The inconvenient truth is that ethanol is bad for taxpayers, bad for air quality, bad for people who like to eat, and it will have no real effect on America's overall energy mix -- too bad DC's politicians won't say anything about it.
Continue reading "Despite Its Huge Flaws, Ethanol Is Political Holy Water in DC" »
As lawmakers limber up to debate the energy package in the House this week, one of the lynchpins of recent US energy policy is conspicuously absent from the agenda: Barring a last-minute amendment, the new legislation will make no attempt to promote ethanol production.
And that’s a big deal. Ethanol is at the core of the White House’s plans to reduce US gas consumption by one-fifth over the next ten years, and until now Congress has been willing to play along. The Senate’s version of the energy package requires a six-fold increase in
America’s renewable fuel production to 36 billion gallons by 2022. Similar measures were expected from the House. Instead, by passing over ethanol altogether (for now, at least), Nancy Pelosi’s crew has given a boost to those with misgivings about the technology, and raised questions about the future of America’s burgeoning ethanol sector.
The move comes at a time when biofuels—once heralded as a consequence-free, green alternative to fossil fuels—are under fire everywhere from the Wall Street Journal to Rolling Stone.
Increasingly, it’s becoming clear that unfettered ethanol production has the potential to become a problem in its own right: Biofuels require huge amounts of water, energy, and arable land, and production on an industrial scale can lead to deforestation and rising food prices. Worse still, corn ethanol—the kind produced and heavily subsidized in the US—requires so much energy to farm and refine that it leads to only minimal reductions in overall carbon emissions.
It seems that everywhere you turn these days, ethanol is being touted as the best way to reduce our dependence on foreign oil. The U.S. Senate recently passed a bill calling for a huge increase in domestic ethanol production over the next 15 years. Auto makers and oil companies run feel-good commercials about their commitment to ethanol. And no leading presidential candidate dares deviate from the gospel of ethanol, thanks to the prominence of corn-producing Iowa in the nominating process.
Yet the public debate about ethanol has been pretty one-sided. We hear a great deal about the potential benefits and very little about the costs. But in economics, there's no such thing as a free lunch. Benefits never come without costs.
The Senate bill calls for annual ethanol production to rise to 36 billion gallons by 2022, up from less than 5 billion gallons in 2006. Let's set aside the question of whether that's enough ethanol to wean us from an oil addiction that has us consuming more than 140 billion gallons of gasoline each year. What are the economic implications of trying to meet the Senate target?
The U.S. Department of Agriculture projects that 12.5 billion bushels of corn will be produced this year. A bushel of corn yields about 2.7 gallons of ethanol, so we'll harvest enough corn to distill nearly 34 billion gallons. However, if we used all of our corn for ethanol, what would we feed our livestock? Where would we get high-fructose corn syrup to sweeten our sodas? It's not an all-or-nothing proposition, but even with increases in corn acreage and yields, the demand for ethanol is already crowding out other corn products.
For years, ethanol's share of corn production hovered around 5 percent. But since 2000, that percentage has grown. Last year, about 20 percent of the American corn crop was used for alcohol-based fuels, and the USDA projects that it will be more than 30 percent by 2016. Even at 30 percent it's unlikely that we'll meet the Senate's goal using corn ethanol. But perhaps that's just as well, because it'll be very hard to build the necessary distillation and distribution capacity by 2022.
By Bryan Sims
Poet LLC, the largest dry-mill ethanol producer in the United States, announced at the 2007 Fuel Ethanol Workshop and Expo (FEW) in St. Louis, Mo., that it has produced cellulosic ethanol from corncobs. The company intends to use the corncobs and fiber (the husk of the kernel) in tandem as primary feedstocks for cellulosic ethanol production. In a joint effort with the U.S. DOE, Poet is converting an existing 50 MMgy dry-mill ethanol plant in Emmetsburg, Iowa, into a commercial cellulosic biorefinery. Once complete, the facility will produce 125 MMgy, 25 percent of which will come from cellulosic feedstocks.
By adding cellulosic production to an existing ethanol plant, Poet will be able to produce 11 percent more ethanol from a bushel of corn, 27 percent more from an acre of corn while almost completely eliminating fossil fuel consumption (83 percent) and decreasing water usage by 24 percent. Poet is currently working with biotechnology and enzyme producer Novozymes to demonstrate enzyme feasibility for the technology. Once the process technology becomes commercially viable, Poet intends to license it to other ethanol producers. Jim Sturdevant, who previously worked at the U.S. Geological Survey’s Center for Earth Resources Observation and Science in Sioux Falls, S.D., will serve as director for the cellulosic ethanol project.
Grand Rapids, Mich. - Ronald Reagan once said that the most terrifying words in the English language are, "I'm from the government and I'm here to help." His one-liner immediately comes to mind when looking at the problems behind the federal government's campaign to boost production of corn-based ethanol with a massive 51-cent-per-gallon subsidy.
Ethanol and other biofuels are advertised as one of the main cures for our oil-thirsty economy. But it's clear that the ethanol boom, with a major assist from Washington, is succeeding in simultaneously raising both fuel and food prices.
With more than 20 percent of corn now dedicated to ethanol production, the US Department of Agriculture is projecting a record US corn crop in 2007 – along with record prices.
Outside the United States, the unintended consequences of ill-considered policies promoting ethanol and other biofuel crops are already in full view. The poor, of course, are hit hardest.
NEW YORK -
Archer Daniels Midland Co.'s fiscal fourth-quarter results showed less profitable ethanol production, but the news did not weigh down other ethanol producer stocks.
Archer Daniels Midland (nyse: ADM - news - people ), the largest U.S. ethanol producer, reported its fourth quarter financial results Monday. Excluding $616 million in asset sales, the company's profit was smaller than in the year-ago period. Higher corn prices and lower ethanol sales made its corn processing division less profitable than it was in 2006.
ADM shares were up 12 cents to $34.17 in afternoon trading.
Morgan Stanley (nyse: MS - news - people ) analyst Vincent Andrews said it was not clear why the company's ethanol volumes were lower than in the year-ago quarter. He called the results were "solid," however, considering investors expected corn supplies to exceed demand.
"Given that corn costs have come down significantly and a robust U.S. harvest is expected, we believe that it is possible that this quarter will represent a trough in corn processing profitability," he said.
Ethanol stocks might also have gotten a boost from news that recent rain has improved the corn growing season in the midwest and driven corn prices down.
Shares of VeraSun Energy Corp. (nyse: VSE - news - people ) shares rose 24 cents, to $14.21.
"Ethanol is the greatest economic development tool for rural Nebraska and other rural states in the last 25 years," said Nebraska Gov. Dave Heineman. By Jennifer Bremer The world's first closed-loop ethanol plant fueled by biogas from animal waste is up and running near the eastern Nebraska town of Mead. E3 BioFuels launched its high-efficiency Genesis Plant on June 28. Biogas from manure from the Mead Cattle Company feedlot adjacent to the plant, powers the plant instead of coal or natural gas. "This plant is referred to as the Genesis Plant because it is the first of it's kind in the world," said E3 BioFuels President and CEO Dennis Langley. "We hope to build 15 more of these kind of plants in the future."
GENESIS PLANT—The E3 BioFuels plant is the first of it's kind in the nation with a patented closed-loop system and is highly efficient and environmentally friendly.
Washington, DC-–Ethanol production and demand moved higher in May, reflecting the growth in the ethanol industry and the increased gasoline demand at the beginning of the summer driving season.
As oil refiners struggled to keep their facilities operating, ethanol production grew to an average of 406,000 barrels per day (b/d), according to information released by the Energy Information Administration (EIA).
This increase in production helped to mitigate the price spikes American drivers endured as a result of refinery maintenance problems, reduced gasoline inventories and higher crude prices.
Additionally, demand for ethanol also increased to an estimated 427,000 b/d per day.
Both production and demand represent increases of 38 and 22 percent respectively over May 2006 figures.
The RFA released the following statistics:
May 2007 Statistics (mg = million gallons; b/d = barrels per day)
"Ethanol is the greatest economic development tool for rural Nebraska and other rural states in the last 25 years," said Nebraska Gov. Dave Heineman. By Jennifer Bremer The world's first closed-loop ethanol plant fueled by biogas from animal waste is up and running near the eastern Nebraska town of Mead. E3 BioFuels launched its high-efficiency Genesis Plant on June 28. Biogas from manure from the Mead Cattle Company feedlot adjacent to the plant, powers the plant instead of coal or natural gas. "This plant is referred to as the Genesis Plant because it is the first of it's kind in the world," said E3 BioFuels President and CEO Dennis Langley. "We hope to build 15 more of these kind of plants in the future."
GENESIS PLANT—The E3 BioFuels plant is the first of it's kind in the nation with a patented closed-loop system and is highly efficient and environmentally friendly.
DES MOINES, Iowa -- As Sen. Hillary Rodham Clinton climbed onto a makeshift stage at the Iowa State Fairgrounds and embraced motor fuel from corn as a key to America's future, she completed a turnabout from being an ethanol opponent, a position she held only two years ago.
"Now, Iowa is way ahead of the rest of the country," the presidential hopeful told listeners at a July 2 campaign stop. "What you've done with ethanol ... you're setting the pace."
Political observers view her about-face as a political necessity, saying Iowa's first-in-the-nation's caucuses -- in which residents of the country's biggest corn-producing state vote their choice for presidential nominee -- makes it politically risky to avoid kneeling at the altar of ethanol-from-corn.
"John McCain tried that, and not too successfully," said former Iowa Gov. Tom Vilsack, referring to the Arizona senator's opposition to ethanol during his unsuccessful bid for the 2000 Republican presidential nomination.
Clinton's turnabout puts her at odds with critics of converting food to fuel, who say diverting grain into the nation's gasoline tanks is a costly boon to the agricultural industry, one that wastes energy, degrades the environment, depends on government subsidies and increases the price of meat, milk, eggs and other foods derived from corn-fed livestock.
"It looks like the high cost of corn is here to stay, which means higher costs for chickens and other food animals," said Richard Lobb, a spokesman for the National Chicken Council. "It really has had a significant impact."