The Big Biofuels Blog

Ethanol Africa has sold a 25% stake to a Black Economic Empowerment consortium bringing itself into line with South Africa's corporate ownership laws that mandate 25% black ownership, according to Business report.

Ethanol Africa is planning to build eight 500 million litre corn-based fermenters and is looking at a guaranteed price for South African farmers.

Abengoa Bioenergy says it is trying to develop a fractionating process and incorporate cellulosic processes into its existing ethanol production stream.

Abengoa executive vice president Gerston Santos-Leon said:

"We want to develop a fractionating technology to break down the biomass into its various components."

 

My colleague Judith Taylor reported from Ethanol 2007 in Tucson, Arizona yesterday.

(Disclosure: both Judith and I work for ICIS. About ICIS)

The increasing use of cellulosic routes to ethanol will help reduce the price of corn in the US from about 2012, LECG consultant John Urbanchuk, told Ethanol '07 in Tucson Arizona, my colleague William Lemos reports.

(Disclosure: William and I work for ICIS: About ICIS)

Ethanol will consume about 30% of the US corn crop by 2012, according Urbanchuk. Urbanchuk did not make a projection on the price of corn, but he said this will retreat from the 2006 peaks as cellulosic ethanol becomes slowly available after 2012.

Just as well, the price of corn increased by 60% between September 2006 and January 2007 in the US, mostly driven by increased demand for ethanol.  

Syngenta hopes it will be able to produce a GM corn that can express amylase, which improves the fermentation of corn starch to sugar by the end of 2008, according to John Baker in ICIS Chemical Business magazine.

(Disclosure: I work for ICIS. About ICIS)

Please email me if you would like copy of the article at

simon.robinson@icis.com

Over in the US PBS has taken a look at the battle over corn being fought by the food and fuel industries in the US. Some interesting numbers about the area of land we'll need to plant...

Heartland, grassroots ethanol has its home, I suspect, at the American Coalition for Ethanol.

The US Department of Energy is putting $385m into cellulosic ethanol and will fund six cellulosic ethanol plants across the US in an bid to drive the technology forward. The goal is to fund plants and technology to produce around 130m gallons (522m litres) of ethanol/year. The story was reported on ICIS news by my good friend Joe Kamalick.

(Disclosure: I work for ICIS: About ICIS)

U.S. Department of Energy  Secretary Samuel Bodman said

"These biorefineries will play a critical role in helping to bring cellulosic ethanol to market, and teaching us how we can produce it in a more cost effective manner"

The lucky companies are

Abengoa

Alico

Blue Fire

Broin

Iogen

Range

The DOE is to be commended for spreading its technology bets widely with technologies ranging from wood or citrus peel gasification to more currently talked about corn stover getting backing. Big chemicals/biotech hittersDuPontt and Novozymes have are partners in theBroin project and Shell is tied up with Iogen. It will be fascinating to see which technology route works best. Which do you think is the most likely to succeed?

In any case, it Looks like I'll have to bring my mental start date for cellulosic ethanol forward by a couple of years.

The Institute of Science in Society has a pretty long article on why biofuels may be a worse cure than the addiction our society has to oil.

BioAmber has a process that may may help make ethanol production greener at a new plant that will take carbon dioxide from ethanol production and make a bio substitute for oil in petrochemicals.

BioAmber, is  a joint venture between Diversified Natural Products (DNP), a U.S. based biotechnology company, and French based Agro Industries Recherche et Development (ARD)) announced plans Thursday for a new facility to produce a green, bio-based replacement for oil in the chemical market.

BioAmber says it

will make succinic acid which can be used to make biodegradable chemicals using the CO2 from a newly constructed ethanol facility located on the same premises. The plant will be able to generate green chemicals, ethanol, bio-diesel, and combination products of succinic acid and ethanol, all in one location.

Now that looks, to me, like a good way of reducing the carbon footprint of ethanol production further... I wonder if they're going to be using crops to make the ethanol...

The press release follows

Is corn ethanol water positive? It depends where you're growing it, obviously, but there are some interesting numbers on EcoWorld, which points out you need between 300 and 900 tonnes of water for each tonne of ethanol grown.
This is very interesting and points to one of the earlier themes of my blog, the effect on water in the environment. It would be good if anyone could help me convert tonnes of water per 300-900 tonnes water per tonne of crop equates to inches of rainfall per year... that would be helpful.

Yellow is not green, necessarily. Using yellow corn to make green ethanol for cars is not necessarily the most environmentally sensitive way of making biofuels. Using biofuels in cars with poor fuel economy is close to being a profligate waste of resources, a point that is made over on Green Options in a guest post pointing to a report out on 18th.

Quoting from Green Options

If we examine GM's E85 fleet, a group of cars that can run on a mixture of gasoline and up-to 85% ethanol, we notice some pretty week fuel efficiency standards. City average less than 11 miles per gallon and Highway less than 15. (See the fleet averages here)

As they say on Green Options:

So rather than fix the real problem, an inefficient fleet of cars, the auto industry has decided to paint the problem green by hoping Americans will swallow the ethanol pill.

But it is a dangerous pill to swallow.

This is why The Network for New Energy Choices, along with Food & Water Watch and Vermont Law School has put together The Rush to Ethanol: Not all Biofuels are Created Equal.

I'll be looking out for that publication.

A Dodge viper hit 220.7mph on a an Oscoda-Wurtsmith Airport runway, according to the Losco county News Herald. Top ethanol dragsters are pretty fast, and this is faster than the fastest gasoline powered car over a standing mile. but there's no news about fuel efficiency

Indonesia's Medco to invest in cassava-based Ethanol in at least one of three factories it is expecting to build in the country for between $135-144m, according to the Investor daily, quoted by Planet Ark.

Medco plans to export the ethanol to India, according to the report.

Indonesia plans to plant more than 5 million hectares with palm oil, jatropha, sugar cane and cassava by 2010 as biofuel feedstock, according to Planet Ark, but it is not clear how much of this will be replaning of existing plantations, and how much will be cleared forest.

Green diplomacy or hard edged national interest? Only someone like Lula from Brazil could do both at the same time in his visit to a number of European capitals, according to Biopact.

Rajesh Valluri has an interesting take on the amount of energy it takes to produce fuel grade ethanol over on his blog. One of the things that strikes me about the fuel ethanol debate is that there is very little spoken about fuel efficiency, and it is ironic that many of the first autos in the US which have been sold as being capable of running on biofuels are MPVs, which typically have very low fuel efficiency. We need to get away from a situation where ethanol production is effectively keeping expensive oil in the ground by displacing gasoline instead of replacing it.

Could methanol be the new ethanol in a couple of years time. I ask the question because my good pal, John Richardson, over on the Asian Chemicals Connection blog has an interesting post about a surfeit of methanol due from about 2012, on current reckoning.
Now methanol and ethanol, apart from having a carbon difference in their composition are both alcohols, and could be used as fuel oxygenates (they both contain oxygen, but that's not the only criteria) with a bit of tweaking of fuel systems, it might work.

There's a long and thorough post over on the Huffington post about biofuel. Does'nt like the idea of it basically because it will do bad things to Brazil. It seems to miss one or two thoughts:
Lets talk about fuel economy. Brazilian ethanol could come to the US if the tariff is removed, which could happen in 2008 at the earliest. And this could see more of the Amazon jungle turned over to sugar cane, and Brazilian grasslands too. (It was OK for the US to plough the prairie, though, apparently).
Alternatively, the US could grow more corn and convert that to ethanol, and in both cases expensive oil would stay in the ground for a little longer. Both of these scenarios also mean that there will be increasing demand for water. who will have the rights to the water? Farmers or people who live in towns and villages?
Or how about US Consumers decide that they would like less power and more miles per gallon from their cars? If fuel efficiency were to be increased then the incremental rise in demand for gasloine would slow and may possibly fall.

Agbengoa Bioenergy is restructuring itself in a series of moves which look to be designed to maintain its profitability at a time when oil is at or close to record highs, and the price of corn is in the same position .
On 23 September, my colleague Charles Shaw reported on ICIS News (Disclosure: I work for ICIS: About ICIS) that Abengoa would be stopping production at its 200,000 cbm/year Salamanca facility in Spain, citing high corn prices and cheap imports of ethanol from Brazil. This follows Abengoa seeing its first-half operating profits rise 20% to €31.2m ($43.2m) on strong ethanol demand and prices, the company said on 17 September and Abengoa is building its stake in low-cost ethanol production.
This is a tough time to be a biofuel producer in Europe, in August, German producer Verbio was forced to reduce capacity at its 200,000 tonne/year plant at Schwedt, citing inhibitive grain costs. But will be offsetting the price of the capacity reduction by selling the grain.

Abengoa at least is not calling for protection from more cost effective imports. and is moving at least part of its production to one of the world's lowest cost producers, Brazil, which exported 50m litres of ethanol to Europe in August 2007.

Perhaps the conundrum of to produce close to the user or in the cheapest part of the world is coming closer to a conclusion.

A Sioux Falls, South Dakota-based ethanol company, Poet, has finalized an agreement with the U.S. Department of Energy to build one of the nation's first cellulosic ethanol plants, according to West Central Tribune. The company is Poet and the plant is likely to come on stream, in 2011, according to the report.
There is some research which suggests that total ethanol yield obtained by fermenting starch and both fiber fractions was 0.370 L/kg compared with ethanol yield of 0.334 L/kg obtained by fermenting starch alone. That's about a 10% yield increase.

But the truth is, corn ethanol is neither the perfect nor the permanent answer to our energy challenge. There are legitimate economic and ecological concerns about an over-reliance on corn-based ethanol. And even if we double or triple its production, it won't replace even a tenth of our demand for gasoline. That's why we must invest in the next generation of advanced biofuels like cellulosic ethanol that can be made from things like switchgrass and woodchips. The struggling paper mills in New Hampshire would be back in business if they could use wood to produce biofuels. We should set a goal to produce the first two billion gallons of advanced biofuels by 2013. And we should make sure that more local farms and local refineries have the chance to be a part of this new industry.

Not me. That was Senator Barak Obama, husting away as a presidential candidate in the US and talking about Real Leadership for a Clean Energy Future on Monday, October 8th, 2007 Portsmouth, New Hampshire. It is good to see him talking about cellulosic fuels from waste wood products. Hats off to Gristmill for the whole speech.

Japanese researchers have developed a super sugar cane that produces double the volume of sugar comapred with traditonal cane, and could help make ethanol more cheaply... here's the video...

According to Planet Ark, yesterday India's cabinet started allowing sugar companies to manufacture ethanol directly from sugarcane juice to aid mills struggling with surplus stocks. Until now, ethanol was produced entirely from the sugarcane byproduct, molasses.
Looks like they're solving a sticky situation... (sorry) more seriously it is interesting that the volume of ethanol to be blended with gasoline is likely to be around 10% from 2008, so the ethanol is likely to be consumed domestically, and not exported.

One way around the US ethanol tariff is discussed over on No1203 a blog. Looks interesting, import non-fuel grade ethanol and then dehydrate it in the US... If that's going to cost less than $.054/gal it might be worth doing... If there's enough spare ethanol to export from Brazil...

Team Ethanol are trying to compare the fuel efficiency of running a Saab from Darwen to Alice Springs (about 930miles/1498km) and running it on e85 (there) and unleaded (back) in the World Solar Challenge, which is more about endurance than raw speed. Google maps puts the drive time at 17 hours and 33 minutes (that's about 86kmh, most efficient driving is at 80 kmh).Among other sponsors, the United Nations of Beer is backing the solar challenge.

Team ethanol is off to Darwin today
You'll be able to follow their progress in a box on the right hand side of the blog. .

There is a new trade group designed to promote industrial ethanol in the European Union... called the Industrial Ethanol Association. It has an interesting view of fair trade in ethanol...

There were several studies on biofuels issued last week, while I was away, and I'm grateful to Ron Steenblik of the Global Subsidies Institute for pointing out his group's new study in of biofuel subsidies in the US, which was launched at on 23 October at a seminar hosted by the German Marshall Fund. Written (as was the original study) by subsidy expert and long-time critic of subsidies to the oil-industry, Doug Koplow, President of Earth Track, the update is almost as long as the original report, published in October 2006. Besides providing revised estimates of government support for ethanol and biodiesel in the United States, it analyses in-depth some of the proposals for expanding support to the industry that are currently before Congress.

The report's conclusion? Support for the industry looks set to exceed a cumulative of $90 billion for the 2006-2012 period -- without a new RFS. With a new, expanded RFS, support levels beyond that period would continue rising into the 2020s.

In light of the report's findings, the GSI recommends that U.S. federal and state governments:

desist from increasing mandatory consumption levels for biofuels and instead adopt a neutral policy position favouring all options to reduce reliance on petroleum in the transport sector;
take into account the environmental effects of biofuels production and distribution cycles in the design of policies that affect biofuels; and
establish a transparent evaluation process to assess the cost-effectiveness of support policies at all levels of government in attaining the declared objectives behind U.S. biofuels policy.

As Martin Wolf says in today's Finanical times

Policy is extraordinarily complex. It can also be highly irrational. Brazil is, for example, the most efficient supplier of bioethanol, but confronts tariffs of at least 25 per cent in the US and 50 per cent in the European Union. A smaller example is the advantage given to production of “flexible-fuel vehicles” in US corporate average fuel-efficiency standards. Because the fuel-economy credit is biggest for the least energy-efficient models, manufacturers concentrate on sport utility vehicles and light trucks. Yet almost all the drivers of these vehicles use ordinary petrol. The result is greater consumption of petrol, not less.

Complex, the idea of trying to get a handle on all of the aspects of biofuels policy makes me want to bang my head on the desk. My colleague, John Richardson, is slightly more forthright in his view of biofuels... he takes a more quantitative approach in his Asian Chemicals Connections Blog: that the biofuels business is driven by idiocy and hypocrisy .

I think that is a little strong, just as I tend not to sign up to conspiracy theories (on the basis that the people who would have to be behind them would not have enough time available in their lives to pull the stunts off or would have to be at least 150 IQ points brighter than your average James Bond villain) and I don't think the business is being driven by hypocrisy. People do see biofuels as being a good thing and are trying their best to mitigate the effects of using gasoline.
They also see biofuels as a way of raising farm gate prices and therefore political support in key consituencies. But, it seems to me that often people's views are partial as is their information. Martin Wolf is right when he uses the word irrational, later in his piece and also when he adds later in his column that there is a hidden cost to apparently costless mandates

eliminate increasingly popular (because apparently costless) mandates to use specific quantities of biofuels, since these shift all the risk of fluctuations in demand and supply of foodstuffs on to their use as food...

Water again, but its not me this time, on always on, Lee Bruno has looked at the biofuel industry's need for water... in a piece called Three Biofuel Waves he thinks they need a lot of water.

Biofuels made from food crops are a "crime against humanity", according to the UN's special special rapporteur on the right to food, Jean Ziegler, and there should be a five year moratorium on their production, according to a report on Reuters.

Jose Sergio Gabrielli, chief executive of Brazil's state petrochemical company, Petrobras, said the US should reduce the tariff on ethanol made in Brazil, because using corn to make ethanol is raising food prices.

The rapporteur's words may seem strong to those of us with comfy lives in the richer parts of the world, but he was speaking from the perspective of the 1bn people world wide who go to bed hungry.

hattip to Biofuelsdigest

US farmers in Iowa are asking their senators to try and change the way that the US Farm Credit system operates to allow it to loan money to ethanol plants that are not majority owned by farmers. According to Domestic fuel.

On the face of it this sounds silly to me. As one of the signatories to the letter sent to the senators put it...

“We understand the struggles of expanding the ethanol and biodiesel industry and trying to keep it profitable in changing economic times,” he adds. “Rising input costs and other factors are creating increasingly smaller margins for ethanol and biodiesel producers.”

In the UK at least, the banks prefer to loan you money to buy an umbrella when the sun is shining. If margins are shrinking and input costs are rising you are not going to have a compelling case to take to the banks.

Jim Schipper, is president of American State Bank at Osceola and current chairman of the Iowa Bankers Association. He explains that the Farm Credit System has preferential tax treatment and access to funding at interest rates a commercial bank is not eligible to get.

“That’s fine as long as Farm Credit lenders are within their mission–providing credit to farmers,” says Schipper. “But this expanded horizons idea goes way beyond that. If they want to finance enterprises that are not farmer-owned projects, then they should have to discontinue their federal support.”

The Government of Quebec has decided it will not allow any more biofuel plants to be built on its territory, according to Francois Cardinal, writing in La Presse. The ban is coming into force because the government of Quebec does not believe that corn ethanol is environmentally beneficial. Zut alors!

Thanks to trusty Babelfish we can get a glimpse of what the thinking behind it could have been...mostly its environmental.

The experts speak about an impoverishment of the soil aimed by the intensive culture, contamination of the rivers, the use on a large scale of weedkillers, insecticides and manure, the rise in the price of the foodstuffs and even of the reduction of the surpluses of corn usually sent to the countries in the need.

But there still, the benefit of ethanol would not be as large as claims it the Charest government. Sunday, in a letter published in the Press, the Beauchamp minister supported that the introduction of 5 % of ethanol into the gasoline sold in Quebec, obligatory from here 2012, will make it possible "to reduce by 780 000 tons per year the gas emissions for purpose of greenhouse".

However the director of the division of research on the toxic emissions of Environment Canada, Greg Rideout, question this kind of assertions. Last spring, network CBC revealed the conclusions of one of its studies: there is no difference between the emissions produced by a car which runs with regular gas or fuel containing 10 % of ethanol.

It is interesting to see a regional government cutting corn ethanol for environmental reasons. Is this a straw in the wind?

Thanks to biofuelwatch for the tipoff

Panda Ethanol has got an air-quality permit, enabling it to proceed with a 115 million gallon/year ethanol plant that will use 38 million bushels of feedstock-grade corn at Muleshoe, Texas.
The firm will use cattle manure for power.

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US BioEnergy has released its third quarter numbers which show an improvement on the prior quarter. A lot of this is down to the firm's hedging strategy which has seen the effective price it has paid for corn in the quarter fall from $3.58/bushel to $3.15/bushel and so increased the revenue it generates from each gallon of ethanol it sells. The opposite was true in the second quarter where hedging operations increased the cost of corn by $0.18/bushel.
Hedging the price of corn is an important part of the more sophisticated ethanol producer's armoury. The problem is that what you wins on the swings you loses on the roundabouts, its just that you don't win quite so much or (ideally) lose quite so much as you would do if you didn't hedge.
Hattip to Energy Refuge.com

This pushes many of my buttons, its got water, its got California and its got Ethanol. It is symptomatic of the increasing doubt that the biofuel industry is facing in the US.

How good for the environment is ethanol? Ask Patty has the answer (to a point), in a nicely argued essay.

20% of the US corn crop has been used to make ethanol this year, according to a report on WJFW, and around 4m acres of the US were planted with corn.

I like this analysis of the US ethanol from corn market as it now stands and Geoffrey Styles, proposal for a smarter ethanol policy for the US. Styles points out that after 25 years' of subsidies the US ethanol market is not economically viable.

He says there is a strong case for

shifting the focus of the ethanol portion of US energy policy--and agricultural policy. Considering all the above factors, I believe a wiser ethanol policy would consist of the following:

1. Freezing the federal RFS at the current level of 7.5 billion gallons per year.

2. Phasing out all subsidies for ethanol derived from food sources within five years.

3. Phasing out the tariff on imported ethanol within two years.

4. Shifting the point of subsidy from the blender to the ethanol plant, to ensure that future subsidies go to US producers, rather than offshore.

5. Increasing the subsidy on cellulosic ethanol to $1.00/gallon until 2010, falling by 10 cents per gallon per year thereafter.

Such a program would focus federal incentives where they will do the most good, promoting the commercialization of cellulosic ethanol, which offers much larger energy and emissions-reduction benefits than corn ethanol and entails fewer concerns about sustainability.

I particularly like his proposal for the end of subsidies on ethanol from food sources and the end to protective tariffs. I guess there would need to be support for cellulose production in the short therm and I'd argue for it to be phased out over 3-5 years after commercial production starts.

Since cellulosic ethanol is expected to be cheaper to produce, once it achieves economies of scale, it should not require permanent subsidies or tariff protection, as corn ethanol has. The result would be a very tough market for current ethanol producers, but it would ensure that the ethanol we use as an oil substitute is produced as efficiently as possible, without merely substituting LNG imports for oil imports

It would also allow corn to be used for what it is best for Food. He asks an unanswerable question which points up the difficulties that the US renewable fuel industry faces.

Whether or not something like this could ever be enacted by the US Congress, this is where the debate should focus, rather than on arguing about expanding an inefficient program by a factor of five.

Of course, there's no debate about fuel efficiency or what the price of any of this fuel will be in the future...

The UK's first ethanol from Sugar Beet plant opened about a week ago...

What is it about fast cars? Anyway I've stumbled on something called A1-Grand Prix, which pits teams of national drivers against each other in identical cars, and they're going to be fuelling them with a 30% blend of ethanol in 2008, according to Greenbang. The mixture is almost certainly called "Hiperflo" E30, sourced from sugar beet in Europe and produced specifically for the series by racing fuels specialist blender Petrochem Carless.
There was some hoopla in the US a while ago when the Indy Car people said they were adding 10% ethanol, which sounds impressive until you find that before that they were using mixtures of ethanol and methanol, chemically its cousin, for years. Slapping 30% ethanol into gas will be more of a challenge for engine builders to cope with, I guess.

US ethanol production at 5 billion gals last year almost exactly matches the volume of gasoline used by US drivers waiting in traffic jams in 2003, according to No Impact Man.

So that's 20% of the US corn crop spent keeping people's engines ticking over.

One of the unintended consequences of the rush to ethanol in the US is that now hops are in short supply. Hop growers have moved into more profitable corn in the Pacific North West, according to Dethroner (where every man is king) this is putting craft beer in a parlous position... Shame, shame, shame.

I came across this over on Envirofuel, a company called Syntic Biofuel has got hold of some catalyst technology to convert biomass into ethanol at a cost of around US 37 cents when operating at

This is the kind of "cellulosic" technology that I like, it is well understood and the products from thermal decomposition look easy to manipulate into sensible fuels. I think that most of the competition will take place in the area of yields and rates of reaction, which is where catalysis technology will be important.

Luke has some good questions that will have to be answered if this technology is going to become commercial.

"the high cost of corn and the low price of ethanol made for difficult economics at the plant"

Look out for more of this this year unless there is a moderation in the price of corn in the US.

The quote comes from a report in the Kansas City Business Journal about E3 Biofuels, which filed for Chapter 11 bankruptcy protection after a fire at the firm's plant at the end of November.

ConAgra looks to have pulled out of a plan to build an ethanol plant in Clovis, New Mexico, because the price of corn and water would have been too high, according to the Albuquerque Journal.

Corn you can expect, but this is the first time that I've seen the cost of water as a reason not to build a plant. But then New Mexico is pretty dry.

Ethanol plants are a bad idea and politicians are at leas venal, according to Residual Forces, which is pretty strident on its dislike of ethanol plants and the demands that they place on water in Minnesota.

There's a long and thorough going piece over on Farm Futures about the Biofuel Smear Campaign. I'm not sure that I agree with it entirely. It is based on the US experience, and that as far as it goes is OK. In the US the price of food is only partly determined by the price of food based ingredients, if food is processed then energy is used to do the processing. So the rising price of corn (up 67% in two years) is less important in the price paid by the consumer of a box of breakfast cereal fortified with sugar, salt and 97 vitamins, than it is to people who mill their own grains to make their food directly.
That said. I like the parts about US Farm policy and the sign off paragraph, which I could have written myself.

Biofuels are not a perfect answer to the problem. They are only one piece of the puzzle. But to dismiss their potential impact on foreign oil dependence is short-sighted at best. There is no more cheap petroleum in the world. American consumers need to wake up and realize the goal to move beyond oil is attainable, but not without a change in attitude and yes, some sacrifice.

This is William Lemos, one of ICIS professional market watchers, talking about the state of the US ethanol market.
(Disclosure: I work for ICIS. About ICIS)

William has a good line on the Brazilain view of the US ethanol import tax. He was talking just ahead of the recent NPRA conference in San Antonio, Texas.

How much does ethanol cost the US, that's the question on a post from Say Anything. just to remind us the author spells it out like this...

The other think that’s remarkable in this article is just how much the ethanol subisdy is costing us. When we fill up with a gallon of ethanol it’s costing the taxpayer (you and me) $1.90 in addition to the $3.40 we’re paying the friendly guy inside the pump. Plus we’re paying in higher food prices as well

I'm going to ask him if he's for ethanol from sugarcane... that should be interesting

For one commentator at least, the end is nigh for ethanol stocks in the US. Its a bit like reading Eyeore, but maybe Douglas A. McIntyre has a point in A Requiem for Ethanol.

I've been in conversation with David Benson, about the role of biofuels in the current round of food price rises across the world.

We've been chatting in the comments a couple of posts back . I don't think that we are too far apart in our appreciation of the situation.

For what it's worth, I think there are a number of pretty likely reasons for the rise in food prices.

One of the most important is that the price of crude oil has risen over the past year from $65.5/bbl to $130/bbl . This hits the price of food because the price of harvesting it, moving it, processing it, distributing it and taking it home is influenced by the price of oil. This influence is greater in the developed world, where people eat more energy intensive processed food.

Another are distortions caused by trade and by protectionism. Most countries want to operate their agriculture at a surplus, this keeps prices to consumers down (which helps keep the peace) and farmers happy, through subsidies. There are often difficulties where this process ends, when local farmers can not compete with imports and when these get more expensive .

Thirdly, there are distortions in the world market. Protectionism isn't perfect and countries with too much excess production may sell their surpluses in foreign markets at or below their own cost of production and transportation. That's dumping, which spoils otherwise well balanced markets. (Fair trade is the best solution but there's no time for that now)

Fourthly, there are futures contracts. These allow farmers to fix the amount of money they will get when their crops are harvested. But also they allow speculators* to enter the market and trade the contracts amongst themselves.

*You may wish to call them investors.

Finally there is the level of production of crops and the demand for crops.

I'd put more weight on this aspect, than David does. I do this on the basis that taking 25% of the US corn crop to use in ethanol in 2007 effectively reduced the amount of grain available for food use by 12% in the US last year. (In 2007, the US produced 334.5 million tonnes of corn and 83.6m tonnes were used in the ethanol business).

The USDA says in its baseline prediction for 2008 to 2015 for corn.

Market adjustments to the increased demand for corn to produce ethanol extend well beyond the corn sector. Movements in relative prices trigger supply and demand adjustments for other crops. Higher feed costs affect the livestock sector, slowing increases in or reducing production of all meats over the next several years.

If you reduced the volume of a big commodity like corn in a big producer it simply has to contribute to bringing supply and demand closer to balance. Once we get to balance then small distortions in supply will have big impacts on prices. This may be why the drought in Australia is being used as one explanation behind high food costs. Australia accounts for about 1.3% of the world grain production, compared with 18% from the US.   

The process begins when the cane is ground up and cooked under high pressure with a mild acid to hydrolyze the hemicellulose and separate it from the cellulose. The five-carbon sugars in hemicellulose are then fermented using genetically modified E. coli. The cellulose is broken down with enzymes and fermented with another type of bacteria called Klebsiella oxytoca. This bacteria does double duty, since it also produces enzymes that break down cellulose, reducing the amount of enzymes from outside sources by 50 percent. The dilute ethanol produced from fermentation of both types of sugar is then distilled to make fuel.

It's going to be a great range-extending type of fuel.

As long as the ethanol mandates are driving up the price of corn and increasing the demand for and cost of natural gas, corn ethanol producers must chase their tails in a vicious circle.

"The world needs to start again and plan properly. If biofuels are to play a part in a renewable energy strategy we must ensure that they benefit the environment and that poor farmers and consumers are not harmed by their use."

Historically, distillers grain represented 10 percent of an ethanol plant's revenue stream, said Jerry Shurson, an animal science professor at the University of Minnesota. Today, it's closer to 20 percent to 25 percent, he said.

What's more, the parliamentary committee is demanding that, before 2015, a full review of the whole EU biofuel promotion policy and its social and environmental impacts be carried out to determine whether the targets need revising. This review should "focus on consequences for food security, biodiversity and the availability of electricity or hydrogen from renewable sources, biogas or transport fuels from ligno-cellulosic biomass and algae," the text reads. 

This flies in the face of much of the current thrust of European biofuel industry, and will create uncertainty in the market. That is not completely a bad thing. The difficulty for many existing companies and the trade associations that represent them centres around their needs to keep shareholder/proprietors happy quarter to quarter and year to year. The Parliament, by voting in this way, is hoping to develop a rounded robust biofuels sector that will have little or no impact on food supplies. This has to be preferable in the long term to a biofuel sector that competes for food crops.

The one thing that I don't like about the vote is that it adds in electricity and hydrogen. I especialy doubt that hydrogen will be a sustainable fuel untill we develop bacteria/algae to produce it from organic material without generating carbon dioxide. Hydrogen is bad because it is currently made using electicity, so the process is less efficicnt than electricity production. There is little or no infrastructure in place to get hydrogen to the point of need. 

The European Parliament's powers vary from area to area, for example, if this decision is seen in the context of agriculture, then parliament can only give its opinion to the Council of Ministers. If its a non-sensitive area then the Council and Parliament have to agree. If there are any experts in the rolls of Council and Parliament out there, I'd like to hear from you.

So where do the Malaysians fit into all of this... They are concerned that the poposed increases in carbon savings that are also included in the parliament's decison will leave palm and soy oil out in the cold. They might neet to lobby national governements, or be much more imaginative.

"Current policies tend to favour producers in some developed countries over producers in most developing countries. The challenge is to reduce or manage the risks while sharing the opportunities more widely."The FAO puts the total share of the world fuel market supplied by biofuels at 2%. It also makes a point that this blog has made on numerous occassions in the past that

If developing countries can reap the benefits of biofuel production, and if those benefits reach the poor, higher demand for biofuels could contribute to rural development. "Opportunities for developing countries to take advantage of biofuel demand would be greatly advanced by the removal of the agricultural and biofuel subsidies and trade barriers that create an artificial market and currently benefit producers in OECD countries at the expense of producers in developing countries,"

Burried at the end of chapter 1 of the State of food  is this gem...

The potential for current biofuel technologies to replace fossil fuels is also illustrated by a hypothetical calculation by Rajagopal et al. (2007). They report  theoretical estimates for global ethanol production from the main cereal and sugar crops based on global average yields and commonly reported conversion efficiencies.

The results of their estimates are summarized in Table 3. The crops shown [wheat, rice, maize, cassava,sugar cane, sorghum and sugar beet] account for 42 percent of total cropland today. Conversion of the entire crop production to ethanol would correspond to 57 percent of total petrol consumption. Under a more realistic assumption of 25 percent of each of these crops being diverted to ethanol production, only 14 percent of petrol consumption could be replaced by ethanol. The various hypothetical calculations underline that, in view of their significant land requirements, biofuels can only be expected to lead to a very limited displacement of fossil fuels. Nevertheless, even a very modest contribution of biofuels to overall energy supply may yet have a strong impact on agriculture and on agricultural markets.

My emphasis. Biofuels can only make a marginal difference to the world's energy demands using current technology, and as I wrote earlier today, second generation technologies around cellulose will become increasingly costly in future.

Should we be downhearted?

No!

There is real scope for biofuels to make a difference, providing that we use the right combination of technologies, we use the right feedstocks and we trade them in the right way. That is fairly across borders using a genuine free market without hidden subsidies or corruption. 

I'm going to say it once again, we as a society must  get to grips with fuel econonmy in all of its guises, from better home insulation and higher building standards to building cars with greater fuel efficiency.

Hattip to c-questor.

Part of the problem stems from protein producers' plans to cut back on production in the next year to avoid paying more for animal feed, which has been a huge weight on profits as the cost of corn has skyrocket. Beef producers cut supply by slaughtering more animals, which sends more product to market initially but reduces the size of herds to lower future inventory levels. Chicken producers, meanwhile, set fewer eggs to hatch.

Introduction:

Recent high crude oil prices reaching 140 $/barrel and federal incentives have spurred biofuel production. Additionally, as noted by a 2007 McKinsey report, cellulosic biofuels have the potential to be a negative cost means to abate CO2. However, the majority of the current ( I generation ) U.S. biofuel production consists of corn converted to ethanol via fermentation ( ~6.5 billion gallons of ethanol in 2007 , ~250 million gallons of biodiesel in 2006). First generation biofuels in the US primarily comprise of corn ethanol and soy biodiesel. This conversion of food to fuels has not been without its disadvantages. For example, concerns about food for fuel, resource (land, water, energy) requirements, as well as net energy balances have made first generation biofuels a topic of debate. In this article, I will examine the some near-term challenges and opportunities for the U.S. biofuel industry , and discuss some of Obama's biofuel energy policies.

In comparison to I generation biofuels, II generation biofuels such as ethanol from cellulose, fuels from lignin likely have lesser environmental impacts. However logistical issues (gathering waste biomass) as well as enzyme costs are the main impediments for the commercialization of this technology. Additionally, in the case of waste biomass from crop refuse, the amount of biomass (ex: corn stover) to be left in the field to replenish the soil carbon is still a subject of research. The so-called III generation biofuels (algal biodiesel, high-photosynthetic rate plants) have the advantage of higher specific yields, but more research needs to be performed before they can be commercialized. For example, algal biodiesel economics are primarily affected by the algal yields, and improvements in algae productivity significantly improve the algal yields and overall economics.

The current economic downturn and lower demand for commodities has impacted several corn ethanol producers who locked into higher corn prices, anticipating an uptrend in commodity prices. VeraSun, for example, has filed for bankruptcy protection and is hoping to renegotiate agreements with corn producers. In the short-run, additional corn ethanol plants are not likely to be constructed because of lower demand for gasoline and tight credit markets . More about the general effects of the credit crisis on various sectors of the energy industry from an article on The Oil Drum .

Biofuels in Obama's energy plan:

1. Federal mandates for biomass-derived fuels and a National Low-Carbon Fuel Standard (LCFS): The Obama-Biden energy plan (referred to as Obama energy plan) calls for 60 billion gallons of biomass-derived fuels by 2030. In comparison, U.S. currently consumes 143 billion gallons of gasoline annually, and current bioethanol production is ~7 billion gallons/year. However, the McKinsey report projects only 15 billion gallons of biofuels (as opposed to 60 in the Obama energy plan), of which 10.8 billion gallons would be provided by starch-based ethanol, and less than 4 billion gallons would be provided by cellulosic biofuels. Given that current corn-based ethanol production is about 7 billion gallons/year, it is clear that achieving the figures in Obama's energy plan will require massive increases in second-and third-generation biofuel production. The LCFS will mandate fuel suppliers to decrease the carbon content of their fuel by 5% by 2013 and 10% by 2018.


2. Impact of regional/federal greenhouse gas trading programs on biofuel demand and utilization: Obama has mentioned that he will work to implement a cap-and-trade program to limit U.S. CO2 emissions, where the CO2 offsets would be auctioned. Whereas it is not clear whether political support to pass such legislation in the current economic environment exists or not, it is somewhat certain that clean fuel standards and green energy credits would be enacted before a federal cap-and-trade bill. On the other hand, regional cap-and-trade programs ( RGGI , MGGA and WCI ) also aim to limit regional GHG emissions. Particularly, MGGA, comprised of many corn-growing, ethanol-producing Midwestern states will likely have strong support for biofuels as a source of CO2 offsets in its program. On the other hand, the use of agricultural land to grow biofuel crops will conflict with other measures in a cap-and-trade regime. Two such examples are biomass co-firing in cement kilns and coal plants, and conservation-tillage leading to agricultural carbon sequestration in the soil. Such conflicting measures could lower the land/biomass availability for I/II generation biofuel production. Therefore, these apparent conflicts should be well addressed in any federal/regional carbon legislation. More about current climate policy proposals from the Resources for the Future and the Pew Center on Global Climate Change .


3. Flex-fuel vehicles: The Obama energy plan will mandate all new vehicles by 2012 to be flexible fuel vehicles (FFVs) which can run on gasoline-ethanol blends of upto 85% ethanol (E85). It is not clear if such FFVs could be operated on other fuels such as biomass-derived butanol .


4. Economic incentives for biofuel production: Obama will likely continue Bush's goal of producing at least 36 billion gallons of biofuels by 2022, which also includes a tax credit of 0.51 $/gallon of ethanol blended into gasoline. He proposes to eventually extend this to cellulosic ethanol. This is likely a measure to prevent further job losses in the corn ethanol industry, which is suffering from the low crude oil/gasoline prices. I note here that his support for ethanol tax subsidies was one factor that set him apart from McCain in the Iowa election. Additionally, the 2008 Farm Bill included a tax credit of 1.01 $/gallon of biofuel produced from renewable cellulosic feedstock. Legislation pending in the Congress also aims to provide excise and income tax credits (1.50 $/gallon) of fuel produced from algae.

Summary:

In the near-term, the demand for biofuels will be affected by existing federal mandates, world oil prices, credit markets and regional cap-and-trade programs. Of these, providing access to lines of credit and accelerating research in advanced biofuels would be some of the near-term initiatives that could help meet the 60 billion gallons/year target for biofuels. Any policy actions taken should not result in unintended consequences. For example, a recent study found that meeting the renewable fuel standards for biofuels by corn ethanol production would worsen the "dead zone" in the Gulf of Mexico. Additionally, the use of agricultural land to grow fuel-producing crops will likely result in conflicts with other means of carbon mitigation. Balanced policy measures addressing the larger picture are required for sustainable biofuel production.