Business Week has just published a great new article called Ethanol: Myths and Realities. It’s a balanced look at the pros and cons of Ethanol, and how much of a difference it might really make.
I especially liked several points made in the article that have been unclear to me until now.
1. How much energy does it really take to create ethanol? More than the ethanol itself produces?
There’s no absolute consensus in the scientific community, but that argument is losing strength. Michael Wang, a scientist at the Energy Dept.-funded Argonne National Laboratory for Transportation Research, says “The energy used for each unit of ethanol produced has been reduced by about half (since 1980).” Now, Wang says, the delivery of 1 million British thermal units (BTUs) of ethanol uses 0.74 million BTUs of fossil fuels. (That does not include the solar energy — the sun shining — used in growing corn.) By contrast, he finds that the delivery of 1 million BTUs of gasoline requires 1.23 million BTU of fossil fuels.
Producing ethanol could get more efficient soon as new technologies help farmers get more corn per acre of land and allow ethanol producers to get more of the fuel from the same amount of corn. The companies developing new corn technologies include chemical giant Dupont (NYSE:DD – News) and Monsanto (NYSE:MON – News), which sells genetically modified seeds as well as chemicals for protecting crops.
2. If ethanol is so great, then why are we putting a 54 cent per gallon tariff on ethanol from Brazil? Is ethanol really a story about domestic farm subsidies, or is it actually about energy independence?
Well, the idea behind the tariffs is to foster domestic production of ethanol. But amid the ongoing furor over high gas prices the idea of repealing the levy has gained momentum in Washington. Though it would probably annoy ethanol producers like agricultural giant Archer Daniels Midland (NYSE:ADM – News), removing the tariffs could have some benefits. It would help ease price pressures and would likely encourage Brazil to boost its ethanol production. However, it’s probably not a short-term solution.
Brazil is undergoing an ethanol revolution far more drastic than that in the U.S. Flex-fuel cars which can run solely on ethanol are widely available and the ethanol supply is short enough that the government recently reduced the mandatory ethanol content in gasoline from 25% to 20%.
“Brazil is the model” for how ethanol can be brought into use, wrote Citigroup (NYSE:C – News) analyst P. J. Juvekar in a recent report. But while buying ethanol from Brazil could be useful in the future, it’s not going to reduce the pain of a road trip this summer.
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