
for Pub. Pol’y of Rice Univ.), June 2004, at 6 [hereinafter BAKER STUDY], available at http://www.
29. GELLER, supra note 22, at 119.
30. BAKER STUDY, supra note 28, at 6.
31. In 1985, the dictatorship gave way and Brazil began the transition to a democratic state.
10 (The James A. Baker III Inst. for Pub. Policy of Rice Univ., 2004), available at http://www.
shortages occurred, not only because ethanol producers were no longer
able to profit from the manufacture of ethanol, but also because they failed
to maintain an adequate supply to keep pace with an increased demand
from the ethanol-only vehicles.
By 1995, as a result of public discontent
over high ethanol prices and continuing shortages, less than five percent of
the new cars in Brazil ran on ethanol.

Yet, despite the fact that the sugar and ethanol industries experienced
difficult times, instead of folding, both industries chose to cut costs and
improve production efficiency.
This “gamble” has seemingly paid off—
oil prices have been rising since the late 1990s, particularly since
September 11, 2001, and as a result, ethanol production in Brazil has
surged, again enjoying a competitive advantage
over increasingly
expensive gasoline.

There are several reasons why the ethanol and sugarcane industries in
Brazil have survived and recently made a comeback. First, Brazil did not
give up on ethanol and continuously required that all gasoline contain
some percentage of ethanol.
This requirement created, at a minimum, a
level of demand for ethanol that provided enough encouragement for the
industries to remain alive and improve their technology and production
Second, Brazil’s ability to efficiently produce ethanol is another central
reason for its success. Brazil produces sugarcane-based ethanol at about
half the cost of the corn-based ethanol produced by the United States.
Third, Brazil is well positioned to produce sugarcane-based ethanol due to
vast quantities of fertile land that receive ample rainfall.

33. Id.
34. BAKER STUDY, supra note 28, at 6. Only a decade earlier, the majority of the new cars
produced ran on ethanol only. See id.
35. The Centro de Tecnologia Canavieira in Sao Paulo continued working to increase the
efficiency of sugarcane-based ethanol. Luhnow & Samor, supra note 4, at A8. See also GELLER, supra
note 22, at 119; Brazil Energy Policy Review, infra note 41.
36. As long as oil is over $45 a barrel, sugarcane-based ethanol in Brazil is cheaper to produce
than gasoline. Regan, supra note 25.
37. Brown, supra note 14.
38. See Luhnow & Samor, supra note 4. Brazil currently requires that all gasoline contain at least
twenty-five percent of ethanol. FROM NICHE TO NATION, supra note 6, at 17.
39. Brazil Boosts Ethanol Output as Prices Soar, MSNBC.COM, Aug. 4, 2006, http://www. But see Paulo Sotero & Edward Alden,
Editorial, Building a Biofuels Alliance; How Brazil Can Be A Part of American ‘Energy
Independence,’ WASH. POST, Mar. 8, 2007, at A23 (noting that sugarcane-based ethanol costs onethird less than corn-base ethanol). Not only is sugarcane-based ethanol cheaper to produce than cornbased ethanol, but it also produces as much as eight times more energy per unit of input than cornbased ethanol. James Surowiecki, Deal Sweeteners, THE NEW YORKER, Nov. 27, 2006, at 92.
40. Luhnow & Samor, supra note 4, at A1. 2008] BRAZIL’S ENERGY INDEPENDENCE 337
Fourth, and perhaps most importantly, Brazil invested in making
ethanol production more efficient and has subsequently reaped the rewards
of that investment.
The efficient production of sugar-based ethanol can
not occur overnight but instead results from decades of hard work and
gradual improvements. “Over the past 20 years, [the government-funded
ethanol research lab] has developed some 140 varieties of sugar, which has
helped lower growing costs by more than one percent a year.”

Finally, of particular importance is the fact that following the 1973 oil
crisis, Brazil invested in an infrastructure that allows ethanol to fully
compete with gasoline. Over twenty-nine thousand filling stations across
the country are equipped with ethanol pumps,
which enables the market
to function and allows consumers to choose equally between ethanol and

Today, Brazil converts half of its sugarcane crop into ethanol
expects to significantly enlarge the amount of land devoted to sugarcane in
order to increase ethanol production.
Brazil anticipates that the increased
ethanol production will further expand the nation’s export of this
alternative fuel.
The increase in exports, however, will likely occur
outside the U.S. market, since the United States, in an effort to protect
American farmers, imposes a fifty-four cent per gallon tax on ethanol

A recent development in Brazil that has also greatly encouraged
ethanol use is the design and implementation of flex-fuel vehicles.
Brazil’s President touts that three-quarters of the new cars produced in
41. Ethanol production efficiency has tripled since 1975. AMERICAS SOCIETY/COUNCIL OF THE
42. Luhnow & Samor, supra note 4.
43. Id. at A1.
44. Since ethanol’s fuel efficiency is about seventy percent of gasoline’s, consumers calculate the
difference in cost based on the efficiency of the two fuels. Monte Reel, Brazil’s Road to Energy
Independence, WASH. POST, Aug. 20, 2006, at A1. See also Lynch, supra note 6, at 2B.
45. Brown, supra note 14.
46. Eduardo Pereira de Carvalho, Homework, SAO PAULO SUGARCANE AGROINDUSTRY UNION
(UNICA), Sept. 17, 2006, Brazil plans to
increase sugar-based ethanol production and has ample land on which to plant the sugarcane crops. Of
the ninety million hectares available to plant sugarcane in the cerrado region, only 4.5 million hectares
are currently farmed. Id.
47. Luhnow & Samor, supra note 4, at A1. Brazil expects ethanol exports to continue to rise as
countries become more concerned about meeting the environmental emission requirements of the
Kyoto Protocol. Id. Brazil further expects ethanol exports to double from $700 million in 2005 to $1.3
billion in 2010. Id.
48. Brazil Boosts Ethanol, supra note 39.
49. Fichera & Kueter, supra note 8, at 2–3. 338 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 7:331
Brazil are flex-fuel vehicles able to run on either ethanol or gasoline.
These vehicles have proven popular with consumers since their ability to
run on either fuel reassures them that the situation of the late 1980s and
early 1990s will not recur.

Brazil, like most other nations, will need to constantly reexamine and
adjust its energy policy.
While Brazil was expected to be energy
independent by the end of 2006,
energy consumption is expected to grow
dramatically in the coming years.
The difference between Brazil and
many, perhaps richer, nations, such as the United States, is that Brazil is
starting at a position of energy independence—free from a need to import
large quantities of petroleum.

B. United States
Although the United States has been aware of its energy supply
problem since World War II,
it has failed to develop viable alternative
energy sources to supplement domestic oil production and decrease
reliance on foreign oil.
While the government has given much lip service
to decreasing U.S. reliance on foreign oil and increasing domestic energy
there has been little success, such that renewable energy in
50. Lula da Silva, supra note 6. According to another source, seventy percent of Brazil’s new
vehicles are flex-fuel vehicles. Regan, supra note 25.
51. Consumers no longer worry about the future price of ethanol increasing, the availability of
ethanol, or their cars becoming valueless, since their flex-fuel vehicles are able to run on either ethanol
or gasoline. Regan, supra note 25. Reel, supra note 44; see also Lynch, supra note 6, at 2B.
52. Brazil was able to achieve its successes despite the fact that energy use between 1975 and
2000 increased nearly 250 percent. GELLER, supra note 22, at 166.
53. Luhnow & Samor, supra note 4, at A1.
54. BAKER STUDY, supra note 28, at 1. While demand is projected to increase 1.3 million bbl/d
(barrels per day), domestic production is only expected to increase between 400,000 and 1.3 million
bbl/d through 2015. Id.
55. See GELLER, supra note 22, at 169.
56. STAGLIANO, supra note 1, at 4.
57. The United States has been a net-importer of energy since the 1950s. NATIONAL ENERGY
POLICY DEVELOPMENT GROUP, NATIONAL ENERGY POLICY 1–11 (2001), available at http://www. See also infra text accompanying note 102.
58. Nixon, supra note 3. Presidents following Nixon have also focused on energy policy and oil
imports. For example, in a proclamation in 1980, President Jimmy Carter stated that oil “imports were
entering the country in such quantities and under such circumstances as to threaten to impair the
national security.” Proclamation No. 4744, 45 Fed. Reg. 22,864 (Apr. 3, 1980) (internal quotation
marks omitted), available at President
Carter further stated that “[t]he high level of the Nation’s consumption of gasoline is the single most
important cause of our dependence on foreign oil.” Id. The trend has continued to the present day as
President George W. Bush has mentioned energy policy in every State of the Union Address since he
was elected in 2000. See John Woolley & Gerhard Peters, The American Presidency Project, State of
the Union Addresses of the Presidents of the United States, 2008] BRAZIL’S ENERGY INDEPENDENCE 339
2005 compromised only seven percent of the U.S. energy supply.
Of the
renewable energy consumed in the United States,
only a small portion is
used in the transportation sector.
“Oil remains at the center of the
transportation sector and at the center of our national energy policy

Due to the transportation sector’s near-total reliance on petroleum, the
lack of success in U.S. energy policy is felt most acutely there.
other industries are more diversified
and are able to switch from one
energy source to another in reaction to rising or falling prices, the
transportation industry depends almost entirely on petroleum for its energy
The U.S. approach to energy policy has been sporadic and piecemeal;
what has been lacking is a single coherent and consistent vision supported
through times of calm and crisis.
While U.S. energy policy has
(last visited Nov. 9, 2007) (select desired term hyperlink for George W. Bush). See also BAMBERGER,
supra note 12, at 3–4; infra note 66 and accompanying text.
59. RENEWABLE ENERGY TRENDS 2005, supra note 15, at 6; Energy Hearings, supra note 5.
60. Hydropower, which accounts for forty-five percent of renewable energy, and wood, which
makes up thirty-five percent of the renewable energy used in the United States, make up the majority
of U.S. renewable energy. Energy Hearings, supra note 5, at 24. If one removes hydropower from the
equation, renewable energy supplies only three percent of the U.S. energy demand. MARK A.
61. RENEWABLE ENERGY TRENDS 2005, supra note 15, at 13.
62. Energy Hearings, supra note 5, at 8.
63. Approximately forty percent of the energy the United States consumes is from petroleum.
Petroleum has controlled approximately the same percentage of market share since 1950. CAROL
(2004). Approximately two-thirds of the petroleum that the United States consumes is used in the
(last visited Jan. 21, 2008). It is predicted that “[i]n light of the current and expected level of imports,
the United States is, and will increasingly be, subject to global market conditions, with the
transportation sector especially affected.” Energy Hearings, supra note 5.
64. The residential, industrial, and commercial sectors are diversified and rely on electricity,
natural gas, and coal as well as petroleum. These sectors have decreased their use of petroleum, or at
least not increased their petroleum use, since 1950. Conversely, the transportation industry is not
diversified and has greatly increased its petroleum dependence since 1950. ANNUAL ENERGY
OUTLOOK 2006, supra note 63.
65. The transportation industry relies almost completely on petroleum to meet its energy
demands. It has failed to diversify into other energy sources. It is thus unable to switch to another
energy source when petroleum prices rise. ANNUAL ENERGY REVIEW 2006, supra note 13, at 42.
66. After every energy crisis, the United States temporarily focuses on energy policy and the
steps needed to lessen its dependence on foreign oil. BAMBERGER, supra note 12, at 3–4.
67. The problem for the United States “[i]sn’t so much that energy policy has failed to be
responsive to crises; rather, during lengthy periods of stability and declining prices for conventional
fuels, it has proven difficult to sustain certain policy courses that might help shield the nation from the
occasional episodes of instability.” Id. 340 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 7:331
periodically received much discussion and attention,
the questions facing
the nation have changed very little since the first energy crisis in 1973. “In
30 years, will we again come full circle and ask ourselves these same
questions about our energy future?”

The United States, like Brazil, sought to change its energy policy
following the 1973 oil crisis.
President Nixon instituted “Project
Independence,” which predicted energy independence within a decade.
Although Presidents Nixon and Ford attempted to push through several
major energy proposals in response to the crisis, Congress was
consistently reluctant to enact any sweeping changes.

During a two-year period beginning in 1975, Congress finally enacted
the Energy Policy and Conservation Act (EPCA)
and Energy
Conservation and Production Act (ECPA).
These bills focused on
oil price deregulation, creation of a strategic petroleum
68. The amount of government investment in alternative energy sources follows the price of oil.
When oil prices increased, the government reacted and increased investment in alternative energy.
However, when oil prices returned to lower levels, government investment also decreased. BERNSTEIN
ET AL., supra note 60, at 1–2.
69. Energy Hearings, supra note 5, at 29.
70. Because President Nixon was aware of the nation’s energy problems prior to the 1973 oil
crisis, he repeatedly appealed to Congress to take action in the area of energy policy. STAGLIANO,
supra note 1, at 19–23. However, Congress refused take any action regarding energy policy prior to
the 1973 oil crisis. Id. Some argue that the 1973 oil crisis was in the works long before 1973 in the
United States due to rising consumer consumption and government price controls that kept consumer
prices below real prices. Donald Losman, Economic Security: A National Security Folly?, POL’Y
ANALYSIS (CATO Inst., Wash., D.C.), Aug. 1, 2001, at 3–4, available at
71. Nixon, supra note 3.
72. Congress, however, did provide President Nixon with emergency authority to restrict energy
consumption and ration energy supplies. STAGLIANO, supra note 1, at 25. The only energy legislation
passed and signed into law before Nixon resigned was the Federal Energy Administration Act of 1974,
which established the Federal Energy Administration. Id. at 26. Later in 1974, Congress passed the
Energy Reorganization Act, which created the Energy Resources Council and the Nuclear Regulatory
Commission. Id. at 27.
73. The Ford Administration sought sweeping energy policy changes, such as increasing
domestic oil production on federal lands and the U.S. Outer Continental Shelf, increasing tariffs on
imported oil, reducing energy consumption through efficiency standards in new buildings and tax
credits for homeowners, a strategic oil storage program, and aggressive research and development into
new and old energy sources. STAGLIANO, supra note 1, at 28–30. However, Congress refused to enact
most of President Ford’s proposals. Id. at 29–30.
74. Id. at 29–30.
75. The introduction of Corporate Average Fuel Economy (CAFE) standards sought to decrease
the use of gasoline by increasing vehicle fuel efficiency. GELLER, supra note 22, at 100. The CAFE
standards and a new tax on inefficient vehicles resulted in the fuel efficiency of light trucks and U.S.
cars increasing approximately fifty percent between 1975 and 1985. Id. Congress has not increased
CAFE standards since 1985, and the average fuel economy of new cars and light trucks has decreased
from twenty-six miles per gallon in 1987 to twenty-four miles per gallon in 2000. Id. 2008] BRAZIL’S ENERGY INDEPENDENCE 341
reserve, and reorganization of federal energy resources.

The government instituted price controls in an effort to forcibly
stabilize the oil market, but instead these price controls had extensive
negative consequences. Since domestic as well as foreign oil producers
were subject to the price controls, this remedy actually discouraged
domestic production and encouraged the importation of crude oil because
of its cheaper production costs abroad.
Although EPCA had provisions
to deregulate oil prices, the deregulation was perceived as too gradual. In
any event, the Iranian Revolution of 1979 resulted in another oil crisis.

Despite passage of the National Energy Act (NEA)
and President
Carter’s firm belief that the government had taken the necessary actions
relating to energy policy,
the 1979 resulting energy crisis caught the
United States off-guard once again.
With President Reagan’s election in 1980, the United States switched
course in its energy strategy.
Bringing to office a new theory for energy
policy, Reagan advocated for and oversaw substantial deregulation of the
energy sector. He believed that without government interference, the
market itself would both increase domestic oil production and develop
76. STAGLIANO, supra note 1, at 29–30. Both the Ford and Carter Administrations believed that
federal government intervention in and control over the energy market was necessary thus both sought
to expand government resources dealing with energy policy. Id. at 28–31.
77. BAMBERGER, supra note 12, at 2.
78. Id.
79. The National Energy Act of 1978 (NEA) was a compromise with Congress in which
President Carter backed away from some of his more sweeping proposals in the National Energy Plan.
STAGLIANO, supra note 1, at 35–38. Nonetheless, the NEA was a massive undertaking and provided
new conservation measures and tax incentives for homes, prohibited the use of oil in new electric
generation and industrial plants, and regulated natural gas. See id.; MILTON COPULOS, THE HERITAGE
FOUNDATION, A REVIEW OF THE CARTER ENERGY PROGRAM (1978), available at http://www.
80. STAGLIANO, supra note 1, at 37–38. The Carter Administration introduced the National
Energy Plan II in 1979, which included the decontrol of oil prices, increasing the number of new oil
wells, deregulation of and increased use of natural gas, increased use of coal, and tax credits and
incentives for research and development into renewable energy to displace oil. Id. at 40–43. But,
Congress again shied away from such sweeping changes. Id.
81. STAGLIANO, supra note 1, at 39. The American public again dealt with fuel shortages. Oil
prices again increased dramatically, this time by eighty-two percent over the course of a few months.
82. “The Reagan administration saw energy from an economic perspective and rejected the view
that energy required special policy attention.” DON E. KASH & ROBERT W. RYCROFT, U.S. ENERGY
POLICY: CRISIS AND COMPLACENCY 260 (1984). Reagan believed that oil and other energy sources
should be dealt with in the same manner as other commodities. Id. As part of Reagan’s campaign for
the presidency, he pledged to get rid of the Department of Energy. Allan Pulsipher, Watershed,
Aberration, and Hallucination: The Last Twenty Years, in THE ENERGY CRISIS 73, 73 (David Lewis
alternative sources of energy.
Oil prices remained low during most of
Reagan’s term, and his policies seemed to achieve success in keeping
prices stable and avoiding crises.
Reagan’s market-based energy policy also proved to be resilient with
subsequent administrations.
It was not until Iraq’s invasion of Kuwait in
1990 that energy policy reemerged as a concern in the United States.

Despite the first Iraq War, both President George H.W. Bush and
President Clinton oversaw times of relatively low oil prices and stability in
the oil market.
Except for the period immediately following Operation
Desert Storm,
energy policy was not a priority.
Indeed, after passage of
the Energy Policy Act of 1992, the next major energy bill was not signed
into law until 2005.
Like his predecessors, President George W. Bush sought to make his
mark on energy policy and decrease U.S. dependence upon foreign oil.
This President’s overall goal was familiar: lessening American
dependence on foreign oil by increasing energy efficiency in homes and
on the road, promoting alternative and renewable energy sources, and
83. KASH & RYCROFT, supra note 82, at 260; BAMBERGER, supra note 12, at 2.
84. Despite the benefits of low oil prices, Reagan’s policies also served to “discourage energy
efficiency and the use of alternative fuels.” Energy Hearings, supra note 5, at 11. While energy
efficiency increased between 1973 and 1986, the low oil prices between 1986 and 1996 produced less
incentive to increase energy efficiency and energy use rose twenty-two percent. GELLER, supra note
22, at 134.
85. BAMBERGER, supra note 12, at 6.
86. Instead, the focus was on oil companies and making sure they survived the low oil prices and
continued to produce and explore for new oil. Between 1968 and 2000, the U.S. government provided
$140 billion dollars in tax incentives to oil companies. GELLER, supra note 22, at 38.
87. Ben Lieberman, Correcting Mistakes of the 1990s Should Top the Energy Agenda for 2006,
BACKGROUNDER (The Heritage Found., Wash., D.C.), Mar. 20, 2006, at 1.
88. Although President Clinton recognized the danger of increasing imports of oil from foreign
sources, his administration did not address the problem and instead oversaw an increase in reliance on
foreign imports, which rose from fifty-one percent in 1994 to fifty-six percent in 2000. J.C. WATTS,
Found., WASH., D.C. 2000),
89. U.S. oil consumption continued to rise throughout the 1990s. Energy Information
Administration, International Petroleum (Oil) Consumption,
international/oilconsumption.html (last visited Dec. 24, 2007) (select appropriate format for “All
Countries, Years 1980–2005 for the International Energy Annual 2005”). During the same time
period, U.S. oil production steadily decreased. Energy Information Administration, International
Petroleum Monthly (IPM), (last visited Dec. 24, 2007)
(follow “4.1c” hyperlink).
90. Woolley & Peters, supra note 58 and accompanying text. Early in his administration,
President Bush announced his energy policy, which included the goals of fuel conservation, lessening
regulation, opening the Artic National Wildlife Refuge for exploration, and providing tax incentives
for efficient vehicles and home conservation measures. John King, Bush Energy Plan Looks to Future,
increasing domestic energy sources.
Congress and the President debated
the energy bill for approximately four years, finally agreeing on EPAct
EPAct 2005 addressed many energy policy issues and provided a
substantial increase in funding and incentive programs for alternative
By granting tax credits to small producers of ethanol and biodiesel
and to fueling stations for installation of equipment to accommodate these
alternative fuels, the Act provided an additional incentive for the market to
develop and produce ethanol and biodiesel.
EPAct 2005 also provided
incentives to consumers for the purchase of hybrid vehicles in an effort to
decrease oil consumption in the transportation sector.
While government investment in alternative fuels and energy efficiency
has increased since 1973, the relatively low cost of fossil fuels prior to
2001 has made alternative fuels economically unappealing.
In 2006,
ethanol made up approximately one percent of the total fuel consumed in
the U.S. transportation sector and even then only as a gasoline additive.
Nonetheless, ethanol production has increased 126 percent since 2001, due
to both the anticipation of new government subsidies and increased oil
Moreover, ethanol production is expected to total more than eight
million gallons by the end of 2007.
91. Press Release, The White House, Fact Sheet: President Bush Signs into Law a National
Energy Plan (Aug. 8, 2005), available at
92. EPAct 2005 introduced the Renewable Fuels Standard (RFS), which required that 7.5 billion
gallons of renewable fuel be blended into the nation’s fuel by 2012 and provided tax credits for
motorists purchasing energy-efficient vehicles. SAMUEL W. BODMAN, DEP’T OF ENERGY, ON THE
REPORT 11 (2006), available at
YOU, (last visited Nov. 21, 2006).
94. Id. EPAct 2005 switches the tax benefit for buying a hybrid vehicle from a deduction (under
the 1992 Energy Act) to a credit, which should result in greater savings for consumers. However, the
credit is complicated in that the amount of credit consumers may receive decreases after a certain
number (60,000) of vehicles are sold by the manufacturer. Tim Gray, You’ll Need a Scorecard for
Energy Tax Breaks, N.Y. TIMES, Feb. 12, 2006, at 26.
95. BAMBERGER, supra note 12, at 3.
96. Thirty percent of fuel sold in the United States has some amount of ethanol blended into it.
FROM NICHE TO NATION, supra note 6, at 2.
97. The rise was even more significant between 1980 and 2005, when ethanol production
increased from 175 million gallons to 4,000 million gallons. Id. at 3. In comparison, Brazil produced
4,200 millions of gallons of ethanol in 2005. DEP’T OF AGRIC., THE ECONOMIC FEASIBILITY OF
Prior to the passage of EPAct 2005, the United States’ primary focus
was on identifying ways to increase domestic oil supplies and, at the same
time, controlling and securing foreign oil sources.
Although similarly
focused, prior U.S. efforts to increase domestic oil supplies failed, such
that domestic oil production is significantly lower today than in 1973.
As domestic production fell,
imports doubled.
The outlook to lessen
U.S. energy dependence is not positive. Domestic production of oil is
expected neither to increase nor to meet future petroleum needs.
In fact,
the amount of petroleum that the United States imports is expected to
increase, reaching sixty percent of demand by 2025.

No one would deny that the United States has a long way to go and that
the changes made recently are but a few of those needed. Despite much
talk of decreasing dependence upon foreign oil, the United States is even
more dependent upon foreign sources of oil today (especially member
nations of the Organization of Petroleum Exporting Countries (OPEC))
than it was in 1973.
The question is whether the United States can
reverse these trends and work toward energy independence or if it will
continue in this self-destructive behavior and remain dependent upon
imported oil.
99. See GELLER, supra note 22, at 135–36; see supra text accompanying note 85. The focus of
Presidents since Nixon has been on oil production and finding ways in which to increase production.
M.A. Adelman, The Real Oil Problem, REGULATION, Spring 2004, at 16, 17, available at http://www.
100. In 1973, U.S. domestic oil production was 9,208 barrels per day. In 2005, U.S. domestic oil
production reached only 5,178 barrels per day. ANNUAL ENERGY REVIEW 2006, supra note 13, at 125.
101. Beginning in the 1970s, demand greatly outpaced domestic supply. Further, domestic oil
production has fallen by approximately forty percent since 1970. Energy Hearings, supra note 5, at 9.
102. ANNUAL ENERGY REVIEW 2006, supra note 13, at 129 and accompanying text; see infra text
accompanying note 103.
103. “U.S. oil production began to decline in 1970 and has dropped by about 40 percent since
then. Since 1970, imports of crude oil and other products have increased 255 percent, and imports now
comprise nearly 56 percent of the U.S. oil supply.” Energy Hearings, supra note 5, at 9. The future
outlook is even more grim: “Total domestic petroleum supply . . . increasing from 8.6 million barrels
per day in 2004 to a peak of 10.5 million barrels per day in 2021, then declining to 10.4 million barrels
per day in 2025 and remaining at about that level through 2030.” EIA Releases 2006 Outlook;
Implications for the Natural Gas Industry, CANADIAN NAT. GAS MKT. REP., Feb. 17, 2006, at 11,
available at Likewise, “[i]n 2025, net petroleum imports,
including both crude oil and refined products, are expected to account for 60 percent of demand.”
ANNUAL ENERGY OUTLOOK 2006, supra note 6, at 8.
104. ANNUAL ENERGY OUTLOOK 2006, supra note 6, at 8.
105. See supra notes 101–03 and accompanying text. Oil imports from OPEC countries have
reached forty-two percent of the U.S. total oil imports, making the United States increasingly subject
to the political instability of the Middle East. Energy Hearings, supra note 5, at 9. 2008] BRAZIL’S ENERGY INDEPENDENCE 345
Although Brazil and the United States started in much the same
position, that is, both were dependent on foreign oil and both desired
energy independence, only Brazil achieved that goal in the intervening
thirty years. The United States, on the other hand, has significantly
regressed from its initial position and is even more dependant on foreign
oil today. What lessons should the United States learn from Brazil’s
experience, and what steps should the United States take to lessen its
dependence upon foreign oil?
While the United States had the same goal of energy independence as
Brazil following the 1973 oil crisis,
the United States has been
unsuccessful in its efforts and thus remains largely dependant upon foreign
Likewise, the United States has made little progress in domestic oil
production or in the development of alternative, renewable energy

Brazil, on the other hand, has made large strides in its journey to
decrease reliance on oil imports (especially in the transportation sector)
through increases in the alternative energy source of sugarcane-based
ethanol and domestic oil supply.
By comparing the characteristics and decisions of both countries, this
Note argues that while the United States could have taken additional and
alternative steps in its energy policy, it could not have duplicated Brazil in
actually achieving energy independence. Nevertheless, the United States
can still learn from Brazil’s experience and develop a long-term plan to
solve its energy dependence problem.
A. The Benefits of a Dictatorship
Simply put, in a dictatorship the dictator makes decisions and those
decisions are then implemented. In a constitutional republic, the decisionmaking process, by design, is slow and cumbersome. In the United States,
the President, agencies, and Congress all debated about the changes
needed and the proper direction for energy policy following the 1973 oil
By contrast, Brazil was already implementing its vision.
106. Nixon, supra note 3.
107. See MONTHLY ENERGY REVIEW, supra note 13, at 15; see also ANNUAL ENERGY OUTLOOK
2006, supra note 6.
108. See supra notes 58–59 and accompanying text.
109. Fichera & Kueter, supra note 8, at 1.
Brazil’s dictatorship of the 1970s allowed it to pursue a clear vision
and goal with respect to its energy policy.
Instead of similarly adhering
to a single policy, the United States changed its focus with nearly every
change in the Executive or Congress.
Periods of crisis produced
reactions from politicians due to outcries from the public. Periods of calm
saw the focus shift to other issues while energy policy became

As a dictatorship, Brazil was able to build an infrastructure to make
ethanol available as an alternative energy source, require fuel pumps at
filling stations to accommodate alternative fuels, and mandate that ethanol
be mixed with gasoline, all within a short period of time and without
alternative, dissenting voices slowing down the process.
The United
States, on the other hand, has been unable to institute a coherent plan,
has not yet built a comparable infrastructure,
and has only recently
required that ethanol be mixed into gasoline.

Although EPAct2005 remains a positive step and provides some
incentive to increase the amount of alternative energies produced and
the United States has failed to provide for any direct
investment in an infrastructure for the disbursement of alternative
energies. Perhaps the easiest and most practical solution would be to grant
incentives to already established fueling stations for the construction of
E85 pumps. While it is unlikely that the government would mandate that
all fueling stations have alternative energy pumps as Brazil did, it is
possible for the United States to provide incentives to build such pumps.
Doing so would not only make E85 available on a larger scale, but it
111. See Luhnow & Samor, supra note 4; GELLER, supra note 22, at 117–22.
112. BAMBERGER, supra note 12, at 4.
113. Id. at 3–4.
114. See GELLER, supra note 22, at 117–18.
115. Although the Nixon, Ford, and Carter administrations submitted comprehensive plans to
address the energy crises, Congress refused to enact such plans in whole and instead enacted
piecemeal legislative solutions. See supra notes 70–85 and accompanying text.
116. At the end of 2004, there were only 205 E85 (an alcohol fuel mixture made up of 85%
ethanol fuel) fueling stations in the United States, most of them concentrated in the Midwest. BRENT
ENERGY, ENVIRONMENT, AND DEVELOPMENT ISSUES 15 (2005). Although the number of stations has
dramatically improved and as of mid-2006, there were 600 fuel stations equipped to sell E85, the
number pales in contrast to the over 29,000 ethanol pumps spread throughout Brazil. Lynch, supra
note 6, at 2B. Another infrastructure hurdle in the United States is the fact that ethanol cannot be
mixed with gasoline in the pipelines, so it must be shipped, usually via train, from the Midwest.
BERNSTEIN ET AL., supra note 60, at 10.
117. With the passage of EPAct 2005, the United States finally set alternative fuel standards and
required that ethanol be mixed into gasoline. BODMAN, supra note 92, at 10.
118. Id. at 10–11. 2008] BRAZIL’S ENERGY INDEPENDENCE 347
would also provide an additional incentive to alternative energy producers,
since they would be guaranteed a place to sell their fuel. Further, car
manufacturers would be more likely to produce vehicles capable of
running on alternative energy and consumers would be more likely to
purchase such vehicles.
B. Natural Resources and Advantages
When Brazil decided to support and develop sugarcane-based ethanol
as an alternative to oil, it had the natural resources to make that happen.
Brazil is blessed with ample rainfall, large quantities of unused fertile
land, and cheap labor,
which makes it an ideal location to produce large
amounts of sugarcane.

The United States, on the other hand, is unable to produce large
amounts of sugarcane, due largely to differences in climate, limited
amounts of available farm land, and comparatively high labor costs.
Instead, the United States has focused on the more expensive corn-based
In 2006, twenty percent of the nation’s corn harvest was
utilized in ethanol production,
which supplied a mere two to three
percent of the nation’s non-diesel automotive fuel.
Even if the entire
U.S. grain harvest was converted into ethanol, it would only satisfy sixteen
percent of U.S. transportation fuel needs.

Simply put, the differing natural resources in the United States and
Brazil make it impossible for the United States to use either sugar or cornbased ethanol as a means of becoming fully independent given current
technologies. However, in 1973 Brazil did not possess the technology to
produce ethanol as efficiently as it does today.
Instead, over the past
119. Luhnow & Samor, supra note 4, at A1.
120. Even today, Brazil has not reached its capacity to produce sugarcane. Only 4.5 million
hectares of the 90 million hectares available in the cerrado region are used for growing sugarcane.
Carvalho, supra note 46. Sugarcane production can and is expected to expand greatly to meet ethanol
demands. Id.
121. See generally SUGAR FEASIBILITY REPORT, supra note 97.
122. Luhnow & Samor, supra note 4, at A1.
123. Agriculture and Rural America’s Role in Enhancing National Energy Security: Hearing
Before the S. Comm. on Agriculture, Nutrition and Forestry, 110th Cong. 2 (2007) (statement of Keith
Collins, Chief Economist, Dep’t of Agric.), available at
124. Worldwatch Institute, Biofuels for Transportation: Selected Trends and Facts, http://www. (last visited Dec. 24, 2007).
125. Brown, supra note 14.
126. See Luhnow & Samor, supra notes 4, 42 and accompanying text. 348 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 7:331
three decades Brazil invested in and researched the production of sugarbased ethanol so that today it is capable of efficiently producing ethanol.

While more investment in corn-based ethanol will likely yield
increased efficiency in the production of corn and ethanol, it is unlikely
that corn alone will solve the U.S. energy dependence problem.
the United States needs to focus on both corn-based ethanol and other
abundant natural resources.

C. Sugarcane versus Corn-Based Ethanol
It is largely accepted that cost has been the main barrier to the
development of renewable energy in the United States.
This cost barrier
is particularly apparent in U.S. ethanol production. Corn-based ethanol in
the United States is significantly more expensive to produce than both
and Brazilian sugarcane-based ethanol.
The low cost of
sugarcane-based ethanol allows Brazil to produce and market ethanol in
competition with gasoline without the large subsidies required to make
corn-based ethanol competitive in the United States.

Further, corn-based ethanol is not the end-all solution that will
transform the United States into an energy independent nation. The use of
traditional food sources for the production of fuel poses serious
consequences to the world’s poor.
In addition, as noted above, there are
127. See supra notes 41, 42 and accompanying text. As long as the price of oil is more than $45 a
barrel, sugarcane-based ethanol in Brazil is cheaper to produce than gasoline. Regan, supra notes 25,
36 and accompanying text.
128. See supra notes 121–25 and accompanying text.
129. One of the more promising alternative fuels is biodiesel, which can be made from either
vegetable oils or animal fats. Not only is biodiesel made from an abundant natural resource, but it is
also the only alternative fuel to meet the Clean Air Act standards because of very low emission levels.
See generally National Biodiesel Board, Biodiesel: Commonly Asked Questions, http://www. (last visited Nov. 10, 2007).
130. BERNSTEIN ET AL., supra note 60, at 1.
131. Some argue that ethanol is not only more expensive to produce than gasoline, but that it is
also more harmful to the environment. Jerry Taylor & Peter Van Doren, Editorial, Expensive, Wasteful
Ethanol Can’t Solve Our Problems, CHI. SUN-TIMES, Jan. 27, 2007, at 15, available at http://www.
132. Corn-based ethanol is about one-third more expensive to produce than sugarcane-based
ethanol. Regan, supra note 25.
133. Ethanol producers receive a wide range of government subsidies ranging from a fifty-one
cent rebate on the federal fuel tax (or a fifty-four cent credit on their federal income tax), ten cent
credit for small producers, and various state subsidies. Steven Pearlstein, Going Crazy for Ethanol,
WASH. POST, May 24, 2006, at D1, D3.
134. Brown, supra note 14. 2008] BRAZIL’S ENERGY INDEPENDENCE 349
limits on how much ethanol could be produced even if an entire corn
harvest was used to produce ethanol.
Brazil, however, has enough resources to greatly increase sugarcane
production for use as ethanol.
Brazil is therefore able to cheaply
produce ethanol
without having to devote an entire crop of sugar to
ethanol production or risk potential disruption of the food supply.

D. Dual Strategy
It is important to remember that Brazil did not become energy
independent solely through ethanol.
Rather, ethanol accounts for only
twenty percent of Brazil’s transportation fuel supply.
The remainder of
Brazil’s transportation needs were provided through a large increase in
domestic oil production.
The U.S. focus since 1973 has been on oil. Specifically, that focus has
been on increasing domestic oil production, securing foreign oil sources,
and keeping oil prices low.
Any U.S. focus on alternative energy was
minimal, except during sporadic periods of high oil prices.
Despite this
focus on oil, U.S. domestic oil production has fallen over the past thirty
The United States is simply not blessed with large domestic oil
On the other hand, Brazil has focused on two avenues since 1973. It
focused on both increasing the domestic oil supply and decreasing the
amount of oil demanded by supplementing oil with ethanol for use in the
transportation sector.
Again, due to the natural resources at its disposal,
135. See Luhnow & Samor, supra note 4; Brown, supra note 14.
136. Carvalho, supra note 46 and accompanying text.
137. Regan, supra note 25.
138. Due to the vast amount of land resources available for production of sugarcane, Brazil is able
to expand production to meet an increased demand for ethanol, rather than being forced to use the
supply already being produced. Carvalho, supra note 46 and accompanying text.
139. See API-BRAZIL REPORT, supra note 17. See also Fichera & Kueter, supra note 8; BATISTA,
supra note 4, at 34; supra note 19 and accompanying text.
140. Luhnow & Samor, supra note 4, at A1.
141. Supra note 19 and accompanying text.
142. See GELLER, supra note 22, at 135–39.
143. BERNSTEIN ET AL., supra note 60, at 1–2.
144. See supra text accompanying note 13.
145. Energy Hearings, supra note 5, at 9. Of the known 1,317.447 billion barrels of world oil
reserves, the United States has only 21.757 billion barrels of domestic oil reserves. Energy Information
Administration, World Proved Reserves of Oil and Natural Gas, Most Recent Estimates (2007),
146. See FROM NICHE TO NATION, supra note 6. See also GELLER, supra note 22, at 121. 350 WASHINGTON UNIVERSITY GLOBAL STUDIES LAW REVIEW [VOL. 7:331
Brazil was able to succeed in greatly increasing domestic oil production
and increasing the use of alternative energy through ethanol production.
The United States can and should learn from Brazil’s strategy of
focusing on multiple avenues to decrease dependence upon foreign oil
sources. Domestic oil production has not and will not solve the U.S.
energy supply problem, but neither will ethanol alone. Instead, the United
States should focus on several potential avenues in addition to alternative
energies, including but not limited to ethanol.
An important part of the U.S. strategy, in addition to finding alternative
energy sources, should be to follow Brazil’s emphasis on automobiles and
their fuel use.
As the United States learned from its first experience
mandating CAFE (Corporate Average Fuel Economy) standards,
automobile manufacturers can increase the efficiency of vehicles when
required to do so.
Although EPAct 2005 started down the right path by
providing incentives to businesses and consumers to purchase fuelefficient vehicles,
the United States should further increase CAFE
standards and require automobile manufacturers to produce more fuelefficient vehicles.
Brazil succeeded in becoming energy independent because it focused
on becoming so, and because its natural resources and political situation
enabled it to expand domestic oil production and supplement oil use in the
transportation industry with ethanol. The fact that Brazil was ruled by a
military dictatorship during the 1973 and 1979 oil crises enabled it to
quickly and aggressively invest in domestic oil production through
Petrobras and likewise invest in, mandate the use of, and build a
distribution infrastructure for sugarcane-based ethanol. Brazil’s natural
resources and cheap labor were ideal for the production of sugarcanebased ethanol, and its continued support of and investment in ethanol
greatly increased efficiency, thus making ethanol more competitive with
gasoline without the need for large government subsidies.
The United States’ main focus in its energy policy was on controlling
the price and supply of oil. Although the government provided some
support for and investment in alternative energies, these efforts were
limited and without great impact. The political indecisiveness and low cost
147. See Luhnow & Samor, supra note 4; GELLER, supra note 22, at 117.
148. See GELLER, supra note 22, at 100–01, 139–40; supra note 75 and accompanying text.
149. BODMAN, supra note 92, at 11. 2008] BRAZIL’S ENERGY INDEPENDENCE 351
of oil during much of the last thirty years resulted in a piecemeal policy
lacking a consistent vision to decrease dependence upon oil.
Although the United States cannot use Brazil as a model upon which to
base its energy policy, there are lessons to be learned from Brazil’s
experience and from the United States’ past mistakes. First, and most
importantly, the United States needs to focus on one consistent plan to
reduce its dependence upon foreign oil. Second, the United States should
not focus on oil, but should instead focus on alternatives to oil. Third, just
as ethanol did not alone make Brazil energy independent, ethanol is not
the entire solution for the problematic U.S. dependence on foreign sources
of oil. Finally, the United States must reduce oil consumption, especially
in the transportation sector.
The United States is not without hope, but neither is it in an enviable
position. It is necessary that the administration and Congress implement a
clear vision and plan to decrease U.S. reliance upon foreign oil, and in
doing so the United States should examine Brazil’s success and take from
Brazil the applicable lessons.
Nancy I. Potter

∗ J.D. Candidate (2008), Washington University School of Law in St. Louis. Thank you to my
friends and family for their love and support.

Red Stripe Photography

Spent the day at the beach yesterday at Hanauma Bay.



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It was bad news to hear about the Kazama D1 car getting stolen just prior to this event, but good to see that the team doesn’t give up so easily.  Regardless of the bad luck, they still brought out their D1SL spec 2JZ swapped IS250 to Nikko to continue competition in the SL series.




When tuned to it’s full potential, the 2JZ is capable of easily making over 600ps; compliments of the Trust TD07S-25G turbo.




More than enough power to slide through the course, yet still street legal to drive home.  The Kazama Auto wide-body ensures that it looks good on it’s way as well.




Mr. Nishio Kinya chatting about the recent events with my friend.  As you can imagine, he was quite upset about his car being stolen just the day before.  It came as a shock to most everyone, as things…

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I’m sorry to disappoint those of you who thought this post might be written about Formula One driver Kimi Raikkonen. Instead, this weeks title was inspired by the frigid temperatures encountered by those of us present at Cars&Coffee/Irvine, the morning of January 12, 2013. Since I began attending this event back in 2008, the morning of the 12th was by far the coldest one I’ve ever experienced. But even with the record-breaking cold temperatures being experienced throughout Southern California, the Cars&Coffee faithful still showed up in droves, albeit decked out in heavy jackets, scarves, hats, gloves and uggs.

Grand Prix white1986 Porsche Carrera, red Speedster_Sunrise at Cars&Coffee/Irvine_3/4 front view_January 12, 2013

Unfortunately the one piece of gear that I had forgotten to pack the night before were my gloves, and by 7 AM, my right hand (camera holder) was suffering from exposure. My friend Gene, who came fully prepared wearing cold weather gear, magically produced from the back of his car, an extra…

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Sharknose and Speed Stars.


Infamous Sakura Racing’s Z10 Soarer.

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Get Some Sleep! Five Ways to Drift Off


Employers lose an estimated $63 billion on “presenteeism” when workers who haven’t gotten enough sleep show up to work and perform poorly. For most of my life, I stayed up extremely late and once I went to bed, I struggled with a racing mind. When I started at Science House, I decided to measure my sleep stats and slept with a band on my head so Zeo could keep track. The results were shocking. Was it possible that I really only got 17 minutes of deep sleep a night (even though I apparently still had an hour and a half of REM?) I decided to tackle the problem, and two years later, it’s solved. Sleeping well has changed my entire life, especially my ability to focus. Here’s what works for me:

1) Exercise a lot. Physical exhaustion helps keep my brain and body in sync. When I start the day with a 5k, my energy level is high, I feel euphoric, I’m able to concentrate all day and I drift off to sleep at night.

2) Keep track of to-do’s. Prioritizing my list into long and short term goals is extremely helpful. I have a whole system for managing my list, and it takes a huge amount of stress away because I don’t have things popping into my head while I’m trying to fall asleep.

3) Worry less. Instead of worrying about things at night, I remind myself that with more sleep I’ll be able to work toward a solution or see things more clearly the next day.

4) Don’t watch movies or TVIf I watch any media before I go to bed, it peps me up and gives me weird dreams. Horror dreams are a guaranteed nightmare, if I can fall asleep at all, but even the slightest hint of action has a way of hijacking my brain.

5) Think big thoughts. This one might seem counterintuitive, but since you can’t just turn your brain off, give it something worth pondering that doesn’t focus on your daily concerns. The best thing to study at night, when you still have some energy at the end of the day, is science. Reading about exoplanets makes it easier to drift off later, and studying particle physics puts things in perspective.


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