The idiocy and hypocrisy of biofuels

I am having a go at the US here (see article below) – a pretty big target – but don’t worry, Asia is the next in line on this blog: the opportunistic, shallow and downright unpleasant palm oil-based biodiesel industry deserves similar treatment.

As for ethanol, Rex Tillerson has a point. The CEO of ExxonMobil was quoted in a recent Forbes article as saying “we can’t add anything to moonshine technology” – indicating the company’s indifference to investing in the biofuel.

Now I never thought I would find myself agreeing with ExxonMobil on anything.The International Monetary Fund’s (IMF) recommendation that the US should eliminate tariffs on biofuels seems very unlikely to be adopted.

The reason is the entrenched nature of the ethanol industry, say some commentators. They argue that ethanol is as politically well connected as oil, meaning that more rather than less government support is probable.

Never mind the economic nonsense and dubious environmental benefits of making ethanol from corn and the valuable resources, time and effort being wasted when the focus should be on more funding for cellulosic research. What matters more, these cynics say, is how many friends you have in government.

The IMF recommendation came in a report released last week, in which the institution claimed that sugar cane-based ethanol was 15% less expensive to produce than gasoline whereas corn-based ethanol was 18% more expensive. It added that sugar cane ethanol also generated fewer emissions than the alternative route via corn.

The elimination of tariffs on US and European biofuels would shift production to more efficient operations in India, Brazil and elsewhere in Latin America, the report added.

But critics of US ethanol claim that a shift in government policy is unlikely because:

Corporate ethanol refiners benefit from ethanol production subsidies and commodity production-driven farm policy.
Congressional representatives gain electoral and financial support from passing legislation which boosts the ethanol industry.
Farmers receive a subsidised market for their crops and commodity programme payments.
However, the biggest beneficiaries have been the big food processors, milling companies, feedlot operators, granaries and meat processors, claims the US non-government organisation Food and Water.

The ethanol industry enjoys subsidies at many levels, including a 51 cent in the gallon tax credit for refiners and the 54 cents/gallon tariff on imported ethanol from Brazil.

Environmental arguments against the usefulness of corn-derived ethanol include increased soil erosion, pollution and depletion of water supply and heavy electricity consumption.

The World Resources Institute, a not-for-profit Washington DC-based environmental body, believes that the development of corn-based ethanol will add to the problems of soil erosion and water quality that already afflict the US.

Its study into ethanol also concludes that fewer farmers will enrol in the Conservation Reserve Program (CRP).

Under the CRP, which was set up more than 20 years ago, landowners receive government cash to set aside highly eroded lands for conservation. This protects topsoil from erosion, improves water quality and helps increase wildlife populations.

By the end of 2005, 35m acres were covered by the scheme, resulting in the sequestration of an estimated 48m tonnes of CO2 emissions.

But contracts on 26m tonnes of these acres are due to expire at the end of this decade.

The concern is that farmers will be reluctant to sign new contracts because of the possibility that they’ll be able to make more money from growing corn for ethanol.

A major problem with expanding corn production is that it is an input-intensive crop that puts enormous pressure on soils.

Most corn farmers have traditionally practised crop rotation – planting one crop (usually soybeans) one season and another crop (corn) the next.

This practice allows soil to regenerate fertility because each crop variety draws different nutrients from the ground.

Although most family farmers are likely to still practice some rotation, the bigger growers are expected to focus only on the crops that make the most money.

Abandoning rotation will mean that because the nutrients in the soil will become exhausted, increasing amounts of chemical fertilisers will have to be used, raising levels of run-off and harming water quality.

Ethanol refineries require large amounts of water. This will tax already strained water resources as production increases.

A recent study by the Institute for Agriculture and Trade Policy in the US estimates that average water consumption for ethanol plants is about four gallons per litre of ethanol produced. It concluded that water availability will be a major issue, particularly west of the Missouri river.

Ethanol plants have become more efficient in water use. But even if plants achieve the target set by the Renewable Energy Association – three gallons of water consumption for every gallon of ethanol produced – the industry will consume an estimated 30bn gallons of water next year.

Coal and natural gas are commonly burned to produce the electricity for biofuel refineries.

These facilities, therefore, discharge many of the compounds that using ethanol as a fuel is intended to reduce – carbon dioxide, carbon monoxide, nitrous oxide, volatile organic compounds, sulphur dioxide and particulates.

Emissions from coal-fired power stations are higher than those run on natural gas. The US Department of Energy says that ethanol made from refineries that depend on coal-generated electricity produces more greenhouse gases than conventional gasoline refineries.

Around 85% of ethanol plants run on natural gas because it is less capital-intensive and is a highly manageable fuel.

However, ironically – because of environmental pressure – natural gas exploration off the US coast has ground to halt.

Gas is likely to remain tight and pricing high, meaning that ethanol producers might have to resort to increased use of coal-based electricity.

And one of the biggest concerns over US ethanol and biofuels in general is the effect on global food prices.

The IMF shares this concern, warning in the report that “one country’s policy to promote biofuels – while protecting its farmers – could increase another (likely poorer) country’s import bills for food and pose additional risks to inflation or growth.”

Corn-based ethanol has, however, consistently been found to produce less tail-pipe emissions than gasoline in numerous peer-reviewed studies.

But the Energy Department says cellulosic ethanol would produce 87% less emissions compared with 18-28% for ethanol made from corn.

Those who support the US ethanol industry are able to contest all the points above by producing volumes of research to the contrary.

But the weight of opinion against corn-to-ethanol, and against rape and palm-oil based biodiesel, is building.

Have we wasted time pursuing these technologies? Time is a commodity seemingly in short supply because of accelerating global warming.

Or should we take whatever environmental gains that can be made now rather than wait for the pipe dream of commercial cellulosic ethanol technologies?

John Richardson, Director of ICIS insight Asia, runs an Introduction to Biofuels training programme for beginners in the industry. For more details, contact john.richardson@icis.com

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