biofuels

What’s In Store for Egypt After Mubarak’s Departure?

by Hans Bader on February 12, 2011 · 1 comment

in Agriculture, Energy, Ethanol, International, Trade

Recently, Egypt’s pro-American dictator, Hosni Mubarak, was forced to resign after 30 years in power, and forced to give way to a military-controlled government.  Victor Davis Hanson has some interesting reflections on the revolution in Egypt at this link.

Earlier, we discussed the role of ethanol subsidies and biofuel mandates in increasing support for the Muslim Brotherhood, an anti-American group opposed to Mubarak, at this link.  By indirectly increasing wheat prices, ethanol subsidies drove up unrest in Cairo’s slums, which are more supportive of the Muslim Brotherhood than they are of Egypt’s historically much smaller pro-western democracy movements.  (Egyptians historically have spent nearly half their income just on food — more than that in the slums of Cairo and Alexandria, Egypt’s largest cities).

The Washington Post‘s editorial board and various columns in the Post, like one by Professor Tim Searchinger, agreed about the folly of ethanol subsidies and their role in contributing to misery and unrest among Egypt’s poorest.

Egyptian Riots Fueled by Ethanol Subsidies and Biofuel Mandates

by Hans Bader on February 4, 2011 · 5 comments

in Agriculture, Energy, Ethanol, International, Trade

As world food prices hit a record high, protests in Egypt demand the removal of the country’s pro-American dictator, Hosni Mubarak. No one can predict with certainty whether his removal after 30 years in power would lead to a constitutional democracy, or a theocratic despotism. The likelihood of an even worse regime replacing Mubarak is real, and has been increased by the widespread diversion of cropland to produce biofuels rather than food. That in turn has led to rising food prices that have fueled unrest among the poor in the teeming slums of Egypt’s capital city of Cairo.

Increased food prices have also led to increasing support for the anti-American Muslim Brotherhood, which has ties to the terrorist group Hamas: it provides relief and welfare services in the slums, increasing its popularity in times of economic distress, and it enjoys greater support among the country’s poor than among Egypt’s smaller and more Western-oriented middle class.

The Telegraph, a leading English newspaper, calls the recent unrest in Egypt and the Middle East “food revolutions.” It points out that “biofuel mandates” have “diverted a third of the US corn crop into ethanol for cars,” reducing food supplies and driving up food prices. “So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies.”

Egypt is the world’s largest wheat importer, and  imports “more than half of its food supply.” As CNBC notes, “It is food inflation that is” most fueling opposition to the Mubarak regime among the country’s poor. Egyptians have historically spent over 40 percent of their income just on food.

As Slate notes, the “anti-Western” Muslim Brotherhood “remains the only political movement” in Egypt that is “capable of providing nongovernmental charitable services. This gives it a reliable political base in the slums of Cairo and Alexandria.” Rising food prices have cemented that base, and driven previously apathetic slum-dwellers into the streets, shifting the locus of opposition away from the more Westernized middle class.

Obama has been an avid supporter of ethanol subsidies, with close links to the ethanol lobby, unlike Obama’s 2008 opponent, John McCain, who opposed ethanol subsidies. The Obama administration has pushed ethanol mandates, even though they have a history of helping spawn famines and food riots overseas. For example, the costly climate-change legislation backed by the administration contained ethanol subsidies. The administration supports them even though ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution. Ethanol production also results in deforestation, soil erosion, and water pollution.

Leading environmentalists have lamented the devastating impact of ethanol and biofuel subsidies on the global environment.

Even commentators with close links to the Obama administration have admitted that ethanol subsidies are a terrible idea. Matt Yglesias at the liberal Center for American Progress, which has close ties to the administration, admits that “ethanol subsidies aren’t a good way to clean the environment, but they’re a great way of raising the price of agricultural commodities.” Economists more critical of the Obama administration, such as Larry Kudlow, have been scathingly critical of ethanol subsidies, linking them to the recent unrest in Egypt and “skyrocketing food prices.”

Ethanol mandates also contributed to starvation, food riots, and a growing anti-American uprising in Afghanistan back in 2008.

Ethanol and the Egyptian Riots

by Hans Bader on February 2, 2011 · 2 comments

in Agriculture, Energy, Environment, Ethanol, International

Ethanol subsidies helped cause the Egyptian riots, contributing to the “skyrocketing food prices” that triggered “the massive unrest now occurring in Egypt,” argues economist and syndicated columnist Larry Kudlow, in “Bernanke and Ethanol Sink Egypt.” “In 2001, only 7 percent of U.S. corn went to ethanol. By 2010, the ethanol share was 39 percent. So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies.” That harmed Egypt, a major wheat importer. Another factor was the Federal Reserve’s inflationary monetary policy, whose effects have already been felt overseas: “In dollar terms, the price of wheat has soared 114 percent over the past year. Corn has surged 88 percent.” (The Fed is even printing money so that the government can buy its own bonds to facilitate record deficit spending.)

Commentators across the political spectrum worry about the effect of ethanol subsidies.  The environmentalist Jeremy Bloom has an article titled “Egypt’s Ethanol Revolution: Bad U.S.  Policy Driving Up Worldwide Food Price.” Rob Port asks, “Are Ethanol Subsidies the Root Cause of Egyptian Protests?”

As I previously noted, the rise in food prices in Egypt seems to have strengthened the anti-American Muslim Brotherhood, rather than the small pro-western reform movements in Egypt, by radicalizing the slums of Cairo, whose residents sometimes rely on relief provided by the Muslim Brotherhood (the only Egyptian political movement that provides non-governmental charitable services), and who have little connection to the Westernized middle class.

Obama Policies Fuel Global Food Crisis Through Ethanol Mandates, While Fostering Obesity in America

by Hans Bader on January 22, 2011

in Agriculture, Energy, Environment, Ethanol, International

Food prices are soaring all over the world. The global food chain is reportedly stretched to the limit, fueled by the fact “that more than a third of the corn produced in the U.S is now used to make ethanol.” As a result of such “bio-fuels” subsidies, one of the world’s largest food producers predicts a “global food crisis.”

Unfortunately, the Obama administration has long pushed ethanol subsidies, even though such subsidies have a history of spawning famines and food riots overseas. For example, the costly climate-change legislation backed by the administration contained massive ethanol subsidies.

The administration is now forcing up the ethanol content of gasoline through EPA regulations, heedless of the fact that ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution. Ethanol production also results in deforestation, soil erosion, and water pollution.

Back in 2008, leading environmentalists lamented the devastating impact of ethanol subsidies on the global environment and the world’s poor. They noted that thanks to ethanol, “deadly food riots” had already “broken out in dozens of nations,” such as “Haiti and Egypt.” And they pointed out that “food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources. . .Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. . . huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest ‘carbon sink.’ . . .the net impact of the food-to-fuel push will be an increase in global carbon emissions.”

By increasing world food prices, ethanol subsidies also fostered Islamic extremism in poor countries like Afghanistan that import much of their food.

Ethanol subsidies are not the only way that the Obama administration is harming poor people. The administration is also discouraging poor Americans from purchasing cheap, nutritious food. For example, it has also disparaged the consumption of potatoes, banning white potatoes from the federal WIC program, while allowing WIC money to be spent on far less nutritious things that are starchy, fatty or sugary (such as apple sauce, which has no nutrition unless vitamin C is artificially added to it).

The potato is superior to most foods in nutrients per dollar (and per acre of farmland), so much so that “in 2008, the United Nations declared it to be the ‘Year of the Potato.’” (Thank you again to the ancients of the Andes for this marvelous little food.)

“This was done to bring attention to the fact that the potato is one of the most efficient crops for developing nations to grow, as a way of delivering a high level of nutrition to growing populations, with fewer needed resources than other traditional crops. In the summer of 2010, China approved new government policies that positioned the potato as the key crop to feed its growing population.” Potatoes provided much of the agricultural surplus that made the Industrial Revolution possible.

Potatoes are more nutritious than other starchy foods like rice and bread, and “are a good source of vitamins.” They have a lot of vitamin C (much more than a banana or an apple), and potassium levels slightly higher than potassium-rich bananas). Potatoes also have all 8 essential amino acids, unlike most other staple foods like corn and beans.

The Obama administration is also using federal funds to subsidize the opening of an International House of Pancakes in Washington, D.C., despite its sugary and fattening entrees, and the development of high-calorie foods that benefit politically connected agribusinesses.

Confessions of a Gasoline Call Girl

by Brian McGraw on November 10, 2010 · 3 comments

in Energy, Ethanol

Marc J. Rauch, Executive Vice President/Co-Publisher of The Auto Channel, posted a lengthy diatribe on the American Petroleum Institute’s recent lawsuit on the EPA’s approval of E15 blends in newer vehicles. Read it here, and note the title: “Gasoline Whores File Frivolous Lawsuit in Attempt to Derail American Energy Independence.” He is mad.

The lawsuit itself is not all that interesting. What is interesting, I think, is how willfully blind the author is to a number of realities that put the successes of the ethanol industry into perspective. He addresses a number of organizations that provided public comments on the EPA decision:

Grocery Manufacturers Association Vice President for Federal Affairs Scott Faber said: “We were disappointed in the Administration’s decision to allow more ethanol in gasoline before truly sustainable advanced biofuels are commercially available.

…

The Auto Channel’s response: Truly sustainable advanced biofuels? Humans have been making alcohol for thousands of years from nearly any plant they could find, what’s more sustainable than that. Advanced biofuels? That’s okay, too, once they’re ready, but why wait for cheaper fuel prices, oil independence and a cleaner environment when we have perfectly good truly sustainable biofuels right now – of which ethanol is only one alternative. By the way Mr. Faber, I challenge you to name what projected biofuels you’re referring to. I think you don’t know. I think you are reading/writing off a prepared script.

TAC is correct when he says that humans have been making biofuels for hundreds of years. Cellulosic ethanol was first developed in 1898. But the ability to create biofuels in a laboratory is different than being able to produce them in an economically and commercially viable manner. Despite 30 years of federal subsidies, corn ethanol has been unable to compete in a serious way with petroleum. The same is true (and even more true) of cellulosic ethanol. There just isn’t a whole lot of energy in plants, and it requires a lot of energy to extract them and make them usable. It’s possible that some technological breakthrough will change this, but it is by no means guaranteed. Congress can’t mandate a cure for cancer, yet when it comes to biofuels they seem to believe they can bend reality.

National Council of Chain Restaurants Vice President Scott Vinson said:“This challenge to the EPA’s decision is necessary to reduce the strain that ethanol production from corn has placed on U.S. agriculture. The EPA’s decision will lead to an ever higher proportion of the nation’s corn crop being diverted to fuel use, raising prices for participants in the food chain and consumers. Already supported by market-distorting mandates, tax credits and import tariffs, ethanol demand for corn has been singled out as the preferred use for U.S agricultural production long enough. Corn is an extremely important commodity used in feeding the world, and it’s about time we reverse the trend of burning more and more of it as fuel.”

TACH’s reply: Mr. Vinson, what script are you reading from? Why don’t you question the government subsidies and allotments that the oil/gasoline industry has been receiving for more than 100 years? Why don’t you question the billions of dollars of our money that is spent to protect enemy regimes and their oil? Oh, by the way, the world isn’t fed by eating corn; wheat is your huckleberry. Wake up and smell the grease, buddy.

Do the oil and gas industries receive subsidies? This is a “yes, but” moment. They receive certain tax breaks – an example is the oil depletion allowance that allow them to pay less tax (relative to other industries) based off of the way in which capital investment is deducted from the net amount of income they generate. This seems to infuriate the average American. But what few realize is that as a percentage of profits, the oil industry still pays significantly more tax than other industries in the United States. As the Tax Foundation explains:
In addition to income taxes, the table below shows that Exxon paid or remitted $20 billion in various sales taxes, excise taxes, severance taxes, and property taxes. This brings the total amount of taxes the company paid or remitted to $29.3 billion, nearly three times the net profits it earned for shareholders.

The oil industry certainly pays its “fair” share of taxes, where fair is defined as a much larger percentage of income than other industries.

National Turkey Federation President Joel Brandenberger said: “In trying so hard to rush out an E15 rule before Election Day, EPA completely disregarded the legitimate scientific concerns surrounding E15 and the potentially disastrous impact of diverting even more corn from food and feed to fuel. We believe the agency ignored the law as well, and we are confident the court will agree.”

TACH’s response: There are no legitimate scientific concerns regarding the use of ethanol. Ethanol is a proven engine fuel used around the world. It has been so used since the earliest automobiles in the mid 1800′s. Until lies such as the ones that you spout about ethanol were created by gasoline interests, ethanol was the preferred fuel of choice by people in the know. Contemporary studies and research continually prove that ethanol hasn’t suddenly become bad: It’s as good and safe as it always was.

Ah yes, it was those evil conniving gasoline interests of the 19th century that ruined ethanol’s chance at becoming the preferred fuel of the “people in the know.” I’m going to assume “people in the know” were people who liked walking everywhere. I’m sure the fact that petroleum was incredibly easy to produce in mass quantities compared to ethanol didn’t have anything to do with petroleum’s adoption. The bolded sentence above alone pretty much shows you how detached from reality Rauch is.

Snack Food Association President and CEO Jim McCarthy said: “In addition to failing to follow the spirit of the Clean Air Act, the EPA has made a decision that will adversely impact our food supply and ultimately cost American consumers greatly.”

TACH’s response: Hey, we love a candy bar and potato chips as much as the next person. But now some guy who represents an industry that might just be the biggest demon in the world is telling us about the environment and product costs! If there’s only 6 cents worth of corn in a $4.00 box of corn flakes, I shudder to think of how much we are getting ripped off on a $4.00 bag of tortilla chips.

But, the number one reason why the lawsuit and entire opposition to e15 is so off base: We don’t need corn to make ethanol, there are plenty of other agricultural products and by-products that can be used, and many of them do not require chemical fertilization or the use of “valuable” farm land. The whole issue of corn’s use for ethanol is irrelevant.

There really aren’t very many products available right now that are (1) scalable and (2) can compete with gasoline at its current prices. Corn ethanol is kind of close, but there are still problems with market penetration – automobile manufacturers aren’t going to produce E85 vehicles unless there is significant long term (non government mandated) demand for it, and with oil prices where they are now there isn’t significant demand for it.

Furthermore, imagine the amount of farmland required to produce 210 billion gallons of ethanol (about 17 times what was produced in 2009), which is the equivalent of the ~140 billion gallons of gasoline the U.S. uses each year. This would have significant negative effects on agricultural markets

You can wave all of these problems away if you don’t care about people taking you seriously, but to produce 210 billion gallons of ethanol from anything will require a lot of “valuable” farmland. Note also how he puts “valuable” in quotations as if the idea that farmland has value (and that value is taken away from it when it’s being put towards less productive use) is some sort of conspiracy concocted by gasoline-interest to keep ethanol down.

Finally, he ends with a good\evil list, where rent-seekers are all placed into the “hero” category and the “evil villain” category ranges from API to Hugo Chavez. He placed himself in the hero category — is Marc Rauch a serious person?

The evil villains:
American Petroleum Institute
National Petrochemical & Refiners Association
OPEC
All gasoline companies
EnergyTribune.com
FollowtheScience.com
Prism Public Affairs
Jerry Taylor and the CATO Institute
David Fridley
The aforementioned coalition members
Hugo Chavez
Mahmoud Ahmadinejad

The heroes
David Blume & Tom Harvey
Ted Chipner & Ohio Biosystems
American Coalition for Ethanol
Growth Energy
Ethanol Today Magazine
Renewable Fuel Association
Anne Korin & the Institute for the Analysis of Global Security
Dave & Steve Vander Griend & ICM, Inc.
POET
Tom Waterman and Ethanol Monitor Magazine
Edwin Black
My business partner Bob Gordon, me and everyone at The Auto Channel

Global Food Crisis Forecast; Aggravated by Biofuels and Global Warming Legislation

by Hans Bader on October 26, 2010

in Agriculture, Energy, Environment, Ethanol, Global Warming, International, Natural Resources

A global food crisis is “forecast as prices reach record highs.”  “Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years.”  “Global wheat and maize prices recently jumped nearly 30% in a few weeks while meat prices are at 20-year highs.” “Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels.”

Drought is one factor in the price spikes.  Biofuels and ethanol subsidies and mandates are another major factor.  According to the UN, “large-scale land acquisitions by foreign investors for biofuels is squeezing land suitable for agriculture.”

Ethanol subsidies have resulted in forests being destroyed in the Third World, and caused famines that have killed countless people in the world’s poorest countries.

These subsidies are expanded in the global warming legislation backed by the Obama administration.  Its ethanol subsidies will result in “damage to water supplies, soil health and air quality.”  The Washington Examiner earlier explained how the global warming bill backed by President Obama would cause deforestation by expanding ethanol subsidies, and thus increase greenhouse gas emissions in the long run.   It was larded up with corporate welfare: 85 percent of its carbon allowances were given away to special interests free of charge, thanks to lobbying that turned the bill into an orgy of corporate welfare.

Earlier, Ron Bailey wrote in Reason magazine about the “global food crisis” that has resulted in food riots across the world, in countries like Mexico, Pakistan, Indonesia, Yemen, Haiti, and Egypt.   The crisis, he notes, is caused by “stupid energy policies” in the form of ethanol “mandates” and subsidies, which result in the world’s breadbaskets producing less food and more ethanol.

In 2008, two prominent environmentalists, Lester Pearson and Jonathan Lewis, published a Washington Post editorial, “Ethanol’s Failed Promise,” which explained how ethanol subsidies and mandates are destroying the environment and fueling hunger and violence worldwide.

Turning one-fourth of our corn into fuel is affecting global food prices. U.S. food prices are rising at twice the rate of inflation, hitting the pocketbooks of lower-income Americans and people living on fixed incomes. … Deadly food riots have broken out in dozens of nations in the past few months, most recently in Haiti and Egypt. World Bank President Robert Zoellick warns of a global food emergency.

Moreover, they noted,

food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts, and some production facilities are reportedly dumping these in local water sources.  Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm. Here in the United States, farmers are pulling land out of the federal conservation program, threatening fragile habitats. … Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. As Time Magazine reported this month, huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest ‘carbon sink.’ And when the forests are cleared and the land plowed for farming, the carbon that had been sequestered in the plants and soil is released. Princeton scholar Tim Searchinger has modeled this impact and reports in Science magazine that the net impact of the food-to-fuel push will be an increase in global carbon emissions — and thus a catalyst for climate change.

In Human Events, Deroy Murdock explained how rising food prices resulting from ethanol forced Haitians to literally eat dirt (dirt cookies made of vegetable oil, salt, and dirt), caused tortilla riots in Mexico, and fueled violent protests in unstable “powder kegs” like Pakistan and Egypt.

In 2008, finance ministers and central bankers called for end to ethanol subsidies and biofuel mandates. South African finance minister Trevor Manuel called such subsidies “criminal.” Earlier, the Indian Finance Minister Chidambaram noted that “in a world where there is hunger and poverty, there is no policy justification for diverting food crops towards bio-fuels. Converting food into fuel is neither good policy for the poor nor for the environment.”

The EPA is now ratcheting up ethanol use, heedless of the fact that ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution.  Ethanol production also results in deforestation, soil erosion, and water pollution.

Ethanol in The Wall Street Journal

by Brian McGraw on October 26, 2010 · 1 comment

in Energy, Ethanol

The editorial staff at The Wall Street Journal have not been kind to ethanol over the past months. They ran two editorials (one in July — “Survival of the Fattest“, one last week — “The Ethanol Bailout“) criticizing U.S. biofuel policy.

The most recent editorial sparked a letter to the editor from Agriculture Secretary Tom Vilsack. The letter reiterates many of the talking points Vilsack made in his recent address. The title, “Ethanol is a Step to More Biofuels,” almost implicitly acknowledges that corn ethanol itself is not the tell-tale solution the ethanol industry markets it as. Though his letter isn’t as bad as much of the propaganda put forth by the industry recently, his ending comment is misleading:

Don’t forget, the petroleum industry receives billions of dollars in tax breaks each year from the federal government.

I don’t think anyone has forgotten that. But two wrongs don’t make a right. Furthermore, a significant portion of the tax breaks received by the petroleum industry are part of a larger portion of the tax code that is not industry specific. You can credibly argue about the inefficiencies created by the U.S. tax code, but you can’t demonize the petroleum industry for taking advantage of credits available to a large portion of businesses in the U.S. (though there are also petroleum specific subsidies).

Additionally, as summarized (.pdf) by the EIA in 2007, while petroleum subsidies look BIG, on a BTU (subsidy per unit of energy provided) basis they’re miniscule in comparison to biofuel subsidies. The report calculates subsidies at $0.03 per million BTU’s for natural gas/petroleum compared to $5.72 per million BTU’s for ethanol/biofuels. Biofuel subsidies are 190 times larger than natural gas/petroleum subsidies on a per unit of energy basis (not sure why they couldn’t separate these out).

And then onto the commentators. Commentators on the Internet are generally known for their thoughtfulness and accuracy. Just kidding. But the WSJ letter includes comments from real live employee’s of the ethanol industry.

Ben Butterfield writes:

I work for Growth Energy, the coalition of ethanol supporters that filed the E15 waiver with the EPA. I agree with Secretary Vilsack that the EPA’s decision is the right step in the right direction. Moving to E15 is the first crack the blend wall – that artificial limit on the ethanol market. It is the one step we can take today to reduce our dependence on foreign oil, create jobs here in the US and improve our environment.

These types of comments are frustrating because they’re so incredibly misleading. The ethanol industry as a whole relies on government mandated biofuel production. Are they being “artificially limited” by restrictions on the amount of ethanol that can be blended into fuel? In a way, yes. But they also artificially exist, and will artificially grow, because of the EISA mandates on biofuel production. So they aren’t allowed to complain about all these unfair restrictions the government has placed on their industry. I’m willing to bet they wouldn’t trade unfettered market access (via tossing out the EPA and allowing fuel stations to sell ethanol blends as they desire) in exchange for killing the Renewable Fuel Standard.

Another, from Scott Miller — a bio-blogger:

Growth Energy (and their chief spokesman, Gen. Wesley Clark) champions the Fueling Freedom Plan ( see http://bit.ly/bZho2I ) which promotes the phasing out of ethanol subsidies to invest in the build-out of flexible fuel infrastructure – primarily the installation of blender pumps and ethanol pipelines – to provide a level playing field for market entry. Part of the problem of market entry of ethanol of all types has been that there are few blender pumps, so people have little reason to buy flexible fuel vehicles (FFVs). Conversely, there is little reason to install pumps if there are no FFVs

This isn’t the “phasing out of ethanol subsidies.” It’s the changing of ethanol subsidies from tax credits on production to subsidizing infrastructure and creating yet another artificial market by mandating FFVs. How can anyone take the “level playing field” stuff seriously? The real problem for the market entry of ethanol is that there isn’t any real demand for it because it isn’t consistently price competitive with gasoline. If oil prices rise back to previous highs ethanol will be price competitive again, and individuals will demand FFVs on their own. Though don’t forget the price of corn ethanol is also volatile and heavily tied to the price of corn and natural gas.

Miller was offended that the integrity of the ethanol industry was called into question. I’m not here to assault their integrity, maybe they genuinely believe ethanol is the fuel of the future. But its fair to attack their actions when they’re benefiting from taxpayer money and are fighting like hell to keep Brazilian sugarcane ethanol from reaching the United States.

Ethanol and Energy Efficiency

by Brian McGraw on October 21, 2010

in Energy, Ethanol

The U.S. Agriculture Secretary Tom Vilsack spoke today at the National Press Club on the future of biofuels in the United States. His remarks contained the expected boilerplate that the White House had previously blogged about here.

Growth Energy, the cheerleader of the ethanol industry, were very supportive of his remarks. But both Vilsack and Growth Energy got one thing wrong — the efficiency of ethanol production.

Growth Energy wrote:

During the Secretary’s speech, he mentioned that there have been efficiency gains in ethanol production. In fact, according to a new report out of the Office of Energy Policy and New Uses at the USDA, there have been significant net energy gains from converting corn into ethanol over the last two decades that have made ethanol one of the cleanest burning fuels on the market. For every Btu put into creating ethanol, we get 2.3 Btu’s in return—a significant increase from the 1.76 BTUs produced in 2004.

Robert Rapier, who writes an excellent energy related blog, explained the creative accounting employed by the USDA in these efficiency “gains” in a post titled “Fun With Numbers: The New USDA Report on Corn Ethanol. Incidentally, Rapier is the CTO of a bioenergy holding company and has a healthy respect for biofuels, but is quick to call BS when he sees it.

The post is long (worth the read if you’re interested in things like the methodology used by the USDA to calculate the amount of energy it takes to produce ethanol), but the cliff notes are that the USDA takes residuals from ethanol production, mainly grain, and subtracts that energy from the denominator of the energy return on energy invested equation. This is a misleading metric , it subtracts residual energy from the input rather than counting it as an output. It’s especially misleading as this wasn’t the methodology they used in some earlier reports, so the casual reader might believe that huge efficiency gains were achieved when most of these gains came from changing the methodology used to calculate the energy return.

Two excerpts from his post:

Imagine if financial returns were calculated in this manner. Say you invested $100, and got a return of $35 cash plus goods (byproduct) that you valued at $30. What is the return on investment? Most people would say that you got a total return of $65 on the investment of $100, for a total return of 65%. Or we could say the cash return is 35%. But if we utilize the USDA’s ethanol accounting, we would use the $30 co-credit to offset our initial investment. We could then argue that we only “really” invested $70 to get a cash return of $35, for a cash return of 50%. So, the answer to the question – “When can a $35 return on a $100 investment amount to a 50% return on investment?” – is “Whenever we apply the rules the USDA uses for ethanol accounting.”

That’s not to say it’s the “wrong” way to do it, but it is certainly a method that inflates the energy returns for ethanol. In the example above, the $35 cash return is analogous to ethanol production, and you can see how a 35% return gets inflated to 50%.

And

So if we keep the accounting methodologies consistent, here are the ethanol-only energy returns (ethanol output/total energy input) from the raw data in the USDA reports:

2002 – 1.09
2004 – 1.06
2010 – 1.42

Here are the ethanol plus byproduct energy returns (ethanol plus byproduct output/total energy input):

2002 – 1.27
2004 – 1.26
2010 – 1.69

Here are the ratios from utilizing the USDA’s 2002 methodology (subtracting byproducts from the inputs) across all three reports:

2002 – 1.34
2004 – 1.32
2010 – 1.93

Finally, the ratios that the USDA highlighted and reported across all three reports:

2002 – 1.34
2004 – 1.67
2010 – 2.34

Yes, the ethanol industry has made efficiency gains, but not nearly to the extent that they’d like you to believe.

Obama Uses Oil Spill to Push Failed Energy Policies

by Hans Bader on June 16, 2010

in Agriculture, Economy, Employment, Energy, Environment, Ethanol, Global Warming, Health and Illness, International, Legal, Natural Resources, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade, Zeitgeist

In his speech last night, President Obama used the massive oil spill in the Gulf of Mexico to push his failed energy policies, such as a “green jobs” program that has replaced American jobs with foreign “green” jobs, and a climate-change bill that includes ecologically-devastating ethanol subsidies.  Meanwhile, Louisiana residents rated Obama’s inept response to the oil spill as worse than Bush’s much-criticized response to Hurricane Katrina, in a public opinion poll–perhaps because Obama delayed the clean-up of the oil spill by blocking assistance from many foreign experts.

Obama used the oil spill to push for more so-called “green jobs” programs, deceptively boasting that “over the last year and a half,” the government has subsidized the so-called “clean energy industry.”  This was a reference to the February 2009 stimulus package, which contained so-called “green jobs” funding, 79 percent of which went to foreign firms, replacing American jobs with foreign green jobs.  (The administration never bothered to define what a “green job” is, and some so-called “green jobs” turn out to be harmful to the environment.)  The stimulus package also contained regulations that destroyed jobs in America’s export sector.

In his speech, Obama also used the spill to push the so-called “comprehensive energy and climate bill” passed by the “House of Representatives” late “last year.”  That bill expands ethanol subsidies, which cause famine, starvation, and food riots in poor countries by shrinking the food supply.  Ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution.   Ethanol production also results in deforestation, soil erosion, and water pollution. Subsidies for biofuels like ethanol are a big source of corporate welfare: “BP has lobbied for and profited from subsidies for biofuels . . . that cannot break even without government support.”

Obama said nothing about waiving the Jones Act, a law that bans foreign ships from working in the U.S. waters unless the President waives the ban.  Past presidents have waived the ban after hurricanes to allow foreign experts to assist the U.S., and speed shipping of relief to hurricane victims.  But Obama refused to do so after the spill, report Voice of America News, the Washington Examiner, and Canadian, Australian, and European newspapers, even though it would make obvious sense to accept help from oil-producing, maritime countries like Norway that have big fleets and expertise in handling oil-drilling and oil-spill issues.   As a result, the Obama administration rejected various offers of assistance from Norwegian, Belgian, Dutch, and Mexican firms.

(The Obama administration has belatedly accepted some foreign equipment for use in fighting the spill, although it continued to block ships with foreign crews, delaying the foreign equipment’s use.  As Voice of America notes, although ”the Netherlands offered help in April,” such as providing ”sophisticated” oil “skimmers and dredging devices,” the Obama administration blocked their crews from working in U.S. waters, and as a result, this crucial ”operation was delayed until U.S. crews could be trained” in June.  “The Dutch also offered assistance with building sand berms (barriers) along the coast of Louisiana to protect sensitive marshlands, but that offer was also rejected, even though Louisiana Governor Bobby Jindal had been requesting such protective barriers.”)

In April 2009, the Obama administration granted BP, a supporter of Obama, a waiver of environmental regulations.  But after the oil spill, it blocked Louisiana from protecting its coastline against the oil spill by delaying rather than expediting regulatory approval of essential protective measures.  It has also chosen not to use what has been described as “the most effective method“ of fighting the spill, a method successfully used in other oil spills.  Democratic strategist James Carville called Obama’s handling of the oil spill “lackadaisical“ and “unbelievable“ in its “stupidity.”

BP Supported Obama Stimulus Package, Global Warming Bill, and Corporate Welfare; BP Bankrolled Obama Campaign

by Hans Bader on June 9, 2010

in Agriculture, Bailout Watch, Deregulate to Stimulate, Economy, Employment, Energy, Environment, Ethanol, Global Warming, Health and Illness, International, Natural Resources, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade, Zeitgeist

Columnist Tim Carney notes that BP, responsible for the massive oil spill, is “a close friend of big government whenever it serves the company’s bottom line.” It lobbied for President Obama’s $800 billion stimulus package, the “cap-and-trade” global-warming bills backed by Obama, and “the Wall Street bailout” that Obama voted for.  “BP has more Democratic lobbyists than Republicans.”  Obama is the biggest recipient of campaign cash from BP executives.

Obama’s global warming legislation expands ethanol subsidies, which cause famine, starvation, and food riots in poor countries by shrinking the food supply, and also result in deforestation, soil erosion, and water pollution. Subsidies for biofuels like ethanol are a big source of corporate welfare: “BP has lobbied for and profited from subsidies for biofuels . . . that cannot break even without government support.”

The $800 billion stimulus package is using taxpayer subsidies to replace U.S. jobs with foreign green jobs. It is also destroying jobs in America’s export sector.

Obama falsely claimed that the stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent . . . The reality is that it passed 10.3 percent.”  In 2008, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

Obama’s global warming legislation would also drive jobs overseas, since it would impose a costly cap-and-trade carbon rationing scheme on American industry, while leaving foreign plants operated by multinational corporations unregulated.  That’s one reason why many big companies with plants overseas are lobbying for the global-warming legislation, which would give them an advantage over competitors that make their products largely in America.  The legislation would result in a tax increase for American consumers of up to $200 billion a year or $1,761 per household.

Unlike other oil companies, which have good records of safety and avoiding spills when it comes to oil drilling, BP has a bad record, earning it the label of “serial environmental criminal” from critics.  The Obama administration granted BP a waiver of environmental regulations in April 2009, yet it blocked Louisiana from protecting its coastline against the oil spill by delaying rather than expediting regulatory approval of essential protective measures.  It has also chosen not to use what has been described as “the most effective method” of fighting the spill, a method successfully used in other oil spills.  Democratic strategist James Carville called Obama’s handling of the oil spill “lackadaisical” and “unbelievable” in its “stupidity.”

Obama is now using BP’s oil spill to push the global-warming legislation that BP had lobbied for.

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