Serra said he supported a new Pro-Alcohol Program but without subsidies for producers or mills, this time.

Brazil began its Pro-Alcohol Program in response to turmoil on the world oil market in the 1970s when oil topped $50 a barrel and Brazil imported about 75 percent of its petroleum.

The clean-burning fuel distilled from Brazil's vast sugar cane crop was used to power a specially modified fleet of vehicles that ran solely on hydrous ethanol. The "alco-cars" used to account for 90 percent of the cars sold in their day.

The program also began the use of anhydrous ethanol, hydrous' chemical counterpart, to make up about a quarter of all the gasoline mix sold at the nation's pumps. This continues even today and greatly reduces pollution in large cities.

But alco-cars lost their luster after a 1989 shortage of the fuel and now account for less than 1 percent of sales. Owners also complain the cars lacked pick-up power and performed badly in colder weather.

But Brazil's Vehicle Manufacturer's Association (Anfavea) said technological progress in fuel injectors and "flex fuel" systems, which automatically adjust to any mixture of gasoline and ethanol, has made the rebirth the alco-car possible.

And cane producers have joined the chorus as they are presently harvesting a bumper crop which has already sent world sugar prices tumbling.

"Why buy a car that runs on just alcohol or just gasoline. It is imperative, if we are to revive our alcohol industry, to give consumers a choice at the pump," said the Agriculture Secretary of Sao Paulo state, Joao Carlos Meirelles.

"This option the flex-fuel cars gives consumers to chose whichever fuel is cheaper will create a healthy competition between gasoline and alcohol."

Brazil, which accounts for a third of global cane output, is the world's leading producer and exporter of sugar with most of the country's output coming from Sao Paulo state's crop.

Sao Paulo's Cane Industry Union (UNICA) said producers have agreed to finance the creation of a strategic stock of 1 billion liters of alcohol to guarantee supply.

"Brazil's capacity to produce alcohol is immense. We are using about only 10 percent of the arable land that could right now grow cane," said UNICA president, Eduardo Pereira de Carvalho. "But the best way to guarantee supply is the strong interest in the revival of a new alco-car."

Brazil, the world's biggest producer and consumer of ethanol, is serving as a model for emerging and developed nations that want to reduce their dependence on fossil-fuels and reduce the impact of auto emissions on the environment, including India, China, Australia and countries in Europe.