What to do with Ethanol….
Is it time to rethink using food for fuel?
For several decades, we have watched a sometimes animated debate about ethanol — the alcohol made from plants that the government has mandated we add to gasoline used by the cars and other vehicles we drive every day. We built a big processing industry to produce ethanol, mostly from the corn that the United States produces so well and so abundantly.
On the surface, it seemed to make a of sense. It used a renewable resource. It helped us reduce dependence on foreign oil imports. It was supposed to be good for the air and our environment. It helped prop up corn prices and injected a lot of money into the rural economy.
But over the years, I couldn’t help but have this not-so-vague sense that something might not be quite right. More and more scientists popped up to debate the so-called environmental benefits. Engineers warned of the effects of ethanol on machinery. Lower-cost petroleum costs made ethanol increasingly non-economic. Experts argued the whole system might have net energy costs more than net energy gains.
To add to my unease, it simply bothered me enormously that we were devoting four of every 10 acres of the corn we produce to feeding machines, not people or animals. I kept asking myself a lot of questions. Is ethanol still the right thing to do? Have changes in the world around us made ethanol less appealing and less practical? Am I being told the complete story, or only a story cranked out by a well-funded, aggressive PR machine?
What’s the real story behind ethanol today?
What is ethanol, anyway? In simple terms, ethanol is a form of alcohol — a volatile liquid produced from the natural fermentation of sugars. It’s been around for literally thousands of years, often used as a recreational beverage — aka moonshine. far more than as an energy source. It’s made from a very wide variety of plants — anything containing the starch and cellulose that provide sugars for fermentation. Sugarcane is a common source material in production of ethanol in South America and other locations, but in America by far the most common source is good old corn.
The United States is the world’s biggest — and best — producer of corn. We plant around 94–96 million acres of corn in a typical year, and with our enormously productive farming sector, generate almost one-third of all the corn grown on this planet. Historically, we’ve used it as a nutritious and economic way of feeding animals, and in recent decades in an expanding array of industrial applications and creative development of highly valuable derivative products.
When it comes to corn, we’re darn good at it — growing it, selling it, processing it, and finding new ways to use it to serve a variety of human needs. Whether we realize it or not, corn is a pervasive part of our entire way of life, not just the dinner plate.
Several decades ago, with growing concern everywhere about both our dependence on foreign energy sources and the protection of our environment, we found a way to make corn a part of the public-policy response. Lawmakers rushed to bring a vibrant ethanol industry to life. Tax breaks, subsidies, grants, loan guarantees — all these and more emerged to stimulate ethanol production. Perhaps most visibly, federal law mandated use of a minimum amount of ethanol as an additive to the gasoline sold to consumers at the pump — a 10 percent blend to begin.
Farmers responded by making investments in a productive capacity. Investors poured massive amounts of money into new processing plants, handling equipment, and other necessary production tools. Rural communities enjoyed the economic vitality that came from serving a growing industry and the farmers who supplied it.
The National Center for Environmental Economics has found that every 1 billion bushels of demand for corn from the ethanol industry raises corn prices by about 3 cents per bushel.
Since the government launched a program mandating inclusion of ethanol in gasoline blends, almost 200 plants have sprung up, mostly across the U.S. Midwest, producing more than 60 percent of all the ethanol produced in the world.
Today, the ethanol industry appears to be on shaky ground. Competing commodity prices made the raw material for ethanol processes that much less competitive, tightening their operating margins. Lower gas prices have cut demand for ethanol substantially. Plants, many key economic cornerstones of rural communities, are seeking new markets or new products to produce. Some are closing down, and many are up for sale.
At the same time, the United States has stepped up its energy independence with fracking and other energy-development initiatives. Pandemic stay-at-home orders added to the problem by drastically reducing gasoline demand. By April 2020, production had dropped by almost half from its peak earlier in the year. Almost a third of ethanol plants had shut down, and another third were operating on reduced schedules.
What’s the right future for ethanol? Ethanol critics argue for radical change — or an end to the program. To critics, ethanol’s day has passed and we should be glad.
· Ethanol is non-economic and a drain on taxpayers. Even in the heyday of our fight to reduce dependence on foreign oil imports, we still had to pay ethanol producers (not the farmers) tens of billions in all sorts of subsidies and incentives to keep them afloat. We can’t afford the price tag of replacing economic reality with economic fantasy, no matter how much we might like to do so.
· With oil prices below the cost of ethanol, ethanol no longer lowers gas prices. Our domestic energy production picture and global markets tell us we don’t need to dictate that we add a more expensive component to gasoline.
· A 10-percent ethanol blend in our gasoline may actually hinder rather than help fuel economy. The biofuels industry has long claimed that the ethanol blend can boost mileage by 1–3 percent. But some reports — including figures from the Department of Energy’s Office of Energy Efficiency and Renewable Energy — contend the 10-percent ethanol blend can reduce fuel economy by 3–4 percent, and a 15 percent blend by as much as 4–5 percent. We could be adding as much as $10 billion to the fuel bill for American consumers, according to the Institute for Energy Research.
· The energy gains from ethanol are illusory. Some studies contend that it takes as much as 29 percent more energy to produce a gallon of ethanol than to produce a gallon of gasoline. The energy needed to refine ethanol may be greater than the energy it delivers. Ethanol might arguably be environmentally friendly, but producing it certainly isn’t. Rather than advancing energy independence, the industry could inadvertently wind up increasing our energy consumption.
· It increases energy demand — and greenhouse gases. The touted environmental benefits and contributions of ethanol to our energy independence may have prompted consumers to drive more, leading to an overall possible increase in greenhouse gas emissions.
· Ethanol artificially raises commodity prices, and the prices consumers pay for food. Analysts at the Congressional Budget Office estimate that consumers may pay an additional $3.5 billion for food as a result of the program and its effect on commodity prices. An economic study at the University of California-Davis found that “corn prices were about 30 percent greater between 2006 and 2011 than they would have been without the mandate.” A similar study by the EPA’s National Center for Environmental Economics found that each billion-gallon expansion in ethanol production yields a 2–3 percent increase in corn prices on average. Corn growers may believe that is great for them and their communities. Consumers might have a different perspective, especially as food prices continue to spike for many in the post-Covid world.
· It’s more about politics than anything else. The ethanol program had at its core a desire to provide an appealing economic opportunity for a group very important to politicians seeking rural votes, especially in key primary election states. It’s time to take at least some of the politics out of a rational discussion about the future of the industry — and our national energy policy. The present economic picture gives us a great opportunity to make the right decision with less controversy — and less pain — than ever before. Let’s not waste it.
But there’s another side to the debate. Ethanol supporters challenge many of the criticisms and point to other critical considerations. Supporters of ethanol say the rural economy needs ethanol more than ever — and so do food consumers, even if they don’t realize it.
· We’re in too deep to quit now. Our country has made massive commitments to the ethanol industry, in good faith. We have invested literally billions of dollars in plants and equipment, and in the production tools and systems we need to serve a huge market for a crop critical to farmers and our economy. Farmers have built ethanol into their production and marketing plans and their budgeting. We just can’t let that investment go down the tubes.
· Farmers need a vibrant ethanol industry for their economic security. Rural communities need the money generated by the industry up and down Main Street America. Investors need to know they can continue to place their money — and faith — in building a multifaceted agricultural system.
· The ethanol industry is about a lot more than energy. By-products from its production have multiple other uses — such as livestock feed additives, other forms of alcohol and other potential fuels, not to mention things like hand sanitizer and disinfectants. There is more at stake here for consumers than just fuel for our cars and other vehicles.
· Economic risks to farmers and rural America from Covid make ethanol more important than ever. We need to make the investment — government and taxpayer dollars — necessary to preserving this critical element of our farm economy. We need to do that just as much as we need to keep Main Street restaurants and other businesses alive during a pandemic, using the same government tools and resources. In comparison to what we are spending to deal with Covid19, the ethanol program is small change.
· The energy picture can change quickly. The global and national energy picture isn’t carved in stone. The fracking industry is on edge because of low prices. . Oil markets are in turmoil. The global economy eventually will open up and begin growing again — and energy demand will grow with it. Don’t write off ethanol as an irrelevant component of our global energy sector or our global economy.
· We must protect our environment in every way we can. Cutting greenhouse emissions should be a priority, and ethanol can help us do exactly that. Ethanol has real, important advantages over petroleum, reducing greenhouse gas emissions by 39 percent compared to those of traditional gasoline. That alone makes the industry worth special effort to preserve it.
· We should exploit our natural advantages. Producing ethanol from corn is another way to exploit the natural advantage the United States has in producing corn. U.S. farmers are the most productive corn farmers in the world. Maintaining an ethanol industry just helps us use that capability to our advantage.
· Consumers need the healthy farm sector ethanol helps provide. Ethanol provides the economic support needed to keep many of the 400,000 farmers who grow corn in business. It helps them make the necessary investments in producing crops critical to our food system, and in the technology and equipment needed to drive continuing improvements in operational efficiency — and the lower food costs that come with them.
So what would you do?
