Reality Check: Ethanol Fuel
Remember a couple years ago when everyone was all excited about the prospects of ethanol production as the newest and greatest biofuel? Well I hope everyone has wised up to the reality that ethanol fuel is probably one of the worst things we could do from both an environmental and an economic standpoint.
First, lets give you some background about ethanol. The most common version is made from corn, one of the most important grains produced in the United States. To understand how it is made, you can visit this website that explains its production and includessome graphics. Now, having to process corn to create ethanol isn’t the problem because, as you well know, we have to refine crude oil to create gasoline and such. The problem comes when you look to see just how much energy it takes to create ethanol.
According to some studies, it can takes roughly 1.29 gallons of fossil fuel to produce just 1.0 gallon of corn-based ethanol fuel. Now, when one of the main reasons to use biofuels is to decrease CO2 emissions, this figure just makes the whole process seems outrageous. Those people who think they are saving the environment by buying “Flex-Fuel” are potentially harming it more than those with regular fossil fuel cars. Ironic, isn’t it?
The sad thing is that this same study found that corn was the most efficient biofuel. For example, switch grass was found to need 1.45 gallons of fossil fuel to produce 1.0 gallon of biofuel (one study has it as better than corn) and wood biomass needed 1.57!
Nevertheless, one must also take into account another environmental impact caused by promoting biofuel production. According to basic economics, the more of some product that is demanded, the higher price that product fetches in the marketplace. With higher potential to make money, more suppliers will then enter into the market in order to supply that product.
Now, what does that mean in our case? Well what we are seeing now is that since corn prices have risen, more people are starting to produce corn. Just last year we had the largest corn harvest here in the United States. Of course some of that was due to good crop conditions but a lot had to do with an overall increase in corn production.
Now, what this means from an environmental standpoint is that farmers are going to have more incentive to plow under land to produce corn. This might be tracks of forest on their properties or just land that, at previous corn prices, wasn’t economically feasible to plow under. For you environmentalist out there, let me break down what this means for you: Less forested land and natural habitats = less biodiversity and less CO2 sequestration = very bad.
For folks like me who tend to care more about the economic side of the issue, corn ethanol still looks like a total waste of money.
One of the major things to keep in mind is that this whole corn ethanol business is very heavily subsidized. For example, in 2006, the ethanol business got $7.0 billion to produce just 4.9 billion gallons of ethanol. That comes out to being about $1.45 per gallon of ethanol. In my opinion, that is a completely outrageous amount of money for such an impractical solution to our energy needs.
More importantly, because of these subsidy, corn prices are kept at an artificially high level. A high price of any other commodity might not be too bad but since it is corn, the results can be an increase in almost all food prices. The reason for this is that the price of corn basically controls the price of every single staple we eat in America. Don’t believe me? Well let me break it down for you.
Cereal? Made from corn.
Beef? Chicken? Pork? Fed corn.
Milk? Produced by cows that have been fed corn.
Cheese? Yogurt? Made from milk that was produced by cows that have been fed corn.
Those little fruit cups you put in your kid’s lunches? I guarantee that they are made with high fructose CORN syrup.
Funny how our lives can be so dependent on the price of just one product.
Here are some statistics you can throw around:
- Global food prices have risen 83% in the past three years and ethanol productions are predicted to increase prices by another 10 – 15%.
- Last year, 27% of the corn crop went to ethanol production.
- Ethanol production was up 37% in the first quarter and could reach a record 7.7 billion gallons by the end of this year.
So why am I writing all about this? Well it is just to help you understand one of the reasons why ethanol is a bad choice that is contributing to the raising food prices worldwide. So whenever you hear a politician talk about ethanol, remember to be wary if they seem to fawning over its production. Not only is corn ethanol production wasting your tax dollars through government subsidies, it isn’t helping the environment at all.
I believe corn is not the only source of ethanol. sugar cane is better. America should find ways to stop sending hard earned money to the middle east. Alot of it ends up in her enemies hands. American farmers should benefit. I am sure fossil fueled farm machinery will be replaced by biofueled ones e.g. bio-diesel etc.
Most economists have already discounted ethanol as a significant contributor to rising corn or other commodity prices. But you’re right about supply and demand. That is what’s driving it…demand from the developing world for corn and other food staples. Wheat and rice have also doubled in price. What does that have to do with the price of corn in America? Nothing. It’s like saying that American SUVs are to blame for $138 oil. It’s China and India who are bidding up the price b/c they have a billion people coming out of poverty and joining the middle class. The cost of energy, though, is another big factor. It’s more expensive to grow it and ship it at $5/gallon for diesel.
Plus, there is plenty of feed left over for animals after the sugar has been pulled from the corn to make ethanol. It is also not edible corn in the first place; it is corn that was being grown for feed.
Any way you slice it, ethanol is not to blame for high food prices. It’s not a sustainable source of energy. Most agree there. But it will build a bridge to cellulosic forms that don’t come from food crops and have much higher energy ratios…higher than sugar, as well.
You’ve no doubt read Michael Pollan’s book, ‘Omnivore’s Dilemma’, which looks at corn’s ubiquity in American processed food.
It should be recognised that corn-based ethanol is seen by some as a ‘gateway’ ethanol, creating an impetus for vehicles to be produced which use ethanol. Proponents of ethanol believe that other, efficient sources will come online in the future. Algae is a strong contender which anyone with opinions about corn ethanol should be aware of.
Max: If you could send me the link to the studies you refer to I would be greatly appreciative.
LL: I haven’t read that book but I do know about the interesting potential for algae to become biofuel. I read about it a while ago in this article.
I probably should have specified better that this article is mainly a rant against corn-based ethanol. If they can find something that isn’t a food crop, such as algae, to produce ethanol, I would be all for it.
[...] Saturday, I wrote about some of the reasons corn-based ethanol is wrong for the country in both the economic and environmental sense. In this article, I talked about how the ethanol sector gets outrageously large subsidies and that [...]
[...] look at some of the reasons that corn-based ethanol is not the right choice for an alternative fuel.http://blatantreality.com/2008/06/07/reality-check-ethanol-fuel/Fuel Cell Works press releaseFuel Cell Works press releaseGM??s CEO praises automaker??s research [...]
[...] more of my thoughts on Corn Ethanol, check out this article I wrote on the subject a couple weeks back. Bookmark and Share: sociallist_61f1b792_url = [...]
Hold on a sec…..
A company called NRG from Canada is using Westinghouse Plasma tecnology and using biomass which will produce a gallon of Ethanol for under $1.00 A pilot project with GM is underway. Ethanol can be produce cheaply, but the problem is that oil companies do not make pumps available to all Americans, so that they can make a choice, like they did in Brazil. It would also cost around $100 to convert existing vehicle to flex- fuel so either gas or Ethenol can be used.
Rumor #1: Increased ethanol production has dramatically increased consumer food prices.
Reality: The impact of ethanol on food prices has been greatly exaggerated.
First, retail food products such as cereals, snack foods and beverages contain relatively little corn. For example, a standard box of corn flakes contains approximately 10 ounces of corn. Even when corn is priced at $4 per bushel, a box of corn flakes contains less than a nickel’s worth of corn (Source: U.S. Departmentment of Agriculture Economic Research Service). According to the U.S. Department of Agriculture, labor costs account for 38 cents of every dollar a consumer spends on food. Packaging, transportation, energy, advertising and profits account for 24 cents of the consumer food dollar. Just 19 cents of every consumer dollar can be attributed to the actual price of food inputs.
Second, food prices have not increased proportionately with corn prices. The U.S. Commerce Department reports that from January 2006 to March 2007, corn prices nearly doubled but consumer food costs increased only 2.1 percent. This percentage increase is less than the 25-year average CPI of 2.9 percent.
So what does influence retail food prices? One recent study suggests that energy prices have twice the impact on retail food prices that grain prices do (Source: John Urbanchuk, LECG, LCC, June 2007). Over the past two and a half years, increases in crude oil prices have added an additional dollar per gallon to the price of regular gasoline. Americans consume about 140 billion gallons of gasoline each year, so a dollar per gallon price increase equates to a $140 billion impact. Seven billion bushels of corn each year is used for food and feed purposes, so an increase of $1 in the price of corn results in a $7 billion impact on prices consumers pay (Source: Acting USDA Secretary Chuck Conner, U.S. Consumer Federation Address, Sept 28, 2007).
Rumor # 2: As current ethanol production continues to grow, the U.S. will not be able to meet the demands of global food and feed markets.
Reality: A sad reality of world hunger is that it generally due to problems with food access, not food production.
According to the United Nation’s Food and Agriculture Organization, the most likely causes of hunger are a lack of infrastructure and access to capital – not food scarcity.
Furthermore, U.S. farmers have easily met all demands for U.S. corn from foreign markets. Even though corn use for ethanol has risen dramatically over the past several years, American corn growers continue to serve as the world’s top exporter of corn. USDA’s 2008 forecast predicts that U.S. corn exports will increase by $600 million due to strong foreign demand and reduced competition.
There is not a direct relationship between commodities and food as some might assume. Both corn and soybeans are used primarily in the production of meat through feed for livestock and not used in actual retail food products. The amount of field corn used for human food processing (starch, sweetener and cereal) ranges between 5 percent and 8 percent of total corn usage. Also, corn demand for food processing markets has been flat for 15 years (Source: USDA, Pro Exporter Network).
Finally, a high-quality feed product known as “distillers grains” is produced as a co-product of ethanol production. The U.S. exports large amounts of distillers grains annually. In 2006/2007, ethanol plants produced more than 12 million metric tons of distillers grains. This product is fed to livestock and poultry, helping to replace corn that can then be used for other purposes. It is estimated that distillers grains displaced more than 500 million bushels of corn from feed rations in 2006, allowing that corn to be used for other uses (Source: http://www.foodandfuelamerica.com).
Rumor #3: There won’t be enough corn to continue the strong growth in the ethanol industry.
Reality: Thanks to continued increases in yields and ethanol processing efficiency, farmers are expected to be able to meet rising demand for corn.
The amount of corn farmers can grow per acre has quadrupled in the last five decades – from 40 bushels per acre in 1950 to 160 bushels per acre in 2004. If yields continue to increase at the rate of the last 10 years, this average will reach 180 bushels by 2015. An increase of just two bushels per acre results in an additional 150 million bushels of corn, which can produce 420 million gallons of ethanol (Source: National Corn Growers Association).
At the same time, technology improvements will mean that we can squeeze more out of each bushel of corn. The average ethanol conversion rate today is 2.8 gallons per bushel, up from 2.5 gallons per bushel several years ago. The conversion rate may soon be as high as 3 gallons per bushel because of emerging processing technologies.
Rumor #4: Ethanol supporters claim it is the total answer to our nation’s energy independence.
Reality: Instead of seeing ethanol as a silver bullet, supporters describe it as a step in the right direction for reducing our nation’s dependence on foreign oil.
While imperfect, today’s renewable fuels create a necessary foundation for future renewable fuel technologies that will offer even greater environmental and economic benefits. Just as the early biplanes were necessary first steps toward transcontinental air travel, today’s renewable fuels sector is a first step down a road that supporters believe will ultimately lead to energy independence.
Some critics of renewable fuels may raise issues that are important to address. However, many of the concerns being raised on a national level today mimic those raised decades ago when ethanol was first emerging as a fuel option in Minnesota. Our experience has shown that ethanol can provide a real-world boost to our economy and our environment even though it has practical limitations and technical obstacles like any other energy option.
Rumor #5: Ethanol contributes little to our nation’s energy security.
Reality: Ethanol makes a significant and growing contribution today by reducing our need to purchase foreign energy.
In 2005, the use of ethanol reduced America’s trade deficit by $8.7 billion and thereby eliminated the need to import 170 million barrels of oil (Source: Renewable Fuels Association). As encouraging as this statistic may be, there is still need for further improvement. Right now, the U.S. imports 65 percent of its petroleum needs. By 2025, the Energy Information Agency (EIA) projects the U.S. will import 71 percent of its petroleum. A major portion of this petroleum is expected to come from the volatile Middle East, where much of the remaining known petroleum reserves exist.
Rumor #6: Ethanol is heavily subsidized in comparison to other fuels.
Reality: Subsidies of renewable fuels are modest when compared with the subsidies directed to fossil fuels.
It is important to compare “apples to apples” when discussing fuel subsidies. According to the Government Accountability Office (GAO), the U.S. has spent more than $130 billion over the last three decades in subsidies to the oil industry. Add to this the amount of money that the U.S. spends to maintain a major presence in the Middle East, and you begin to see the “embedded” cost in our gasoline coming from the oil imported from this region.
Ethanol has received government subsidies as well. However, with the rise in today’s market price of corn, agricultural subsidies in their current form will be reduced from more than $10 billion/year to approximately $2 billion/year. Even by factoring in the current cost of the U.S. excise tax credit to gasoline blenders, which amounts to $3 billion/year, the subsidy level is greatly reduced from previous norms.
Rumor #7: It takes more energy to produce a gallon of ethanol than you get from it.
Reality: Most studies show ethanol to have a positive net energy balance, while all studies show gasoline has a net negative energy balance.
Reality: Most studies show ethanol to have a positive net energy balance, while all studies show gasoline has a net negative energy balance.
According to a 2006 Congressional Research Service (CRS) report, ethanol produced from corn provided 67 percent more energy than is used during production. Furthermore, the CRS report concluded that there is a net energy loss of 19 percent in the production of gasoline.
The CRS report is not alone in finding a positive net energy balance for ethanol. Since 1995, at least 11 independent studies have found ethanol to have a positive net energy balance while only one study, which used methods that have been challenged by other scientists, found the energy balance to be negative (Source: National Corn Growers Association). However, this single study continues to be cited without proper context by renewable fuels critics and media outlets.
Rumor #8: Ethanol only provides a small reduction in greenhouse gases.
Reality: In 2006, ethanol use in the U.S. reduced greenhouse gas emissions by approximately 8 million tons, the equivalent to removing annual emissions of more than 1.21 million cars from the road. (Source: Renewable Fuels Association)
The American Lung Association of Chicago credits ethanol-blended gasoline with reducing smog-forming emissions in the Chicago area by 25 percent since 1990.
The U.S. Department of Energy’s (DOE) Argonne National Laboratory estimates that the use of 10 percent ethanol blends reduces greenhouse gases by up to 19 percent compared to conventional gasoline.
In 2002, General Motors commissioned a “Well-to-Wheels” life cycle analysis of energy use and greenhouse gas emissions. The study compared 15 propulsion technologies and 75 different fuel pathways. The study found E85 reduces greenhouse gas emissions more than any other alternative fuel. Phase 2 of General Motors’ study, released in May 2005, concluded there is no better way to address petroleum fuel use and carbon dioxide emissions than by using ethanol. Hybrid and diesel propulsion systems reduced carbon dioxide emissions by only 20 to 30 percent, while E85 reduced carbon dioxide emissions anywhere from 75 to 85 percent.
Rumor #9: To produce high corn yields to meet ethanol demand, applications of farm chemicals will need to be dramatically increased.
Reality: Over time, farmers are becoming more efficient and are using smaller amount of costly farm inputs per acre.
According to the USDA’s Economic Research Service, the additional increase to be expected in corn yields comes with no large increase in nitrogen use per acre. Furthermore, with the improved genetic traits of seeds, less herbicide and pesticide will be required. Since 1996, biotech crops have reduced pesticide sprayings by 500 million pounds – 6.9 percent reduction worldwide (Source: Graham Brookes, PG Economics, Ltd.).
Rumor #10: Ethanol’s economic benefit for local communities has been overstated.
Reality: At the 550 million gallon production level in 2006, Minnesota’s ethanol industry generated an estimated $2.77 billion in total economic impacts and over 10,000 jobs. Many of these jobs are located in greater Minnesota, where the state’s ethanol plants are located.
Nationwide, 2005 ethanol industry supported more than 150,000 jobs. This economic activity helped boost U.S. household income by $5.7 billion (Source: Renewable Fuels Association).
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