Effects of ethanol production from sugar‐cane with a free sugar market

A free market for sugar is simulated. Results indicate that area under sugar‐cane would decrease by 49 per cent and labour employment by 26 per cent relative to the actual situation. Sugar‐cane would only be produced in areas with a comparative advantage. No sugar would be exported. Ethanol production from sugar‐cane would only occur with government price supports which would lead to an increase in the price of edible sugar. Development costs per additional worker employed of a one billion litre ethanol industry would amount to about R35 300 compared with over one million rand for a new petroleum from coal plant (Sasol).