Friday, December 01, 2006

Ethanol or Hybrids? — The Real Story, Part II

There is a general assumption that Americans are a patriotic bunch, perfectly willing to make considerable sacrifices to lifestyle and even pecuniary interests in order to insure long-term benefits to country and humankind. If that were indeed the case, we all would 1) be driving hybrid cars, 2) clamoring for that wondrous combination of ethanol and gasoline called E85, a mixture of 85% ethanol and 15% gasoline—the latter being the politicians’ solution to our dependence on (indeed addiction to) imported oil.

The Politicization of Ethanol

As indicated in Part I of this series, it is widely acknowledged that Wayne Andreas, the former chairman of Archer Daniels Midland was most instrumental in advancing the concept of ethanol, particularly corn based ethanol, as the best substitute for our nation’s dependency on oil imports. It was not his personality that endeared that concept to the politicians; instead that illustrious group slavishly succumbed to the lure of his generous campaign contributions (that were more than enough obviously, to overcome the scandal that tarnished the reputation of that same company). A more recent event however, serves to cement the notion that political self-interests easily trump the highest-minded political principles.

The unmistakable evidence is based on a mid-November 2006 announcement made public by Senator John McCain’s staff to the effect that he intended to form an exploratory committee for a possible presidential campaign. The more pertinent part of that message indicated that he had not yet made up his mind whether to run, but is giving it strong consideration. Well, here is a wake-up call—he is definitely going to run. Why am I so sure? As they say, “the proof is in the pudding;” although in this case “the proof is in the ethanol.”

In its October 31 st issue, Fortune magazine stated the following: “ Iowa, home to the first-in-the-nation presidential caucus, is the biggest corn-growing state in the country, and in Iowa ethanol isn’t just another campaign issue. It’s the cash cow, the golden goose and the fountain of economic youth all wrapped up in one.” The article emphasizes, “Mike ‘Heckuva job’ Brown would stand a better chance of winning an election in New Orleans than an anti-ethanol candidate would of winning Iowa’s caucus.” (As I was writing this, Dick Armey the former Republican House leader essentially said the same thing on TV.)

With that in mind, Fortune commented on John McCain’s mid-term election campaign stops, ironically titled “Straight Talk Express” (that might have been better termed “Flip-Flop Express.”) It cited McCain’s seemingly adamant argument in the past that, “government support for ethanol actually raises gasoline prices. He has claimed ethanol does nothing to make the U.S more energy independent. He has even questioned the science behind making fuel from corn — contending that ethanol provides less energy than the fossil fuels consumed to produce it.”

In fact, in November of 2003, McCain stated, “… thanks to agricultural subsidies and ethanol producer subsidies, it is now a very big business—tens of billions of dollars that have enriched a handful of corporate interests—primarily one big corporation, ADM. Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality.” (My emphasis)

Indeed, honestly held principles stated in this forthright manner are what caused Independents and even many Democrats to believe that John McCain was a different type of politician, one whose designation as a straight talker was warranted. However, a speech he gave last August (plus his shift in a number of other issues) disabused most of that notion. It is obvious that his recognition of Iowa as a major factor in a run for the White House nomination has forced him to make a 180-degree change in his ethanol focus signaling that he is really just another archetypical politician at heart. Here is his new mantra as explicated in (where else?) Grinell, Iowa: “I support ethanol and I think it is a vital, a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.” With that statement, McCain went from “straight talker” to “double talker” — and John Kerry was called a flip-flopper.

Now, before I am accused of a prejudice against Republicans, that is not the intent. It is an attempt to convince readers that the promotion of corn ethanol as a panacea for our oil problem has become so politicized on behalf of special interests that it has developed into a tidal wave that probably cannot be stopped. As further proof of at least a semblance of impartiality, two celebrity Democrats, Hillary Clinton and Joe Biden both with presidential ambitions, have also flip-flopped on their ethanol stances, undoubtedly in anticipation of the Iowa caucus. Regardless of political affiliation, this type of conduct reminds me of Ronald Reagan’s comment that “It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.”

Money is the Catalyst

The International Institute for Sustainable Development (IISD) launched the Global Subsidies Initiative (GSI) in December 2005 to put a spotlight on subsidies—transfers of public money to private interests—and how they undermine efforts to put the world economy on a path toward sustainable development. Its web site explains that “Subsidies are powerful instruments. They can play a legitimate role in securing public goods that would otherwise remain beyond reach. But they can also be easily subverted. The interests of lobbyists and the electoral ambitions of office-holders can hijack public policy.”

The Institute then reveals that one of its studies has determined that the total cost of tax breaks and subsidies provided to the production of ethanol in 2006 in this country is in the range of $5.1 billion to $6.8 billion. That’s a heap of taxpayer money, but if it really could solve the problem of oil dependency it would be worth every penny—however, what if ethanol, more specifically “corn” ethanol cannot attain that objective, or come anywhere close to doing so?

Ethanol Mania

There is a veritable modern-day gold rush driving the construction of ethanol plants throughout the mid-west, California, and even the east coast, all, at the moment, to be fueled by corn. Hedge funds, private equity firms, venture capitalist, and the likes of Bill Gates and Richard Branson are jumping on the ethanol wagon. There are already over 100 ethanol plants functioning in the United States, and within the next six to nine months over 40 more will go into production, at which point the United States will surpass Brazil as the largest ethanol producer. (Actually, we are already the largest producer of corn-based ethanol since Brazil uses only sugar as its base.) The new plants will push total ethanol production to some 5 billion gallons a year, a 30 percent increase over current production. Much of the excitement is the result of Congressional legislation mandating that refiners increase their use of ethanol to 7.5 billion gallons by 2012, an amount that will be surpassed within the next year or two—of course, the $.51 a gallon subsidy doesn’t hurt either.

Is Ethanol the Panacea?

Proponents of ethanol maintain that it is a renewable fuel that can be created from agricultural feedstock, can be produced domestically, results in less pollution, and is thus environmentally friendly. Critics however, contend that these views are much too simplistic, and ignore a number of negative factors. The most contentious is whether or not ethanol produces more energy than is used to produce it. One cartoon on this subject has the first panel showing a large harvesting machine dumping corn into a truck with script saying, “the corn farmer— America’s great hope to cure our addiction to oil.” The next panel shows a driver sitting in another truck and the words, “Why is this man smiling?” The third panel discloses that the smiling man, an Arab, is sitting in a huge oil truck pumping oil into the harvester—and the text answers the smiling question—“Because it takes 1.29 gallons of fossil fuel to produce one gallon of ethanol.”

That statistic was developed by David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley. They co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains.

That represents one school of thought agreeing that more energy in the form of fossil fuel is dissipated in the processing of ethanol than is created. The ethanol lobby however, claims there's a 30 percent net gain in BTUs from ethanol made from corn. However, one primary fact not disputed is that ethanol as a transportation fuel, will provide from 20 to 34 percent lower mileage than gasoline.

There are also serious logistic problems since unlike oil and gasoline, ethanol cannot be shipped through pipelines because it picks up water and other impurities. That necessitates transport by trucks, trains, or barges (using more oil to do so), thereby creating a much less efficient distribution system. Because ethanol is also corrosive, gas stations will require special stainless steel storage tanks at an estimated cost of $200,000.

An article published this June in The New York Times quoted Warren R. Staley, the chief executive officer of Cargill (a multinational agricultural company that is a competitor of ADM), as saying, “…this is a bit like a gold rush. There are unintended consequences of this euphoria to expand ethanol production at this pace that people are not considering. “ The Times wrote, “There is concern within the agricultural and food industries that ethanol at its current pace of development, could strain food supplies, raise costs for the livestock industry, and force the use of marginal farmland in the search for ever more acres to plant corn.”

The Biomass Alternative

As an indication of how farfetched it is to believe that corn-based ethanol could lead to oil independence, it is calculated that even if every acre of current corn growth was used for ethanol, it would replace only 12.3% of the gas used in the country. The more effective solution is celullosic ethanol made from crop residue, wood waste, municipal solid waste, and high biomass dedicated energy crops such as switchgrass. The latter is particularly useful because of its tolerance to drought, a minimal requirement for fertilizers (unlike corn), and its potential for high fuel yields. In fact, the amount of energy produced by switchgrass not only produces triple that of corn, but one acre of land planted in switchgrass produces four times the cellulosic material planted in corn.

Unquestionably, a biomass material such as switchgrass is far superior to corn in the production of ethanol. However, before full commercialism of biomass ethanol can be brought to fruition, a major stumbling block must be overcome. Scientists are struggling to create the perfect enzyme, a catalyst that will convert cellulosic material into fermentable sugars. Several companies are working toward that goal, but one, Iogen Corporation, headquartered in Ottawa, Canada is planning its first full scale facility, based on the use of an enzyme called Eco Ethanol. Partners in this enterprise are high-powered names such as Royal Dutch Shell, Volkswagen, and Goldman Sachs. Despite a commitment of $130 million, production of ethanol in this plant will be will amount to only 40 million to 50 million gallons annually, whereas the norm is 100 to 200 million gallons.

To place the potential role of ethanol in reducing our addiction to oil in perspective, according to a recent article in the Chicago Tribune, “the Department of Energy has established a goal of supplying 30 percent of the nation’s need for fuel for transportation with ethanol by 2030.” So, despite all the politicians’ efforts to convince the country that ethanol is the ideal solution to oil independence some 25 years from now we will still depend on oil for 70 percent of our fuel needs—unless another more timely and effective solution can be found. Next month’s article will discuss what might be the Holy Grail of future transportation needs—the Plug-in Hybrid.


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