Business & Technology Nexus

Dave Stephens on technology and business trends

Ethanol from Corn – Going Beyond Sound Bites

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Anyone interested in understanding how Brazil managed to introduce Ethanol as a viable alternative to gasoline should read this informative Yale University report. Brazil’s path to energy independence seems often portrayed as an overnight success when in reality it has been a journey underway for well over 30 years (and at a cost of billions of U.S. dollars in subsidies).

I became interested in Brazil’s story because of the huge U.S. government subsidies currently being offered for our nascent ethanol-from-corn program.

Using corn for fuel has opened up a new market for farmers, strained production, and upset long-term pricing trends. A good summary of the 2006 effects were written up by Jeff Wilson for Bloomberg News. Jeff cited a 77% increase in corn prices, to $3.72 a bushel. And the price spike came despite the harvest being the third-largest in U.S. history.

Even before prices began to spike the ethanol-from-corn government investment was widely criticized. A fun and informative assault was made back in 2005 by Robert Bryce for Slate in an article entitled Corn Dog.

Putting politics aside, Bryce cites a report written by 2 scientists, one from Cornell and one from U.C. Berkeley, which concludes that it takes more energy to produce ethanol from corn than the resulting ethanol contains. If this proves a “firm” fact, i.e. one that can’t be changed by introducing greater efficiency or new technology, then it is unlikely the program will ever reduce U.S. dependence on foreign oil – or solve our insatiable appetite for energy.

A web-version of an academic paper entitled “Thermodynamics of the Corn-Ethanol Biofuel Cycle” authored by one of the scientists, Tad W. Patzek of U.C. Berkeley’s Department of Civil and Environmental Engineering, spells out the science behind the assertion that current U.S. policy is flawed.

While well-worth a lengthy read, the report concludes (through analyzing the inputs and outputs of energy generation through biomass) that generating energy from plants is simply unsustainable.

So it will be interesting to watch corn prices over the coming few years. And it will also be interesting to see whether any serious debate over this policy occurs in the 2008 U.S. Presidential Race. If I had to guess today – I’d wager corn prices will continue to climb as ambitious politicians each vie for being labeled the most “pro-ethanol” candidate.


Written by Dave Stephens

07/15/07 8:13 AM at 8:13 am

Posted in Opinion

One Response

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  1. Production inefficiencies aside, Ethanol was never a viable solution.

    Bryce completely missed the point. It isn’t about energy. It’s about agriculture. Many have tried to debunk the “food or fuel” debate. Among other things. they state that food is plentiful and current fuel crops only account for a tiny percentage of overall production. They tell us that people starve because they’re victims of an inequitable economic system, not because they’re victims of scarcity and overpopulation.

    Where shall I start? Do these “experts” believe an inequity that has only grown worse this past century will be resolved any time soon, or ever? It’s easy to be optimistic on a full belly. Yes, the total food production worldwide may be more than enough to feed the world, but it’s obviously not making its way into the hands of all who need it. It is reasonable to assume this inequitable distribution will continue to be the case into the foreseeable future.

    Any re-purposing of “existing or excess agricultural capacity” will undoubtedly have an impact on food production. Whether the increase in fuel crops would make food less available is a matter of debate. But one can be certain overall worldwide food production, as a percentage of total agricultural output, would definitely decline.

    Next…current fuel crops are only a small fraction of total production because the concept hasn’t taken off yet. You can bet that percentage will increase dramatically if the demand for biofuels skyrockets. Corn/cane crop prices would go through the roof and farmers looking to maximize profit would undoubtedly focus on fuel crops. It’s no different than the situation with farmers in Afghanistan who’d rather produce cannabis and poppies. By comparison, food simply does not pay as well…unless you raise the cost of food, or subsidize it.

    Pundits claim this is a complex issue and attempt to discredit “food or fuel” as an oversimplification. I say, no…it IS just that simple. It’s about the bottom line, maximizing profits.

    We know it. The farmers know it. And investors would happily stoke the fire.

    If we begin using crops as a primary source of fuel (even if we can overcome the inefficiencies of production) we’ll only make a bad situation worse.


    11/23/07 10:54 PM at 10:54 pm

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