The costs of ethanol

In 2005, the U.S. government mandated that biofuels like ethanol be mixed into the nation’s gasoline supply – 4 billion gallons in 2006 with a goal of 7.5 billion gallons by 2012 (1). In addition to those mixing mandates there are also many other federal and state subsidies available for ethanol that in 2006 ranged between $1.05 and $1.38 per gallon (2), depending on which state the ethanol is produced.

Along with those subsidies, the same acts that give those subsidies also mandate that the US will produce 38 billion gallons of ethanol a year by 2022. For some who support ethanol this is the beginning of a revolution that could replace our 21 million barrel of oil a day addiction.

Farmers will get rich, the air will be cleaner and the planet will be cooler. Unfortunately, for the people who live in the real world, those great sounding things are false and I will explain why in each instance.

The supporters of ethanol I spoke of in the last paragraph are the ethanol producers, Midwest farmers, and politicians who serve those two populations. First off, ethanol does not burn cleaner than gasoline, nor is it cheaper.

Our current ethanol production level reflects only 3.5% of our gasoline consumption while at the same time, it consumes 20% of the entire US corn crop which has caused the price of corn to double between 2007 and 2008(3).

The increasing acreage devoted to corn for ethanol means less land for other staple crops. This has given farmers in South America an incentive to carve fields out of the rain forests which cool the planet and help prevent global warming along with countless other benefits such as undiscovered medical uses from plants and animals that live there.

As I talked about in the introduction to this paper, corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 — twice as much as wheat subsidies and four times as much as soybeans(3).

Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon — about half of ethanol’s wholesale market price.

If ethanol was actually going to solve the energy crisis in the US these subsidies might be acceptable, but it will not. As a gasoline substitute, ethanol has big problems: Its energy density is one-third less than gasoline, which means you have to burn more of it to get the same amount of power.

It also absorbs water so it cannot use existing pipelines to be transported but must use diesel burning trucks, which again need to be added into its costs as it is very inefficient.

Gasoline has an energy balance of 5 to 1 which means you get 5 times the energy out of it than you need to put in to produce it. Ethanol has an energy balance of 1.3 to 1(3), which is almost worthless.

There is basically one company in the US that produces ethanol, Archer Daniels Midlands (ADM). A quote from Jeff Goodwell’s article, “The Ethanol Scam”, Rolling Stone Magazine, August 9, 2007 will explain a lot about the main reason why we started using and still do use ethanol in this country:

In the 1970s, looking for new ways to profit from corn, ADM began pushing ethanol as a fuel additive. By the early 1980s, ADM was producing 175 million gallons of ethanol a year. The company's then-chairman, Dwayne Andreas, struck up a close relationship with Sen. Bob Dole of Kansas, a.k.a. "Senator Ethanol."

During the 1992 election, ADM gave $1 million to Dole and his friends in the GOP (compared with $455,000 to the Democrats). In return, Dole helped the company secure billions of dollars in subsidies and tax breaks.

In 1995, the conservative Cato Institute, estimating that nearly half of ADM's profits came from products either subsidized or protected by the federal government, called the company “the most prominent recipient of corporate welfare in recent U.S. history.”

ADM and the politicians they pay off are the ones who benefit from ethanol, not the public. In fact, the taxpayers and the environment suffer grave abuses from ethanol production. Today, ADM is the still leading producer of ethanol, supplying more than 1 billion gallons of the fuel additive last year (2007).

Ethanol is propped up by more than 200 tax breaks and subsidies worth at least $5.5 billion a year. And ADM continues to give back: Since 2000, the company has contributed $3.7 million to state and federal politicians.

According to the Senate bill I spoke about above (1), only 15 billion gallons of ethanol will come from corn, in part because even corn growers admit that turning more grain into fuel would disrupt global food supplies.

In fact, there have already been food problems worldwide that can be blamed in part to the unprecedented rise in corn prices. What will happen if this continues? Even if ethanol producers manage to hit the mandate of 36 billion gallons of ethanol by 2022, that will replace a only 1.5 million barrels of oil per day — only seven percent of current oil needs.

Even if the entire U.S. corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use (3).

One of the biggest misconceptions about ethanol is that it is green. In fact, corn production depends on huge amounts of fossil fuel — not just the diesel needed to plow fields and transport crops and the finished product, but also the vast quantities of natural gas used to produce fertilizers.

Runoff from industrial-scale cornfields also silts up the Mississippi River and creates a vast dead zone in the Gulf of Mexico every summer. What's more, when corn ethanol is burned in vehicles, it is as dirty as conventional gasoline and does little to solve global warming: E85(1, the new mixture mandated with 85% ethanol) reduces carbon dioxide emissions by a modest fifteen percent at best, while fueling the destruction of tropical forests.

But the biggest problem with ethanol is that it steals vast swaths of land that might be better used for growing food. In a recent article in Foreign Affairs titled "How Biofuels Could Starve the Poor," University of Minnesota economists C. Ford Runge and Benjamin Senauer point out that filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn — roughly enough calories to feed one person for a year.

Yes, ethanol has many problems and yes, the world has many problems with energy. No, I do not have the answer to solve the problems. I do know that according to all the research I have done for this paper, the main thing I can take away from it and hopefully pass on to you, is that the only ones that ethanol is really good for is ADM and the politicians who they pay off to keep them producing ethanol.

I do hope that someday we will find answers to the questions this paper presents, but for now, oil is the best product we have. It would be nice if “we could all just get along”, but as many of my postings to this class as a whole have spelled out, war is the natural state of the world and not peace.

If there were one thing worth fighting for it is not some lie about “democracy”, it is energy to keep us in the lifestyle we live, and that means oil.

source: helium