Ethanols impact on food and greenhouse gases

A report from the Congressional Budget Office was released in April, 2009 with the title "The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions" (PDF, 26 pages). Here are a few exerpts:

Rising demand for corn also increased the demand for cropland and the price of animal feed.

Those effects in turn raised the price of many farm commodities (such as soybeans, meat, poultry, and dairy products) and, consequently, the retail price of food. Pushed up in part by those effects and by surges in the price of energy, food prices rose by almost 2½ percent in 2006, by 4 percent in 2007, and by more than 5 percent in 2008. That those increases coincided with higher prices for corn raises questions about the link between ethanol production, the demand for corn, and food prices.

Also:

Changes in food prices affect spending for federal food assistance. The federal government administers several assistance programs that are operated at the local level by state agencies and other providers. The largest of those programs are SNAP and the National School Lunch and School Breakfast Programs. Federal reimbursements and benefits for those programs are adjusted automatically each year according to the change in various food price indexes. The change in food prices from 2007 to 2008, the period covered by this analysis, determines the benefits for those programs for fiscal year 2009. As a result, the rise in food prices attributable to increased production of ethanol will lead to higher federal spending for those programs: specifically, an estimated $600 million to $900 million of the more than $5 billion increase in spending projected for fiscal year 2009 as a result of the rising price of food.

... and ...

Although WIC assistance is funded through a different mechanism than are SNAP and the school programs (WIC is not an entitlement program but instead receives an annual appropriation), ethanol’s effects on the cost of the basket of goods available through WIC could be similar to the impact that its production has had on food prices in the other federal nutrition assistance programs.

So not only did we see an increase in food prices, something I've been arguing for awhile now, but it's also impacting government programs. That increase in prices (totally up to a billion dollars) will do one of two things: either more money will need to be diverted into those programs (at the tax payers expense, in a time of already bloated budgets), or people who benefit from these programs will see a cut in services as there will not be enough money to go around. To me, neither option seems particularly appealing, but I see no other options.

So, despite the bad news, is there anything good coming from this?

Research conducted by the Argonne National Laboratory (ANL) and used by federal agencies suggests that in the short run, the production, distribution, and consumption of ethanol will create about 20 percent fewer greenhouse-gas emissions than the equivalent processes for gasoline. For 2008, such a finding translates into a reduction of about 14 million metric tons of carbon dioxide and equivalent gases (a standard measure of greenhouse-gas emissions), or CO2.

But, don't celebrate just yet ...

In the long run, the result is less clear. If increases in the production of ethanol led to a large amount of forests or grasslands being converted into new cropland, those changes in land use could more than offset any reduction in greenhouse-gas emissions— because forests and grasslands naturally absorb more carbon from the atmosphere than cropland absorbs.

So, in the short run we're benefiting from the use of corn-based EtOH from a climate change aspect, but that could easily be erased. They do go on to discuss the potential for cellulosic ethanol, which is the preferred route to go (it could replace corn-based EtOH) and uses waste which would otherwise rot and be converted to carbon dioxide and methane by biological processes.

The report then goes on to discuss the viability of the EtOH-as-Fuel market.

The Congressional Budget Office’s (CBO’s) analysis of current technologies and prices suggests that, without subsidies for producing ethanol, the “break-even ratio” of the price per gallon of retail gasoline to the price per bushel of corn is currently about 0.9. In other words, when the price of a gallon of gasoline is more than 90 percent of the price of a bushel of corn, it is profitable to produce ethanol. At that point, revenues from the sale of ethanol would be sufficient to cover the fixed and variable costs of producing it.

So?

It is unlikely that, on average, ethanol producers over the past several decades would have turned a profit if they had not received production subsidies. The average ratio of a gallon of gasoline to the price of a bushel of corn fluctuates substantially from year to year and has exceeded 0.9 only once, in 2005

Click on the attached figure below.So currently, EtOH is only viable thanks to government subsidy.

At the current subsidy of 45 cents per gallon of ethanol produced, the break-even ratio that would allow producers to cover their fixed and variable costs falls to 0.7.

So, what do we have? We have a fuel which increases demands on our food supply which increases prices on food and government programs. It is also currently only profitable given government subsidies. Lastly, it has so far shown benefits in terms of climate change, but those could easily be wiped out with massive land clearing for more corn production.

I'll leave it to you, reader, to judge for yourself whether or not EtOH is the fuel of the future.

Newsflash: Bioethanol Still Bad Idea

According to this article at least.

Indeed, many livestock operations are getting hit with a double whammy. First, they’re paying more for each ton of corn-derived feed. At least as importantly, a new study finds, the corn product that’s they're feeding to their animals can be anticipated to carry triple the normal load of fungal toxins.

Because those fungal poisons — or mycotoxins — threaten the health of animals, farmers can look for reduced livestock growth, especially in swine.

The new analysis conservatively estimates the current cost to U.S. hog producers from just one of those toxins, fumonisin, at about $9 million a year.

More about that link ...

... between food and fuel.

This article cites Lester Brown, who wrote Plan B 2.0. It's a very informative book, and an excellent read. He's also come out with Plan B 3.0, but I have not had a chance to read it yet.

Anyways, back to the article. There are many issues with using corn grain as a fuel. One of the main reasons is easily seen in your supermarket. Corn diverted to fuel affects more than just the price of corn for consumption. Corn is used as feed for cattle, poultry, and swine. The article relates the following ...

Now, however, the legislation is being criticized for making food more expensive while gasoline prices continue to climb. Rick Perry, a Republican who succeeded Bush as Texas governor, has asked the Environmental Protection Agency to waive half of the "misguided" ethanol requirements because of rising food costs; every penny increase in per-bushel corn prices costs his state's livestock industry $6 million a year, he said.

That increase in cost is eventually transferred to the consumer. I don't know about you, but I'm tired of looking at $7.99/lb for a London Broil and $4.99/lb for chicken breast meat. Matter of fact, I got so tired of it that my wife and I have gone to a mostly vegetarian diet. Fortunately for both of us, there is a farmer's market not too far from my place of employment, and we don't mind eating a lot of vegetables. The loss of corn from the food market also has the effect of placing greater strain on the other food grains. While I'm no economist, I imagine that's at least part of the reason we're seeing an increase in the price of wheat (flour), and rice. As we consume more of these staples, as replacements for corn, our demand for them increases their prices as well. It's a vicious cycle.

Then there is the little nagging fact that corn ethanol might not really be the silver bullet when it comes to saving us from high fuel prices. Why? There just isn't enough of it. Look at the following figure, provided by the University of Tennessee Agricultural Economics Department report 25 x 25 (25% Renewable Energy for the United States by 2025).

That yellow section at the bottom is corn grain (when looking at the report, this figure is found on page 33, it's Figure 11). Through 2025, you can notice that there really isn't an appreciable increase in the amount of corn grain over the next 15 years. Instead, we really need to be looking at the dedicated energy crops (the green section on the chart). Unfortunately, they're not really expected to come online for another 5 years or so. This is, in part, due to the need for increased efficiency for cellulosic ethanol production. One question that can be asked however is, is that even necessary? Thermochemical processes can be brought to bear today, and those crops, which are already being (or are) planted could be used in gasification. Production of methane from that process could be scrubbed clean, essentially becoming "natural gas". Compressed (CNG) and Liquid (LNG) Natural Gas are already used in vehicles across the country. T. Boone Pickens, an oil magnate in Oklahoma has suggested that NG be used on his own website.

While chairman of the National Natural Gas Vehicle Coalition for almost three years, Pickens traveled the country advocating the merits of natural gas. When he left Mesa Petroleum and its management wanted to divest of the natural gas fueling concerns, he purchased them and in 1997 formed Pickens Fuel Corp. He touted natural gas as the best alternative vehicular fuel because it’s a domestic resource that reduces our foreign oil consumption, and enhances America’s energy security; clean (NGV vehicles emit up to 95 percent less pollution than gasoline or diesel vehicles); less expensive than petroleum and hydrogen; and safe (lighter-than-air compressed natural gas is nontoxic and disperses quickly, and has a higher ignition temperature than gasoline and diesel fuel, which reduces the chances of accidental ignition).

Obviously, we're going to experience some growing pains, as we change our infrastructure to adapt. The question is, are we as scrappy and as resourceful as previous generations seem to have been? Honestly, I think it'd be easy for the government to help out as well, when you consider where all our tax dollars are currently being spent. You know this "economic stimulus package"? Why not save that and give it as a tax credit for people who would convert their existing gasoline car into a LNG car instead? I believe the conversion kit costs between $1.5K and $2K. Don't you think that would boost the economy a bit as well? I think there is hope for our country, but this isn't going to be an easy fix. I think the younger generations are ready to make this change, the question is ... are the Baby Boomers? They're the largest voting bloc this election year.