Costs and Benefits of U.S. support of Corn Ethanol

Recently Scientific American had a great article on the advantages and disadvantages of the U.S. supporting corn ethanol production.  The main disadvantage is that corn ethanol raises the price of corn, and thus raises the price of food all over the world.  The main advantage is that using ethanol reduces our dependence on foreign oil.  These two points are summed up in the closing section of the Scientific American article:

The CBO estimated that ethanol contributes as much as 15 percent to the recent rises in food costs. And that's not just the case in the U.S. The U.N. Food and Agriculture Organization noted in a 2008 report during the last food crisis that the increase in demand for sugar and corn for biofuels was "one of the leading factors behind the increase in their prices in world markets which, in turn, has led to higher food prices." In fact, the International Food Policy Research Institute has called biofuel subsidies in rich countries the equivalent of a tax on food.

Of course, using homegrown crops—whatever the impact—does reduce the need for the roughly 11 million barrels of foreign oil (and the military entanglements required to secure that foreign oil) the U.S. imports every day; it also improves the livelihoods of rural communities. "We have only just begun to realize the benefits of home-grown fuels," U.S. Secretary of Energy Steven Chu said in a February address to the National Ethanol Conference in Phoenix, although he has also expressed skepticism about whether corn is the right crop for fuel.

So should the U.S. continue to give monetary incentives for ethanol production?  From the article:

That means subsidies: $7 billion in 2010 alone, once tax credits, tariffs and other incentives are added together. In fact, between 1980 and 2000 the U.S. government has devoted some $19 billion in tax breaks alone to the ethanol-from-corn effort, according to the U.S. Government Accountability Office, and ethanol subsidies per liter of the biofuel have often been larger than the total cost of a liter of gas the biofuel replaced.

I wont even get into the environmental "benefits" as there are many reports that say producing corn ethanol releases more CO2 into the atmosphere than the corn captures while growing, not to mention the negative effects of fertilizer that runs off the corn fields and into our water supply.

I fully support reducing our dependence on foreign oil (and I'd rather use ethanol than MTBE in gasoline), but I want to make sure the most sustainable policies are in place to do so.  Could the $7 Billion that was spent on corn ethanol subsidies last year have been better  spent on other oil reduction policies (like methanol, plug-in hybrid technology, alternative methods of transportation)?


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John, I haven't looked at biobutanol in a while. I know it is closer to the energy density of gasoline but I'm not sure if it is a good substitute for petroleum for the production of olefins for making plastics. I'm reading through some of the research on this <a href="" rel="nofollow">site</a> as well as a <a href="" rel="nofollow">fact sheet</a> from the joint venture between Dupont and BP on bio-butanol. Either way, both methanol and bio-butanol are better alternatives to petroleum than ethanol! Powell
There's a lot of trouble with reports like this. Yes, the discussion is needed, but the folks at Scientific American did not include enough information to draw any conclusions. Cover to cover, one issue of their magazine is not enough space to cover all the things which influence food prices. But I digress. It sure looks like we should be doing more to produce butanol. What do you think? ...John
Of course the whole reason grain-to-ethanol subsidies were conceived and enacted was to increase the price of grain by increasing demand for it, and thus to improve farmer incomes. This has succeeded wonderfully. (Some big agribusiness firms like ADM also pushed for these subsidies and benefited from them.) This is what Congress intended. The idea that ethanol production might substitute for petroleum imports was just the cover. In fact blending grain-derived ethanol with gasoline has had very small impact on the amount of petroleum imported or the amount of carbon emitted from burning motor fuels. (See <a href="" rel="nofollow">this post</a> and <a href="" rel="nofollow">this post</a> for facts and figures.)
Anytime you tie energy production to anything to do with food production it's a foolish enterprise at best. There is only one fact that matters, it's about crop production for food and anything that takes away from that is a problem. That also includes anything that takes away agricultural land for biomass production. Corn used for fuel is really killing people in the 3rd world as food prices rise but who cares about unintended consequences, right????. My point is, real solutions take time to truly evaluate and we are not there yet. VB

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