It does have other side effects, which include higher food costs. The RFA (Renewable Fuels Association) would lead us to believe that “corn demand for ethanol has no noticeable impact on retail food prices” (http://www.ethanolrfa.org/resource/facts/food/) and that “Ethanol production does not reduce the amount of food available for human consumption.” (http://www.ethanolrfa.org/resource/facts/agriculture/) There are two very serious issues with both these statements, and both are somewhat obvious, even to the average citizen. First off, even the RFA admits that ethanol production raises corn prices (http://www.ethanolrfa.org/resource/facts/economy/). Second of all, as for reducing the amount of food available for humans, the increase in corn grown for ethanol has reduced other agricultural resources to increase the RFA member’s checkbooks. Soy production, among one of the food supplies lost to corn ethanol production, dropped 22% in 2007 for one instance. Feed for livestock and other animals will increase in price, raising the price of poultry, pork and meat. And lastly, don’t forget the .51 cent per gallon ethanol tax credit (VEETC Subsidy) to ensure viable ethanol production in the U.S., thereby reducing the Federal Highway Trust Fund by the same amount.
Why will ethanol production continue to grow you ask?
To reach the goal of the US to make 100% of all U.S. gasoline fuels blended with 10% ethanol (E10), it will take about 20 billion gallons of ethanol per year. We would need at least 7.4 billion bushels of corn per year for that much ethanol. USDA forecasts that ethanol will use 2.15 billion bushels of corn from the 2007 crop. The difference between today and full E10 production is a minimum of 35 million more acres of corn, or 125 million acres per year. Corn for ethanol will replace other crops to some extent, also raising soybean, wheat and cotton prices. We simply do not have the resources or farmland for enough feed, exports, food use and this level of ethanol. Elevated corn prices will stop ethanol growth long before the ethanol market reaches saturation. We, the consumers will pay the price, not only at the gas station, but also at the grocery store. In essence, the ethanol industry (Mainly, the RFA) may represent one of the greatest challenges ever faced by the U.S. meat and poultry industries. Even without subsidies current oil prices imply that corn is worth more to the ethanol producer than it has historically been worth for food production. With subsidies ethanol production is going to cause major downward adjustments in U.S. animal agriculture production and crop exports. So, as it stands now, the animal agricultural industry is now competing not only with other meats, but also oil companies and the deep pockets of the Federal government, and it hardly seems like a fair fight.
So where does the industry get their ethics from, the stuff my pockets group? We have starving people across the world, and people can’t afford the higher costs of foods, but what the heck, we are reducing C02 emissions a bit. This is wrong, on many levels, and probably won’t change without a major uprising of some sort. To literally force people into starvation for the sake of a few gallons of ethanol is ludicrous, immoral, and should be illegal to say the very least.
The following was taken from the “Biofuel Support Policy Costs to the U.S. Economy” dated March 24, 2008 (http://farmecon.com/public_articles.aspx).
“Biofuel Support Policy Costs to the U.S. Economy Executive Summary: The U.S. government has a long history of aiding the biofuel industry. In 1978 the first federal financial supports for use of ethanol blended with gasoline were set at a fixed $0.40 per gallon payment for 1 gallon of ethanol added to 9 gallons of gasoline to make “gasohol”, now known as “E10”. Subsequent programs changed support levels and added usage mandates, but we have had continuous Federal financial support of biofuels for over 30 years. Current Federal law pays a fixed minimum of $0.51 per gallon for all ethanol blended with gasoline. Payments go to petroleum blenders in the form of a tax rebate. The recently enacted Energy Independence and Security Act of 2007 also mandated 9 billion gallons of renewable food-based biofuel use in 2008 and 15 billion gallons by 2015. There is also additional Federal support for small ethanol producers, a $0.54 per gallon import duty on ethanol, and biodiesel tax credits. Additional Federal mandates for biofuels raise the total mandate to 36 billion gallons in 2022. State and local programs for both fuel ethanol and biodiesel also add to the financial support for biofuels. This paper will focus on the effects of the Federal biofuels program for corn-based ethanol and soyoil-based biodiesel.
Why have biofuel supports become a national concern after 30 years? When energy prices were lower than current levels Federal supports for biofuels had little impact on agricultural feedstock markets or food prices. Ethanol and biodiesel production was not viable enough, even with supports, to use enough corn or soybean oil to make significant differences in prices, production or supplies of crops available for food production. However, over the last three years that situation has changed.
Prices of crude oil, and thus gasoline and diesel, have more than doubled since 2003. Even without Federal policy support biofuels would be playing an increasing role in the demand for feedstocks, mainly corn and soybeans. That is, the energy value of crops used for biofuel production is now higher than their historical food-based prices prior to the run-up in energy prices. Even in the absence of Federal policy support biofuel production would be growing, and crop prices would be higher than in the past, due to the increased demand for biofuels.
Federal support policy has significantly increased the attractiveness of ethanol and biodiesel production to levels well beyond that furnished by market forces alone. U.S. energy policy is now having major effects on crop demand, crop plantings, crop prices, food production costs and the long term availability of major U.S. grain and oilseed crops for food use and exports.
The feedstock demand and price-enhancing effects of Federal energy policy have been so extreme that feedstock prices have increased to the point where biofuels profitability itself has been reduced significantly. An ethanol refinery model maintained by DTN3 showed losses for much of early 2008. In 2006 and 2007, when corn prices were much lower, the model was showing significant profits. Biodiesel production from soy oil has become very unprofitable.
The effect of biofuel policy on biofuel costs and profitability is perhaps the greatest irony of our biofuels support policy. By dramatically increasing demand for limited supplies of feedstocks our Federal energy policy has increased the total cost of biofuel production well beyond what the free market alone would have allowed. Biofuel producers are not reaping most of the benefits of the program. Biofuels support payments have become windfall profits for grain and soybean producers.
As a result of Federal biofuels support cost increases for domestic users of the 2007 corn crop will be about $14.7 billion. Cost increases for domestic users the 2007 soybean crop will be about $8.5 billion. Those extra costs will rise sharply in the 2008/2009 crop year and beyond. Prices of other feed ingredients have also increased in tandem with corn and soybeans. While higher prices represent increased revenue for crop farmers, those revenues are costs to everyone else who uses corn or soybeans – including biofuels producers.”
Cellulosic Ethanol to the Rescue?
This is a better option, as it won’t take food from babies’ mouths so to speak. I do see one issue though, if we use wood for this process, which absorbs co2, which will then be released again as we use the wood for fuel, seems a little absurd. I hope they have that issue resolved by the time it goes into production. Here is a more detailed review of Cellulosic Ethanol from :(http://www.wikinvest.com/concept/Cellulosic_ethanol)
“Cellulosic ethanol is produced from more widely available plant-based materials, such as wood and grass, and can even be made from urban and animal waste. While the end result, ethanol is the same whether it is produced from grain or from cellulose, producing ethanol from cellulose has several advantages over producing ethanol from grain. Since it is produced from non-edible parts of plants, cellulosic ethanol does not compete with the production of food, competition that can cause significant price volatility. It can also be produced with the aid of chemical catalysts, making it potentially more efficient to produce than grain-based ethanol, if the right technologies are in place. The production of cellulosic ethanol is also more energy efficient than the production of grain-based ethanol (which requires natural gas), resulting in greater decreases in the greenhouse gas emissions which many claim contribute to climate change.
The early entrants into cellulosic ethanol refining and marketing will benefit from the growth in the cellulosic ethanol industry. Companies who have begun production of cellulosic ethanol include Logen Corporation, the first to sell cellulosic ethanol and in whom Chevron has taken an equity stake, SunOpta, who built the first cellulosic ethanol plant, and Abengoa Bioenergy (AMB-MCE), which is currently building out a commercial-scale cellulosic ethanol plant in Spain. Dupont should benefit from a growth in cellulosic ethanol as well, as it is piloting several new technologies for cellulosic ethanol refining.
Chemical companies that might supply the catalysts required to produce cellulosic ethanol will benefit from the growth in the cellulosic ethanol industry. Early-stage chemical companies, such as Genencor and Novozymes (NZYM B-CPH), both of which have received U.S. Department of Energy funding for research into this area, would stand to benefit. Diversa (DVSA) is another major enzyme producer.
Timber companies, with access to significant resources of wasted wood, and waste management companies who control access to cellulosic waste will benefit from growth in the industry as well as rising timber prices. As suppliers to cellulosic ethanol plants, they may be able to monetize previously worthless assets (such as wood shavings, or unprocessed waste). Plum Creek Timber Company and Rayonier Inc. REIT (RYN) represent such companies.
Companies who purchase large amounts of corn will also benefit from the rise of cellulosic ethanol, as this will relieve the pressure on corn prices which has been increasing their raw materials costs. Companies that use significant amounts of corn syrup (e.g., Coca Cola, PepsiCo) and corn-based oils (e.g., makers of heavily processed foods, such as Kraft Foods) are the most likely beneficiaries. Additionally, companies that specialize in cattle, meats, animal feed, and packaged food will benefit from decreases in grain prices.
Companies that lose
Companies committed to corn-based ethanol will find themselves hurt by the rise of cellulosic ethanol. These will include design and construction firms committed to existing ethanol refining technologies, but will also include such food conglomerates as Archer Daniels Midland, who have benefited significantly from the run-up in corn prices (though ADM is currently conducting research into using corn waste as a feedstock for cellulosic ethanol, which could mitigate the negative impact). Companies tied to corn farmers, such as Deere & Company (DE), a major suppler of equipment to the farming industry, may suffer, if they are unable to tailor their product offerings to the producers of cellulose ethanol feedstocks.
Oil companies with extensive retail distribution networks, such as Royal Dutch Shell or Exxon Mobil, may suffer as a result of the required investment in developing new pumps and especially storage facilities for cellulosic ethanol, which has different chemical properties than traditional gasoline.
Vehicle manufacturers either unable or unwilling to design and build out Flexfuel cars will also suffer, as customer demand for Flexfuel cars increases along with the rapid growth in cellulosic ethanol. Companies with capital constraints (e.g., General Motors, which is near bankruptcy) and those with hefty investments in existing technologies (e.g., Ford Motor) will find this conversion a particular challenge.
Still in its nascency, cellulosic ethanol depends heavily on government support, including broad support for ethanol as embodied by President Bush’s mandate to increase ethanol production to 35 billion gallons per year by the end of the decade, as well as funding for cellulosic ethanol plants and research. When the government announces new initiatives to support renewable energy, ethanol, or cellulosic ethanol, stocks in the sector tend to benefit.
Development of infrastructure and a distribution system to support ethanol
The cellulosic ethanol industry suffers from a “chicken-and-egg” problem. Oil companies and car manufacturers don’t want to invest in new technologies to distribute and utilize ethanol until there is widespread supply, but ethanol producers don’t want to invest in more production until they are sure it is feasible for use by vehicles on the road and the gas stations that fuel them. Cellulosic ethanol in particular, which requires investment in R&D before it can achieve cost-parity with grain-based ethanol, will be supported by the widespread adoption of new distribution systems and automotive technologies.
Cellulosic ethanol is not yet commercially mass-produced. The production process, which involves extracting cellulose from plant biomass, breaking the cellulose down with enzymes, and fermenting the sugar into alcohol, remains in the development stages. The U.S. Department of Agriculture conducted a study showing that the U.S. agricultural sector could produce 150 billion gallons of cellulosic ethanol from 1.3 billion dry tons of plant biomass while keeping forestry lands sustainable. Production of 150 billion gallons of cellulosic ethanol, the energy equivalent of 100 billion gallons of gasoline, could decrease oil imports by 80%. In 2008, cellulosic ethanol could be produced on a small scale for $1.50-$2.50 per gallon.
The U.S. Environmental Protection Agency, under the Energy Independence and Security Act of 2007, is responsible for ensuring that gasoline sold in the United States contains a minimum volume of renewable fuel. The Renewable Fuel Standard Program will increase the volume of renewable fuel required to be blended into gasoline from 9 billion gallons in 2008 to 36 billion gallons in 2022. “
There are many issues to tackle obviously, in our quest to remove fossil fuels from our energy diet, and ethanol is one of them. Another is our plan, I don’t think our reduction rate will be fast enough, or high enough to keep us from going over the edge so to speak in co2 levels where it won’t matter anymore and we will have put into motion a chain reaction of events that will seriously jeopardize life as we know it on this planet. To make the price of food out of reach of individuals to make a questionable impact on co2 emissions steps over the line, is unethical, and totally immoral to say the least. Let’s raise our voices and put a stop to this nonsense, and devote our energy and resources towards cellulosic ethanol, which can be attainable and sustainable, along with other more sustainable energy sources.