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Energy policy fact of the day
The tax credit for ethanol is an example of a cost ineffective subsidy. The cost of reducing CO2 emissions through this subsidy exceeded $1,700 per ton of CO2 avoided in 2006 and the cost of reducing oil consumption over $85 per barrel.
I am not shocked, but it is worse than I had thought. Here is the full paper. But the funny thing is, that's not even the worse thing I read about biofuels today. Courtesy of Daniel Akst, try this article:
...a growing body of scientific evidence suggests these gasoline alternatives will actually boost carbon-dioxide levels and thereby aggravate the problem of global warming. A study published in the latest issue of Science finds that corn-based ethanol, instead of reducing greenhouse-gas emissions by a hoped-for 20%, will nearly double the output of CO2 and other gases that trap the sun's heat. A separate paper in Science concludes that the clearing of native habitats around the world to grow more biofuel crops will lead to more carbon emissions.
Or try this ungated version of a similar result. Wonderful.
Posted by Tyler Cowen on February 7, 2008 at 10:55 PM in Economics | Permalink
Comments
You left out the most damning evidence of all - increased ethanol demand appears to be causing many farmers to replace barley crops with corn which is leading to higher beer prices.
Posted by: effay at Feb 7, 2008 11:33:10 PM
I thought the subsidies were purely about energy security? Did anyone ever claim that they reduced GHG emissions?
Most total lifecycle GHG studies show US corn-based ethanol releasing similar amount GHG's as producing and burning petrol. Though Paul Crutzen, Nobel chemistry prize winner claims that corn-based biofuels could in fact be much worse due to the NO2 emissions caused by fertilizer application.
Biofuels from corn are an environmental disaster. Though biofuels can also be generated from waste products economically, at a competive cost, with ~30% of the lifecycle GHG emissions of petrol. But NOT in large enough quantities to quench a nations thirsty SUVs.
Here is some further reading on the topic...
A Life Cycle Assessment of Energy Products: Environmental Impact Assessment of Biofuels
http://www.theoildrum.com/node/2976
The Royal Society (UK), Sustainable biofuels: prospects and challenges - January 2008
http://royalsociety.org/displaypagedoc.asp?id=28632
House of Commons, Environmental Audit Committee, Are biofuels sustainable? - January 2008
http://image.guardian.co.uk/sys-files/Environment/documents/2008/01/18/EACbiofuelsreport.pdf
Posted by: Greg at Feb 7, 2008 11:33:10 PM
In all the talk about biofuels, it's important to keep in mind the difference between corn-based ethanol and cellulosic-based ethanol. Just about everything bad you hear about ethanol is really about corn-based ethanol. None of it applies to its much more promising sibling.
Posted by: Rue Des Quatre Vents at Feb 7, 2008 11:43:25 PM
"I thought the subsidies were purely about energy security?"
They are about rural land values & ADM's profit line. The voter is the consumer of the policy, so the "reason" for it is simply a product of what you'll believe. You want "energy security"? Yep, that's what it's for.
Posted by: kebko at Feb 8, 2008 12:01:48 AM
But of course the purpose of the subsidy is not just to provide ethanol being manufactured with current technology at a cheap price forever. The purpose (in addition to energy security) is to give the industry a market to develop into to spur technological advances that will lower the cost of production over the medium-term.
I guess this economics-based opposition is what the forces of inertia have moved on to now that the "it uses more energy to produce than it generates" argument has been debunked.
Posted by: Geoff Hamilton at Feb 8, 2008 12:06:44 AM
I think the important question is whether or not politicians will respond to this evidence or if rent seeking corporations and farmers will win out.
Posted by: Chris at Feb 8, 2008 12:11:50 AM
From Cato: "Ethanol will not lead to energy independence. If all the corn produced in America in 2005 were dedicated to ethanol production (and only 14.3 percent of it was), U.S. gasoline consumption would have dropped by only 12 percent. For corn ethanol to completely displace gasoline in this country, we would need to appropriate all U.S. cropland, turn it over to ethanol production, and then find 20 percent more land on top of that."
http://www.cato.org/pub_display.php?pub_id=8024
Posted by: effay at Feb 8, 2008 12:12:27 AM
Greg,
I thought the subsidies were purely about energy security?
Which incentives do you believe more likely effects the democratic process: farm lobbies and Iowa caucuses, or a desire for energy security? Given the amount of petroleum needed to produce corn ethanol, I don't think its even very good at offering energy security.
Chris, this evidence has been out there for a while. I've read studies that placed the energy efficiency of corn ethanol anywhere from .7 to 1.3. Sugarcane is much better, around 3 I think. I believe the reason we can't buy much of that from Brazil because of sugar tariffs lobbied for by the sugar industry.
Posted by: Grant at Feb 8, 2008 1:13:42 AM
Geoff,
It does use more energy that it generates... that is, so long as you're referring to the American subsidies and not Brazilian, sugar-based ethanol, which is restricted by quota in both this country and the EU. So where's the mythical debunking to which you refer?
Posted by: Petrarch at Feb 8, 2008 1:14:52 AM
Geoff,
If corn could be made into an economically viable fuel, why would subsidizing the current (inefficient) use of it be helpful? Its true that after some practice, engineers typically find significant improvements in any process, but this would also be true after corn were made commercially viable by R&D (if that is even possible). Besides, if politicians wished to subsidize corn ethanol R&D, I'd think they'd just subsidized corn ethanol R&D (although I still think that would be a bad idea).
Does anyone think corn is going to pass sugar cane in its usefulness in ethanol production?
Posted by: Grant at Feb 8, 2008 1:25:30 AM
Corn-based ethanol is a strawman. Processes
for going from cellulose to ethanol, propanol,
butanol, and others seem to be getting close
to commercialization. They promise to be
truly carbon-neutral and maybe even cheaper
than fossil fuels.
Posted by: Cal at Feb 8, 2008 1:34:00 AM
What? And people thought that biofuel supposedly helps us slow down this whole climate change impending doom scenario. Maybe we should take a look at other alternatives like solar powered cars or those that run with water. For now though, I'm sticking the little ways I can help contribute to the environment. One step at a time for me.
Posted by: Jay, writer MemberSpeed.com at Feb 8, 2008 3:29:00 AM
What use is energy independence if you start being food-dependent?
Posted by: andy at Feb 8, 2008 3:54:53 AM
andy, there was book review some time ago, perhaps even here at MR, of a book called "Twinkie,deconstructed". From an interview about the book:
Ettlinger discovered that a whole lot of Twinkie ingredients – as with many other processed foods – are derived from petroleum and petroleum products.
That solves the problem in away. You can turn to corn ethanol for fuel, and turn the petrol saved into Twinkies...
Posted by: greatzamfir at Feb 8, 2008 5:11:07 AM
No single fuel that does not emit CO2. buat I thought the carbon from biofuel is much saver, no?
Posted by: daustralala at Feb 8, 2008 6:07:25 AM
Does the US even have a farming lobby anymore after the eminent domain policy prior to Bush's executive order in 2006? I thought that the government had handed the farming lobby everything they wanted. Shouldn't they now be in debt to congress?
Posted by: Brainwarped at Feb 8, 2008 6:55:14 AM
More GHGs. Finally, a good reason to support bio-fuels!
Posted by: aaron at Feb 8, 2008 8:55:17 AM
If you really believed in the potential cellulosic ethanol, wouldn't you call for an end to corn ethanol production subsidies, and a shift to cellulosic research.
It is simply not true that the production subsidies, the lion's share of all corn ethanol subsidies, go to the research you want.
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Posted by: Steve at Feb 8, 2008 9:57:17 AM
There is an important difference between bio fuels and fossil fuels.
The carbon in fossil fuels come from the ground where they have been buried for millions of years. So burning fossil fuels adds to the CO2 in the atmosphere. The carbon in bio fuels comes from the atmosphere (Plants take CO2 out of the air). So burning bio fuels just returns CO2 back to the atmosphere.
So the net effects on atmospheric carbon from burning bio fuels is less than burning fossil fuels.
Posted by: David at Feb 8, 2008 10:58:05 AM
That's the observation that gave us initial hope David, that the "burning" part must be co2 neutral. Unfortunately there are "inputs" to the growing and processing part that affect this as well. I assume that is what the current numbers-battle is all about, inputs and such.
Posted by: odograph at Feb 8, 2008 12:18:42 PM
Given that we impose tariffs on imported ethanol, the goal of government legislation does not seem to be the decrease of usage of gasoline, but rather a subsidization of U.S. corn producers. The ethanol subsidy is probably much more effective at transferring money to corn growers than, say, a carbon tax.
-Kevin
Posted by: Kevin Postlewaite at Feb 8, 2008 3:23:29 PM
Opponents of biofuels have nothing to fear then as it will never be economic to produce, even with the subsidy. I agree it will have little effect as is, and tropical deforestation would be a monumental mistake, but this just shows how little there is to fear from it. Somehow, I just don't think opponents believe it themselves.
Posted by: Lord at Feb 8, 2008 4:39:54 PM
Seems an odd way to test an idea, Lord. That is, "let's subsidize it massively and see if it still fails!"
Posted by: odograph at Feb 8, 2008 5:43:32 PM
Lord said,
"Opponents of biofuels have nothing to fear then as it will never be economic to produce, even with the subsidy."Opponents don't fear biofuels they want to end the ecologic and economic destruction they are causing. The destruction is occurring because biofuel mandates and subsidies drive biofuel production even though they are not economic.
Posted by: TJIT at Feb 8, 2008 10:49:28 PM
