http://www.reason.com/news/show/123759.html
Bioethanol Boondoggle
Political viability is more important than commercial viability
Ronald Bailey * December 4, 2007
Congress is finalizing an energy bill that should come to a vote before the end of 2007. Although all the details of the newly negotiated bill are not yet public, an earlier draft mandated that refiners annually blend 20.5 billion gallons of ethanol into transport fuels by 2015, with 5.5 billion gallons of that coming from non-food sources like cellulosic ethanol. The mandate would rise to 36 billion gallons by 2022. This more than quadruples the 2005 directive of 7.5 billion gallons by 2012.
Promoters of the ethanol mandate assert that it would help the United States achieve energy independence and slow the accumulation of greenhouse gases that are driving climate change. Evaluating the scientific and economic claims being made for bioethanol can be vexing, but a few urgent questions come to mind: if bioethanol is such a good energy deal, why must refiners and consumers be forced to use it? Again, if it's such a great idea economically, why does the federal government offer a tax credit of 51 cents per gallon for blending ethanol into gasoline?
In fact, the subsidies are probably higher than that. For example, a 2006 report by the International Institute for Sustainable Development estimated that if one took into account state renewable fuel tax breaks and direct agricultural subsidies that reduce other costs, the total amount of the ethanol subsidy rises from $1.05 to $1.38 per gallon of ethanol
Another big concern is that fuel is now competing with food. A new study from AEI/Brookings Joint Center points out that in 2005, the ethanol program consumed about 15% of U.S. corn production but displaced less than 2% of gasoline use. The International Food Policy Research Institute (IFPRI) just issued a report projecting that if countries simply pursue their current biofuel expansion plans the global price of corn will increase by 26 percent and the price for oilseeds will rise by 18 percent. If biofuel production doubles over current projections, the price of corn rises by 72 percent and oilseeds by 44 percent. The IFPRI report notes that "The increase in crop prices resulting from expanded biofuel production is also accompanied by a net decrease in the availability of and access to food." Even in North America, access to food calories drops by between 2 to almost 5 percent depending on which biofuel production scenario plays out. In food stressed sub-Saharan Africa, available food calories drop by between 4 and 8 percent.
Even cellulosic ethanol produced using waste products like wood chips and corn stalks, or fuel crops like switchgrass or hybrid poplars do not solve the food/fuel conundrum. "The trade-offs between food and fuel will actually be accelerated when biofuels become more competitive relative to food and when, consequently, more land, water, and capital are diverted to biofuel production," concludes the IFPRI report. And there is no avoiding the trade-off between conservation and ethanol production. Already, U.S. farmers have taken 4.6 million acres out of the 36 million acres of farmland put aside in the Conservation Reserve Program (CRP) to raise fuel crops. Switching land from the CRP to ethanol production will obviously effect wildlife, water usage, and soil erosion.
The most vexing question: Does corn bioethanol actually reduce greenhouse gas emissions? A study last year by Cornell University biologist David Pimentel and University of California at Berkeley engineer Ted Patzek says no. According to the study, "Ethanol production using corn grain required 29 percent more fossil energy than the ethanol fuel produced." And the news was even worse for cellulosic ethanol using switchgrass, which requires 50 percent more fossil energy than it displaces; woodchips needed 57 percent more; and biodiesel burnd 27 percent more fossil fuel than it displaces. On the other hand, the researchers at University of Minnesota offer a much sunnier analysis of the net energy benefits of bioethanol. They find, "Ethanol yields 25 percent more energy than the energy invested in its production, whereas biodiesel yields 93 percent more."
This technical dispute over the net energy balance of biofuels will be resolved some day. In the meantime, a new study from the Oregon State University asks if biofuels are commercially viable? The study finds that they are commercially viable in Oregon if one takes current government incentives into account. Translation: biofuels are not really commercially viable without subsidies. In addition, the Oregon study analyzes the effectiveness of biofuels in promoting energy independence. The researchers find "for all three biofuels evaluated, energy independence is achieved at costs that are 6 to 28 times higher than for other policy options such as raising the gas tax or increasing corporate average fuel economy (CAFE) standards." The AEI/Brookings study estimates that in meeting the current ethanol mandate the costs will exceed the benefits by about $1 billion a year.
Biofuels are commercially questionable, do not materially advance energy independence, and may not even help reduce greenhouse gas emissions. Naturally, Congress wants to mandate them. Why? Well, Iowa caucus voters win; Archer Daniels Midland wins; and special interest contributors to political campaigns win. Bioethanol is just a subsidy boondoggle masquerading as a solution to America's energy problems. But it does help get some politicians elected.
Bioethanol Boondoggle
Political viability is more important than commercial viability
Ronald Bailey * December 4, 2007
Congress is finalizing an energy bill that should come to a vote before the end of 2007. Although all the details of the newly negotiated bill are not yet public, an earlier draft mandated that refiners annually blend 20.5 billion gallons of ethanol into transport fuels by 2015, with 5.5 billion gallons of that coming from non-food sources like cellulosic ethanol. The mandate would rise to 36 billion gallons by 2022. This more than quadruples the 2005 directive of 7.5 billion gallons by 2012.
Promoters of the ethanol mandate assert that it would help the United States achieve energy independence and slow the accumulation of greenhouse gases that are driving climate change. Evaluating the scientific and economic claims being made for bioethanol can be vexing, but a few urgent questions come to mind: if bioethanol is such a good energy deal, why must refiners and consumers be forced to use it? Again, if it's such a great idea economically, why does the federal government offer a tax credit of 51 cents per gallon for blending ethanol into gasoline?
In fact, the subsidies are probably higher than that. For example, a 2006 report by the International Institute for Sustainable Development estimated that if one took into account state renewable fuel tax breaks and direct agricultural subsidies that reduce other costs, the total amount of the ethanol subsidy rises from $1.05 to $1.38 per gallon of ethanol
Another big concern is that fuel is now competing with food. A new study from AEI/Brookings Joint Center points out that in 2005, the ethanol program consumed about 15% of U.S. corn production but displaced less than 2% of gasoline use. The International Food Policy Research Institute (IFPRI) just issued a report projecting that if countries simply pursue their current biofuel expansion plans the global price of corn will increase by 26 percent and the price for oilseeds will rise by 18 percent. If biofuel production doubles over current projections, the price of corn rises by 72 percent and oilseeds by 44 percent. The IFPRI report notes that "The increase in crop prices resulting from expanded biofuel production is also accompanied by a net decrease in the availability of and access to food." Even in North America, access to food calories drops by between 2 to almost 5 percent depending on which biofuel production scenario plays out. In food stressed sub-Saharan Africa, available food calories drop by between 4 and 8 percent.
Even cellulosic ethanol produced using waste products like wood chips and corn stalks, or fuel crops like switchgrass or hybrid poplars do not solve the food/fuel conundrum. "The trade-offs between food and fuel will actually be accelerated when biofuels become more competitive relative to food and when, consequently, more land, water, and capital are diverted to biofuel production," concludes the IFPRI report. And there is no avoiding the trade-off between conservation and ethanol production. Already, U.S. farmers have taken 4.6 million acres out of the 36 million acres of farmland put aside in the Conservation Reserve Program (CRP) to raise fuel crops. Switching land from the CRP to ethanol production will obviously effect wildlife, water usage, and soil erosion.
The most vexing question: Does corn bioethanol actually reduce greenhouse gas emissions? A study last year by Cornell University biologist David Pimentel and University of California at Berkeley engineer Ted Patzek says no. According to the study, "Ethanol production using corn grain required 29 percent more fossil energy than the ethanol fuel produced." And the news was even worse for cellulosic ethanol using switchgrass, which requires 50 percent more fossil energy than it displaces; woodchips needed 57 percent more; and biodiesel burnd 27 percent more fossil fuel than it displaces. On the other hand, the researchers at University of Minnesota offer a much sunnier analysis of the net energy benefits of bioethanol. They find, "Ethanol yields 25 percent more energy than the energy invested in its production, whereas biodiesel yields 93 percent more."
This technical dispute over the net energy balance of biofuels will be resolved some day. In the meantime, a new study from the Oregon State University asks if biofuels are commercially viable? The study finds that they are commercially viable in Oregon if one takes current government incentives into account. Translation: biofuels are not really commercially viable without subsidies. In addition, the Oregon study analyzes the effectiveness of biofuels in promoting energy independence. The researchers find "for all three biofuels evaluated, energy independence is achieved at costs that are 6 to 28 times higher than for other policy options such as raising the gas tax or increasing corporate average fuel economy (CAFE) standards." The AEI/Brookings study estimates that in meeting the current ethanol mandate the costs will exceed the benefits by about $1 billion a year.
Biofuels are commercially questionable, do not materially advance energy independence, and may not even help reduce greenhouse gas emissions. Naturally, Congress wants to mandate them. Why? Well, Iowa caucus voters win; Archer Daniels Midland wins; and special interest contributors to political campaigns win. Bioethanol is just a subsidy boondoggle masquerading as a solution to America's energy problems. But it does help get some politicians elected.
