The Few Winners and Many Losers of Biofuel Mania

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The biofuel mania that has gripped the US heartland is creating some big winners, and a lot of losers, including many farmers in the US and billions of hungry people around the world. Corn ethanol isn't doing much to improve the score against global warming either. Piece together a few recent reports, and you'll arrive at this conclusion: we can lick global warming in a hurry if we harness "market forces" properly -- and not leave it up to the biggest, greediest and fastest actors to respond from raw self-interest alone.

The good news is this. In 2005, Congress enacted a law requiring 7.5 billion gallons of ethanol by 2012 in the nation's fuel mix, compared with the 3.5 billion gallons of 2004. Ethanol producers are to hit that target by the end of this year, five years early. Look what America can do.

The bad news is this, as described in a recent Foreign Affairs article:

Washington's fixation on corn-based ethanol has distorted the national agenda and diverted its attention from developing a broad and balanced strategy.

The price has been high. We drew attention earlier to a report about how the oil industry is collecting billions in subsidies for blending ethanol into gasoline, and at the same time stalling delivery. Now two further developments are showing what happens when Washington throws an ethanol bone to its best friends in oil and agribusiness: more hungry people all over the world and hard times in the farm belt all over again.

Authors Runge and Senauer of the Foreign Affairs article, called "How Biofuels Could Starve the Poor," point out that the "root of the problem is that the biofuel industry has long been dominated not by market forces but by politics and the interests of a few large companies." Most notable? ADM - Archer Daniels Midland. It's the biggest ethanol producer in the US. With the ethanol boom in farm country now stalling -- the price of ethanol has dropped 30% since May -- ADM won't lose. It will win again! As smaller companies go out of business, ADM will buy them out in the sweeping consolidation that is expected. The NYT called it a "poorly planned overexpansion" that will fail to serve as "a serious antidote to the nation's heavy reliance on foreign oil."

And what about global warming? Corn ethanol is doing very little to reduce the carbon footprint of the transport sector. It's a barely better alternative to fossil fuel. Everyone has given great lip-service to the idea that corn ethanol is a bridge to cellulosic ethanol. But that technology is optimistically 10 years away. In the meantime, the number of corn ethanol production plants in the country has gone from 81 in 2005 to 129 today, with 80 more on the way. The investment in the infrastructure of this technology will lock in our dependence on corn fuel, guarded by industry giants and government subsidies. Some say they can retrofit these plants. Sure.

Protectionist trade policies also slap a hefty tax on better biofuels -- for example sugar ethanol from Brazil, which has a carbon benefit almost 8 times better than corn. Relying on tropical countries to produce ethanol -- and helping them to do so -- would be far more efficient. It also would not compromise the availability of corn, a vital staple food.

Instead, we've got a handful of winners cashing in on a bad situation poised to get worse. Runge and Senauer again:

The world's poorest people already spend 50 to 80 percent of their total household income on food. For the many among them who are landless laborers or rural subsistence farmers, large increases in the prices of staple foods will mean malnutrition and hunger. Some of them will tumble over the edge of subsistence into outright starvation, and many more will die from a multitude of hunger-related diseases.

This is what is meant by business-as-usual. Carbon emissions do not substantially decrease, as political will and financial power team up in the name of democracy and free markets to take advantage of the opportunities that could otherwise be transformed into sustainable outcomes. Such a shame. All that American ingenuity and can-do spirit harnessed for the benefit of the few. Imagine what we could do if we redirected them. For the benefit of the many.

Let's call a time out.

 

 

 

 

 


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