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An increasing number of scientists and activists are raising concerns about the impact of biofuel production. The ethanol boom has its roots in a corn surplus that depressed prices - now, shortages of corn are causing food prices to skyrocket and there’s a fear that high commodity prices are pushing farmers to expand cropland. The resulting deforestation is releasing more carbon than the biofuels are saving:
There was just one flaw in the calculation: the studies all credited fuel crops for sequestering carbon, but no one checked whether the crops would ultimately replace vegetation and soils that sucked up even more carbon. It was as if the science world assumed biofuels would be grown in parking lots. The deforestation of Indonesia has shown that’s not the case. It turns out that the carbon lost when wilderness is razed overwhelms the gains from cleaner-burning fuels.
This situation illustrates the Law of Unintended Consequences. This law, which is more like Murphy’s Law than a scientific maxim, states that “for any action one can conceive, there will always be results that were not predicted.” For example, when city planners first came up with suburbs, they expected these housing developments would reduce traffic and overcrowding in downtown areas. Instead, many of these suburbs made traffic worse because they increased the size of the workforce commuting into downtown.
As with anything ethanol related, there’s some controversy about whether ethanol use is what’s driving up the price of corn, or whether the cost rise is driven by population growth and global wealth. As consumers in Asia and India develop disposable income, we’re seeing a sharp rise in the consumption of animal protein. The residents of third-world countries are developing an appetite for more meat, which means that the cost of grains will continue to rise (because raising chickens, pigs, cows, and other farm animals consumes a lot of feed).
There’s some symmetry to the Law of Unintended Consequences - the ethanol boom itself may have been created by accident. According to FoodAndWaterWatch.org, corn prices were historically about $2.50 a bushel after adjusting for inflation. It was only after changes in US law drove down the price of corn that it became an affordable feedstock for ethanol plants:
Nominal corn prices have been low and declining since the 1996 Farm Bill shifted U.S. commodity policy to promoting over-production.
The oversupply of corn created a decline in value, which, in turn, led farmers to seek new markets (such as ethanol) and pressure their representatives in Congress to subsidize these markets. So, by this line of reasoning, the 1996 Farm Bill led to a sharp increase in the price of per bushel. There’s some tasty irony for you.
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Recently, many commodity prices have gone through the roof. You don’t have to look any further than the gas station to see the effects of $110 for a barrel of oil. A visit to the grocery store will quickly reveal that prices are also jumping for corn and wheat, as well as chicken, pork, and beef. The high price of transporting food (as well as the secondary effects of corn being diverted for ethanol production) is directly tied to high oil costs, and these rising food costs are creating serious problems for the working poor.
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Even if you’re a model of self reliance and walk everywhere while growing your own food without chemical fertilizer, try this on for size - increased worldwide demand is causing a coal shortage. Since about 50% of the US electric grid relies on coal power plants, this means that rising coal costs are likely to cause rising electric bills (and/or increasing outages). That will affect the cost of green power purchased on the open market too - which makes solar panels look a lot more attractive (more marginal benefit from power savings and higher resale prices on grid tie-ins). Always look on the bright side!
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The Wall Street Journal writes today on the front page about how enthusiasm for corn based ethanol is cooling in the United States.
The fortunes of many U.S. farmers, farm towns and ethanol companies are tied to corn-based ethanol, of which America is the largest producer. Ethanol is also a cornerstone of President Bush’s push to reduce dependence on foreign oil. But the once-booming business has gone in the dumps, with profits squeezed, plans for new plants shelved in certain cases, and stock prices hovering near 52-week lows.
Now the fuel’s lobby is pleading with Congress to drastically boost the amount of ethanol that oil refiners must blend into gasoline. But formidable opponents such as the livestock, packaged-food and oil industries also have lawmakers’ ears. What once looked like a slam-dunk could now languish in pending energy legislation that might not pass for weeks, if ever.
Ethanol’s problems have much to do with its past success. As profits and production soared in 2005 and 2006, so did the price of corn, gradually angering livestock farmers who need it for feed. They allied with food companies also stung by higher grain prices, and with oil companies that have long loathed subsidies for ethanol production.
The U.S. gives oil refiners an excise-tax credit of 51 cents for every gallon of ethanol they blend into gasoline. And even though it’s the oil industry that gets this subsidy, the industry dislikes being forced to use a nonpetroleum product. The U.S. ethanol industry is further protected by a 54-cent tariff on every gallon of imported ethanol.
This year, even as the production glut was driving down ethanol’s price, critics and opposing lobbyists were turning up the heat. Environmentalists complained about increased use of water and fertilizer to grow corn for ethanol, and said even ethanol from other plants such as switchgrass could be problematic because it could mean turning protected land to crop use. Suddenly, environmentalists, energy experts, economists and foreign countries were challenging the warm-and-fuzzy selling points on which ethanol rose to prominence.
I think there is definitely room for growth in the use of biofuels in the United States, and I also think that ethanol can work as a potential option.
But let’s face it, if we as a country really believe in ethanol as a solution, then why are we putting a 54 cent tariff on every gallon of imported ethanol, which prevents us from bringing in much cheaper sugarcane based ethanol from places like Brazil?
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