Burning Issues Over Ethanol
Location: New York
Author: Ken Silverstein, EnergyBiz Insider, Editor-in-Chief
Date: Friday, May 16, 2008
Detractors of ethanol are trying to decelerate its take off. Ethanol
production is ramping up to meet federal mandates, which critics say has
created global food shortages and potentially more greenhouse gas emissions.
Federal policies have favored ethanol production as a way to lessen the
dependence on foreign oil and as an innovative to way to clean the air. But
critics say that this country's strategy is not working, pointing out that
ethanol is made mostly from corn. That has diverted about a quarter of the
nation's corn crop away from food production and into ethanol use -- an
amount that will grow to 30-35 percent this year.
Those skeptics also say that it takes an awfully lot of energy to create a
gallon of ethanol from corn. A recent study presented by Science magazine
says that by the time corn is converted to ethanol, more global warming
gases will have been released than if fossil fuels were directly burned.
Other examinations, however, reach different conclusions. A study by the
University of California at Berkeley says that ethanol can generate higher
energy content than petroleum while producing 10-15 percent fewer greenhouse
gas emissions -- a powerful reason to expand ethanol use. Today, cars run on
90 percent gas and 10 percent ethanol, although manufacturers can make
vehicles that are able to run on 85 percent ethanol.
The Energy Act of 2007 laid out a plan to grow ethanol use from a base of
6.5 billion gallons. In 2008, the federal mandate for ethanol production is
9 billion gallons. By 2015, the directive will be 15 billion gallons and by
2022, it will be 36 billion gallons. Federal law also gives generous tax
breaks to producers of ethanol, providing them with $3.2 billion in all last
year and the biggest energy-related subsidy ever granted, says the U.S.
Energy Information Administration.
The result has created a skewed marketplace. Farmers are replacing other
crops with corn, thereby creating shortages of other food products. Since
February 2006, the price of corn, wheat and soybeans has increased by more
than 240 percent, according to World Agricultural Supply and Demand -- a
third of which is the direct result of diverting corn to make ethanol.
"We need to assess the corn-based ethanol mandate and its unintended effects
on food prices for American consumers," says Sen. Kay Bailey Hutchinson,
R-Texas. "When we passed the ethanol mandate, the EPA was given the
authority to waive the mandate or make necessary adjustments to prevent
collateral damage." The senator has introduced legislation, along with the
presumptive Republican presidential nominee and Arizona Senator John McCain
that would freeze the current ethanol requirements at current levels.
Playing Politics
While energy independence and environmental concerns are the driving forces
behind ethanol development, politics also plays a big part. Both parties, in
fact, are trying to win the influential farm vote by doling out billions in
tax credits.
Ethanol producers say that they are not starving anyone, noting that the
nation's corn crop is the biggest that it has been in 60 years and 130
million more bushels than last year. Total acreage devoted to corn
production is up 20 percent from last year to 90 million acres. World food
shortages, they add, are the result of growing demand from developing
countries -- not because more corn is now used to make ethanol.
"Retreat from bio-fuels is just an empty gesture that won't fill anybody's
stomach and won't fill anyone's gas tank," says Archer Daniels Midland Chair
Patricia Woertz, in a conference call. The nation's biggest ethanol
producer, which contributed $700,000 to political campaigns last year, goes
on to say that any attempt to curb the subsidies given to the industry would
be "foolish and dangerous."
Corn-based ethanol has plenty of critics. But cellulosic-based ethanol has
far fewer. Such fuel sources, comprised of wood chips and switchgrass, are
abundant and could supply billions of gallons of ethanol. But the conversion
process is expensive and undeveloped. To move it along, the U.S. Department
of Energy is investing about $385 million in six projects over the next four
years. When fully operational, the "bio-refineries" are expected to produce
more than 130 million gallons of cellulosic ethanol per year.
For now, though, the reliance is on corn. Because the United States is the
world's breadbasket, that has created global shortages and driven up all
food costs, critics say. While corn acreage has grown in this country, most
of it now goes toward fuel production and not food. An estimated 15 percent
of all such land was dedicated to fuel in 2005 but today that is about 33
percent, and growing, as farmers abandon less profitable crops in favor of
those that are highly subsidized.
The key policy question then becomes whether the ethanol should be
subsidized, particularly to the tune of billions per year. If ethanol can
supplant foreign oil and diminish greenhouse gases, then a strong case can
be made. But if that is wishful thinking that leads to adverse consequences,
then the overall policy needs to be rethought.
"An array of analysts and scholars warned policymakers against the
politically expedient path of using food crops for fuel," says Competitive
Enterprise Institute Senior Fellow Marlo Lewis. "We can only hope now that
past ethanol advocates will acknowledge the results of their policies and
support the repeal of bio-fuel mandates."
None of this is to say that corn-based ethanol does not have a place in
today's energy economy. It does. But it must come along side other viable
options that include all renewable energy forms as well as clean coal and
nuclear. It's one thing to try to offset oil consumption. It's quite another
to distort global food and energy markets.
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