Blatant Reality

It seems like everyone is beginning to abandon any biofuel mandate that could potentially lead to increases in food prices. Australia’s New South Wales joining in the trend by not implementing a mandate that would increase biofuel requirements to 10% by 2010.

NSW Premier Nathan Rees has ditched his predecessor’s commitment to introduce mandated levels of biodiesel in motor vehicles and boost ethanol levels from 2 per cent to 10 per cent.

 

In a setback for the biofuels industry, Mr Rees signalled yesterday that Morris Iemma’s mandate plans would not be implemented — putting himself at odds with Lands Minister Tony Kelly, who had insisted the Government backed the biofuels policy.

 

The about-face in NSW comes amid mounting evidence that biofuel mandates have contributed to growing world food shortages and rising prices.

It seems like some biofuel businesses are enviously eying Africa for land to support the western world’s thirst for alternative fuels. Some of their offers are quite ludicrous and sound almost like modern day Panama Canal deal (except  with the Africans reaping none of the benefits).

A little history, the reason we have a Panama Canal (and not the Nicaraguan Canal) was our Government decided to help stage a little revolution to create the newly formed (and friendly) Panamanian government that was willing to sell us the land we needed for the canal. This was all bought for $10 million (roughly $250 million, adjusted for inflation) with an annuity of $250,000. Was this wrong? Eh, from what I can tell it was a fairly bloodless revolution but I will let smarter people decide that. What I do know is that Panama got a fortune for letting us “exploit it” compared to what the African people will get.

Take a look at this (emphasis added):

The Tanzanian government has granted the British firm the use of 9,000 hectares (22,230 acres) of sparsely populated farmland, or enough land to cover about 12,000 soccer fields, for a period of 99 years—free of charge. In return, the company will invest about $20 million (€13 million) to build roads and schools, bringing a modicum of prosperity to the region.

 

Sun Biofuels is not alone. In fact, half a dozen other companies from the Netherlands, the United States, Sweden, Japan, Canada and Germany have already sent their scouts to Tanzania. Prokon, a German company known primarily for its wind turbines, has already begun growing jatropha curcas on a large scale. It expects to have 200,000 hectares (494,000 acres)—an area about the size of Luxembourg—under cultivation throughout Tanzania soon.

 

A gold rush mentality has taken hold—not just in East Africa but across the entire continent. In Ghana, the Norwegian firm Biofuel Africa has secured farming rights for 38,000 hectares (93,860 acres), and Sun Biofuels is also doing business in Ethiopia and Mozambique.

 

Kavango BioEnergy, a British company, plans to invest millions of euros in northern Namibia. Western companies are turning up in Malawi and Zambia, where they plan to produce diesel fuel and ethanol from jatropha curcas, palm oil or sugar cane. Foreign investors have their eye on 11 million hectares (27 million acres) in Mozambique—more than one-seventh of the country’s total area—for growing energy plants. The government in Ethiopia has even made 24 million hectares (59 million acres) available.

Now will this be a good thing? This could be the thing that Africa needs to set up some infrastructure. However, as you may already be aware, I’m wholeheartedly against any biofuel that takes agricultural land. Therefore, companies using this land, even if it is “only sparsely populated farmland,” is very disheartening. Combine this with the following paragraphs from the story and you will know why I am very skeptical of these investments.

In Tanzania, while there are hopes, there is also plenty of reason to be skeptical about promises that everything will improve. In April 2006, Sun Biofuels claimed that it had received formal approval for cultivation from 10 of the 11 affected villages. At that point, however, several communities were not even aware of the plans, while others had attached conditions to their consent. A village head complained, in writing, to the district administration that Sun Biofuels had cleared and marked off land without even contacting the village elders.

 

(…)

 

Seventy kilometers (43 miles) farther south, on the Rufiji River, thousands of residents are being forced to move to make way for the Swedish company Sekab’s plans to grow sugarcane, a highly water-intensive crop, on at least 9,000 hectares (22,230 acres) and then distill it into ethanol. Five thousand hectares (12,350 acres) have already been approved.

 

The river and the wetlands along its banks are the only source of drinking water for thousands of people, especially during the dry season. Sekab also plans to tap this reservoir to irrigate its plantations. Transparency? Nonexistent. Compensation? None whatsoever. Information? A scarce commodity. When residents attending an informational event asked about compensation payments, they were told curtly: “You will get what you are entitled to.

At this point of the story, I’m getting pretty mad to be honest. This is Africa people, a mostly third world continent, where things are about as corrupt as you can get. I have very little faith in the governments to uphold their ends of the agreements even if the companies plan on keep their promises.

But that is even besides the point, the real problem is why they plan on growing a crop like sugarcane in Africa. If I remember correctly, Africa is a fairly parched continent with a premium put on water. This brings up another issue I have with crop based biofueld: they use needed freshwater for crops or, in this case, drinking water even.

If you’re getting fairly mad by now, I can completely understand, but try to hold it together until after you read the next part.

But Brennan’s rosy predictions do not reflect opinions in East Africa. A study on energy plants in Tanzania, conducted by the German Agency for Technical Cooperation, lists a host of negative side effects. What is more, this is not the first time that white investors have promised prosperity for Tanzania.

 

With similarly enticing promises, small farmers were talked out of their land several decades ago to make way for coffee plantations. In the 1990s, foreign mining companies arrived in Tanzania to dig for gold. “They promised us jobs, new roads, new wells and schools,” says journalist Joseph Shayo. “And what happened? No schools, no wells and few jobs, which were low-paying jobs, to boot.” To make matters worse, large mining zones were fenced off and became inaccessible to the original residents.

 

In a recently published study on the “Biofuel Industry in Tanzania,” journalist Khoti Kamanga of the University of Dar es Salaam warns against the side effects of energy plantations. The population, Kamanga writes, is usually uninformed, while the cultivation of energy plants usually goes hand-in-hand with forced resettlement. According to Kamanga, it is very likely that ethanol production will also affect food prices in Tanzania, with the country’s dependency on food imports growing even further.

Alright, so we got companies having a history of breaking their promises, forced resettlement, and higher food prices. Wow, If you take away the food part, this could practically be what the American government did with the Native American tribes here: breaking treaties and forcing Native Americans on reservations.

Looks like Africa is following our example, just the wrong one.

A note: I’m not against businesses investing in Africa. The potential for these businesses to help change the quality of life in these thirdworld countries is definitely there. However, exploitation, what this sounds like, is completely unacceptable. In Africa, having access to land is essential. Depriving people of this is dispicabl.

Normally I just leave polls up for a couple weeks but this one has been up since the beginning of July. I figured that since it was one of those polls that don’t really get old, I could leave it up there to try to get a bigger sample size. Anyways, here are the results of the poll and it looks like people are pretty much in agreement that crop based ethanol is a bad idea:

How do you feel about crop based Ethanol?
Selection		Votes
A) I support it	8%	3
B) It’s a necessary step in the right direction	8%	3
C) It’s an environmentally bad idea	26%	10
D) It’s an economically bad idea	33%	13
E) It’s pointless; drill more oil	26%	10
39 votes total

This is funny. Al Gore’s newest boat, “Bio-Solar One,” supposedly will run on biofuels such as ethanol (which, as you know from some of my past articles, isn’t that environmentally friendly in its current state). The funny thing about this is the lake its located on only has regular GASOLINE. Ironic? I think so.
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This should be fairly obvious but it is worth stating that McCain is against subsidies for ethanol.

Republican presidential hopeful John McCain stopped by the Iowa State Fair on Friday, repeating his opposition to ethanol subsidies and vowing to open markets around the world to Midwest commodities.

 

McCain has long opposed subsidizing the production of ethanol and has never shied away from making his point known, even in farm country.

 

“My friends we will disagree on a specific issue and that’s healthy,” McCain said as he stood behind bales of straw at the fairgrounds. “We will disagree from time to time. I believe in renewable fuels, I don’t believe in ethanol subsidies, but I believe in renewable fuels.”

Here is more on the subject from his campaign website:

John McCain Believes Alcohol-Based Fuels Hold Great Promise As Both An Alternative To Gasoline And As A Means of Expanding Consumers’ Choices. Some choices such as ethanol are on the market right now. The second generation of alcohol-based fuels like cellulosic ethanol, which won’t compete with food crops, are showing great potential.

 

Today, Isolationist Tariffs And Wasteful Special Interest Subsidies Are Not Moving Us Toward An Energy Solution. We need to level the playing field and eliminate mandates, subsidies, tariffs and price supports that focus exclusively on corn-based ethanol and prevent the development of market-based solutions which would provide us with better options for our fuel needs.

As you could probably tell from reading this blog, I am pretty vehemently against any kind of biofuel that comes from crops that take up agricultural land, requires freshwater, and receives obnoxiously large subsidies. This means that the only biofuel that I really support at the moment is algae based biofuels and that I’m a strong opponent of ethanol. So it saddened me to see that the EPA ruled against Texas Governor Rick Perry’s request to lower the ethanol mandate.

The Environmental Protection Agency today denied Texas Gov. Rick Perry’s request to reduce federal ethanol requirements this year.

 

The decision dealt a blow to Perry and a broad consortium of industry groups that claim rising U.S. ethanol output is inflating corn prices, hurting livestock and food producers and boosting grocery bills.

 

But in a noon conference call, EPA Administrator Stephen Johnson said the the federal Renewable Fuel Standard that sets the ethanol requirement isn’t causing “severe economic harm,” which would be required to justify a waiver, and is improving national security and benefiting farmers.

 

In a statement, Perry said he was “greatly disappointed with the EPA’s inability to look past the good intentions of this policy to see the significant harm it is doing to farmers, ranchers and American households.”

 

“For the EPA to assert that this federal mandate is not affecting food prices not only goes against common sense, but every American’s grocery bill,” he said.

Crop based ethanol is just a bad idea both environmentally and economically. I wouldn’t be against ethanol nearly as much as I am if the government wasn’t propping up the industry through subsidies and artificially creating a market for it through a mandate. There are other options out there, such as algae biofuels, that could potentially stand on their own in the free market and wouldn’t have the negative environmental effects associated with crop biofuels (clear cutting forests for new land, increased freshwater usage, etc.).

Bjorn Lomborg has added his name to the list of those who have attacked the world’s infatuation with crop-based ethanol. Mind you, Lomborg isn’t a ’skeptic’ in the sense that he believes CO2 is affecting the climate. However, he does believe that things have been drastically overstated. Take a look what he says here about some of the major problems with ethanol:

Bio-fuels essentially take food from mouths and puts it into cars. The grain required to fill the tank of an SUV with ethanol is enough to feed one African for a year. Thirty percent of this year’s corn production in the United States will be burned up on America’s highways. This has been possible only through subsidies that globally will total $15 billion this year alone.

 

Because increased demand for bio-fuels leads to cutting down carbon-rich forests, a 2008 Science study showed that the net effect of using them is not to cut CO2 emissions, but to double them. The rush towards bio-fuels has also strongly contributed to rising food prices, which have tipped another roughly 30 million people into starvation.

 

Because of climate panic, our attempts to mitigate climate change have provoked an unmitigated disaster. We will waste hundreds of billions of dollars, worsen global warming, and dramatically increase starvation.

Once again people, ethanol from crops (or anything that takes up agricultural land) is a bad idea that has led to millions suffering from starvation. Take a look at some more of the downside in some of my previous articles posted here, here, and here.

Since I have been talking about ethanol for a while, I figured it might be a good idea to see what you think about it. If you want some background on some of the discussion here about the subject, you can view any of these posts found here, here, and here.

Judging from the comments posted on two of my posts about ethanol (seen here and here), I need to go a little more in depth about why I do not like the idea of growing our next source of fuel on farmland.

There are many reasons why I don’t like the idea of growing ethanol crops on farmland no matter if you are growing corn, sugar cane, beets, switch grass or any plant that requires space and water. One thing that none of the major proponents of any of these ethanol sources are confronting is the reality that in our capitalistic economy, using these crops as fuel would give farmers more incentive to plant them.

You can already see this with farmers planting the most acres of corn in 2007 since 1944. This year (2008), farmers were expected to plant less corn but thank goodness they didn’t because floods have affected a lot of the farmland devoted to this crop.

Bad for Aquifers

Underground aquifers are found all over the world and they are basically natural reservoirs. These aquifers have been tapped and are used for irrigation and the like. More farmland means more water use and this can be bad news for these aquifers. For example, one of our largest aquifers, the Ogallala, has gone down roughly 100 ft due to our use of it for irrigation. Normally, the aquifer would refill itself with rain but our withdrawal rate far outstrips the replenish rate so as of now, every year the aquifer gets lower and lower.

Now, I am not arguing that we stop using this aquifer (though I would argue that we should use it more efficiently by eliminating water subsidies for farmers) but I don’t like the idea that we could potentially increase the withdrawal rate due to increased crops being used for fuel. Freshwater is an important resource in general so I don’t like the idea of using it for creating fuel in the heavily subsidized ethanol industry.

Massive Subsidies

And thats another thing about ethanol, it is a very heavily subsidized industry. Sure the oil industry is subsidized as well, but the ethanol industry receives a subsidy almost twice as big as the oil industry. For example, Minnosota’s Department of Agriculture tries to make the argument that the oil industry gets larger subsidies. Take a look:

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.

These two paragraphs try to make the argument that the subsidies to ethanol are “modest” in comparison to oil. Well if the subsidies are truly modest, I would really like to see a dictionary on how Minnesotans define modest. If one uses my definition of modest, the two paragraphs above show that the subsidies are anything but modest in comparison.

First off, they try to confuse you by saying that “the US has spent more than $130 billion over the last three decades.” Not per year people. Talk about not comparing “apples to apples.” $130 billion per three decades comes out to about $4.33 billion/year.

Now lets look at the second paragraph, keeping the $4.33 billion/year in mind. First of all, they use the phrase “will be reduced” which means the ethanol subsidy is still at $10 billion/year. I, for one, have great faith in our lobbying industry and their ability to keep subsidies coming no matter if they are needed or not so I doubt the subsidies will be disappearing anytime soon. Therefore, instead of Ethanol subsidies being “modest” in comparison, they are over two times more than oil per year!

Even if you take their approximate $5 billion/year subsidy ($2 billion + $3 billion stated about), you still get a subsidy amount that is above the oil industry’s average $4.33 billion/year. Another estimate puts the ethanol industry subsidy at $7 billion for the year 2006 so any way you look at it, subsidies for ethanol are definitely not modest.

Bad for Biodiversity

Anyways, back to the environmental aspect of ethanol production. As I have stated in the past articles linked to above, with the increase in demand for ethanol producing crops, people are going to either switch from food crops to crops that produce and/or clear more land for farmland. The latter part means that farmers might actually see that it is economically worth clearing acre upon acre of forests or prairie which, as we have heard the Greens say multiple times, is bad for the environment. By clearing these lands, farmers are hurting the biodiversity of that particular region.

One example of this can be seen in Indonesia where there is a large palm oil industry. This oil is a big component in some biofuels and Europe is helping drive Indonesia’s palm oil industry by mandating that 10% of their fuel comes from biofuels by 2020. Thanks to the central planning of Indonesia’s government, 75,000 square miles of land are set to be converted to palm oil production by 2020 (”The Really Inconvenient Truths“). The land being converted consists of forests that are being cut with the fauna (tigers, orangutans, elephants, etc.) being killed (see the book link above for more).

Now the United States wouldn’t mandate a certain number of acreage to be put under for ethanol crop production, would they? No, but with legislation that has already been passed, they really don’t have to. Instead of mandating a specific number of acreage devoted to ethanol production, the government has mandated the use of 7.5 billion gallons of ethanol by 2012 with goals of renewable fuels in general reaching 36 billion gallons by 2022. With tariffs on cheap foreign sources of ethanol (like sugarcane from Brazil) impeding importation, it looks like we will be growing our own, hence the need to cultivate more land.

Conclusion

Now, do I believe that oil is the best form of energy in the world? Of course not. Do I believe that it is something that we are going to be primarily using for a while? Yes I do. Do I believe we should relax restrictions on drilling in ANWAR and offshore? Absolutely. However, I also like the idea of alternative energy, as long as it is economically feasible and can basically stand on its own.

My problem with crop based ethanol is that it is going to give farmers the incentive to grow crops specifically for fuel instead of for food and as prices rise due to increasing demand(be it for ethanol or increasing demand for food worldwide), more and more farmers are going to get on the action. This means more land under cultivation which will end up hurting the environment more than any alternative fuel might help it. I’m no environmentalist but I do appreciate nature (conservationist) and hate to see forests get chopped down for unnecessary reasons.

So why add any extra demand on farmland for things other than growing food when there are viable fuel alternatives out there?

The Algae Alternative

At this point you are all probably wondering that since I absolutely abhor crop-based ethanol, what other feasible alternatives are there? Well there is at least one that looks pretty promising (or at least more friendly to the environment and our food supply).

Farming algae for either ethanol or biodiesel could potentially be the answer for growing renewable fuels.

Now hold on a minute, I bet your about to comment something to the affect that “Algae basically lives in water! How will using algae lesson our water usage?” Well that is a great question and I’m glad you asked it.

The great thing about algae is that it can be grown in wastewater or even saltwater. Obviously there is little demand for those two sources of water and since we are not going to be eating it, it really doesn’t matter what the water source is. This flexibility would allow us to save freshwater for our food crops and drinking water.

Another great this about algae is that these algae farms could be located next to power plants and the CO2 they produce can be used as nutrients for the algae. Therefore, instead of investing in carbon sequestration methods which basically just cost money to the power plants, they could potentially make money by selling the CO2 to the farms.

Some of you might also be thinking that algae is just as bad as farms because land will have to be used to produce this algae harvest. Well this is where I would tell you that you’re not entirely correct. The first benefit of algae is that you don’t have to use land that has agricultural value (basically it can grow anywhere as long as the temperature and nutrients are right). Another benefit is that with algae, you don’t have to grow it horizontally. What I mean by this is that you could theoretically have a skyscraper that house algae producing vats.

And do you know what the best part about algae is? It’s a whole lot more efficient at producing oil than crops. Take a look:

Companies in California, Texas and Florida are leading the effort to produce and market fuel from algae. PetroSun of Rio Hondo, Texas, began producing fuel in April 2008. The company says it can produce 4.4 million gallons of oil every year from its 1,100 acres of algae ponds – roughly 4,000 gallons per acre. In contrast, one acre of corn produces about 330 gallons of ethanol, according to industry reports.

So there you have it, more reasons why crop-based ethanol is a bad idea and an alternative that is better in every single aspect that we could focus on producing instead.

Corn ethanol is once again being linked to as a contributor of rising food prices and it seems that things will only get worse. This year, because of flooding and other factors, the corn harvest expected to be drastically smaller than last year. When you add this to the fact that the government has mandated a 9 billion gallon corn-based Renewable Fuel Standard (RFS), the demand for corn is going to far outstrip the supply. This will end up contributing to the increase of prices of all corn-based products, including food.

“A lot depends on how badly this weather has devastated the corn crop,” said Thomas Elam, an agricultural economist at Indiana University who was commissioned by the Balanced Food and Fuel Coalition to release a study on the matter. “A smaller crop will be devastating to meat, dairy, and poultry producers if the Renewable Fuels Standard is maintained, and consumers will suffer as food and fuel costs rise.”

 

About 5% of the world’s corn supply goes to producing bio fuels - representing a whopping three years of growth in typical crop production, according to Elam.

 

“Corn will have to go to at least $8 a bushel to squeeze out enough food use to keep up with corn for ethanol,” he said. “Food prices will be significantly impacted by corn if RFS goes to 10.5 billion gallons for 2009.”

 

How significantly? Collins said food costs could rise 23% to 35% above the normal annual inflation rate of 2.5% over the next two to three years if the RFS mandates are not reduced. Elam said food price inflation rate could go as high as 7% without a mandate reduction.

“Collins” is the US Department of Agriculture chief economist just to let you know. How should we fix this? Well the article states that just a simple 50% reduction in the RFS would bring the bushel price of corn to $2. Sadly, this probably won’t happen.

I sure hope everyone is beginning to see that using a food crop for fuel is never a good idea, no matter how well intentioned or fool-proof it looks on paper.

For more of my thoughts on Corn Ethanol, check out this article I wrote on the subject a couple weeks back.