Grain alcohol. Once made from malted mash in small stills to bring in extra cash for poor farmers and hillbillies, these spirits are now to be the savior of small farmers, the economy, and even the entire planetary environment. How is this all bullshit? Let me count the ways:
Wacky Economics and Markets
American corn ethanol has been subsidized since the 1970s. Back then the main advantage of its use was seen to be increases octane levels while helping to reduce certain pollutants, most notably carbon monoxide.
The 2007 Energy Security and Independence Act mandated the use of 36 billion gallons of biofuels annually by 2022. Because of this, primarily, there are over 200 ethanol plants in at least 27 states, almost all of them processing corn.
This law requires the U.S. to produce increasing amounts of corn ethanol up to 15 billion gallons in 2014. With the much reviled “big gubment” picking up the check, the market for ethanol is hot, hot, hot. According to the Congressional Budget Office, the price tag last year for the ethanol tax break comes to about $6 billion.
Refineries that blend the ethanol with gasoline now get a 45 cent tax break for every gallon they produce.
This money mainly benefits refiners and big corporate farmers.
U.S. corn prices last year hit their highest levels since mid-2008 — and will dip by at most 5 percent by the end of this year, according to a Reuters poll of 16 analysts.
“Even if we have a good year, we are not going to have the inventories we’ve seen before. I really do think the time of cheap food prices is over, and that’s just it,” analyst Chris Mann of Traders Group, Inc. in Chicago told Reuters.
Corn futures posted the best gains (52%) among grains and oilseeds last year.
This is due to two things:
1) Strong demand from the ethanol industry. The U.S. Department of Agriculture reported February 9 that the industry’s projected orders this year rose 8.4 percent to 13 billion bushels after record production in December and January.
2) High corn exports out of the U.S. after the Russian drought and subsequent ban on exporting their grain.
Translation: The U.S. will have 675 million bushels of corn left over at the end of year. This is only 5 percent of all corn that will be consumed, the lowest stockpiled surplus level in fifteen years.
These wacky economics, along with changes in federal farm subsidy programs designed to make farmers rely more on the markets, mean that large U.S. corn reserves may be a thing of the past.
What does this mean for me? Higher grocery and gas bills, for one. What about everyone else?
Can it get any worse?
International Communication (How you say, “We are fucked?”)
Only 7 percent of U.S. corn crop went to ethanol in 2001. That number rose to 39 percent in 2010 and will continue to rise for the next decade. Corn is still food, right?
The growing demand for corn ethanol combined with rising demand for corn food and feed has corn stocks at their lowest level in decades. Low stocks and high demand combine to increase price.
Rising corn costs correlate with rising meat costs. Both are about to skyrocket if the latest import Chinese import projections from the U.S. Grain Council are anywhere near the mark. Chinese imports may be as high as 9 million tons in 2011-12, up from am already-monumental (even by China’s standards)1.3 million tons in 2010-11.
Equally troubling, U.S. ethanol subsidies keep American corn relatively cheap, not allowing small farmers around the world to compete in the market. Countless livelihoods and lives have been lost for this exact reason.
For the bigger picture on the human cost of dwindling worldwide food supply, see this recent World Bank Food Price Watch link:
The Brazilian trade organization Unica, whose members produce half of the sugarcane ethanol in the Brazil, has launched an effort, aimed at Americans, including a video, “All I Need to Know About U.S. Ethanol Subsidies.” The video claims ethanol policies now cost American taxpayers $6 billion a year and have totaled a loss of $45 billion since 1980.
Bioenergetics & Environment: “Oh yeah, it doesn’t even make sense, but just go with it or we’ll look bad”
Corn ethanol production uses abundant domestic supplies of coal and natural gas. (USDA report, 2002). The same report cited a negative net energy value in ethanol production versus output in four of ten studies (net energy value).
In an additional study, (Pimentel & Patzek, 2005), ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced. The study was heavily critical of a USDA paper that finds ethanol to have a positive net energy value. They point out that the USDA study only accounts for nine U.S. states (theirs includes all 50), as well as lacks an accounting for farm machinery maintenance and the need for new infrastructure for ethanol production.
Carbon emissions from ethanol production and use may not even be lower than those from oil. Water pollution and consumption, as a cost-benefit analysis of ethanol production, have received less scrutiny.
Corn requires vastly more water, fertilizer and pesticides than soybeans or other potential biofuel crops. (Hence, more pollution)
A 2003 U.S. Government Accountability Office report found that at least 36 states expect water shortages by 2013.
Modern ethanol plants use about three gallons of water to produce one gallon of ethanol. It used to be seven.
Increasing corn production to meet the 2007 renewable fuels target would increase nitrogen pollution from fertilizers in the Gulf of Mexico by 10 to 34 percent. This will grow the already huge “dead zone” at the mouth of the Mississippi River, where algae flourish in the nitrogenous waste, creating an toxic anaerobic environment where few vertebrates can survive, if any.
An overwhelming majority of gasoline (E10) in the U. S. today is 10 percent ethanol. Ethanol provides 6 to 7 percent of the energy of gas per unit volume. What? It gets better.
The industry produced 12.5 billion gallons in 2010 and is therefore nearing market saturation to supply E10 ( the U. S. burns about 138 billion gallons of oil a year). The Environmental Protection Agency has just granted a waiver to allow gasoline to be blended with 15 percent ethanol. This is now being implemented with President Obama’s endorsement. Bipartisanship exists!
Reflecting environmental concerns, the 2007 energy bill called for 20 billion gallons of biofuel to be made from “advanced” sources, such as cellulosic ethanol from less resource intensive plant sources (not from food crops!) or algae that produce ethanol as metabolic waste.
But there are no commercial-scale cellulosic ethanol or algae plants operating in the United States, so what has all the research and hubub been for? Sounds like a mix of lip service and bureaucracy to me…
An ethanol blend called E85, which contains 85 percent ethanol and 15 percent gasoline, has been put forth as a cure-all to everything from air polution to terrorism. Sadly, most cars on the road cannot use it.
And remember, cars go fewer miles on a gallon of ethanol than of gasoline.
The fuel can be found in the Corn Belt but is not usually sold elsewhere.
Sleep tight, fellow Midwesterners!