(cross-posted at Deny My Freedom and Daily Kos)
That may seem like any other factory, but it is in fact a factory where ethanol is produced. Earlier this year, Bush went around the country, touring in support of ethanol production. The main arguments were in favor of fuel efficiency and in having cleaner emissions from cars. The facts look impressive, to say the least. It’s a renewable source of energy (it is mainly produced by corn, but there are plans to produce ethanol from alternative sources, such as sugar cane), it reduces emissions from cars by 12-19%, and it lowers the level of carbon monoxide released from an automobile’s tailpipe.
Al Gore makes an important point when he says that environmentally friendly policies can coincide with the goals with corporations, which is, quite plainly, to maximize profit. However, at what point are these goals too much aligned with one another? In particular, I am speaking about the rising price of ethanol to the point where it doesn’t alleviate the pain of filling up at the pump – it aggravates it.
Ethanol has been touted by President Bush and others as a possible long-term cure for Americans’ addiction to fossil fuels, especially expensive gasoline. But right now it is pushing pump prices higher in the U.S.
Ethanol, a plant-based fuel, is being used in the U.S. primarily as an additive to blend with gasoline in proportions of up to 10%, not as an outright substitute. Demand for ethanol as an additive has caused its price to soar about 65% since early May to around $4.50 a gallon in U.S. spot markets, according to the Oil Price Information Service. That makes it far more expensive than gasoline, which costs about $2.90 a gallon at the pump on average, according to the AAA driving club.
[…]
“We’d probably have retail gasoline prices between $2.30 and $2.40 a gallon if not for ethanol,” estimates economist James Glassman of J.P. Morgan.
Ethanol trader Sal Gilbertie of brokerage firm Fimat USA agrees the additive is pushing up gasoline prices — but he pegs ethanol’s impact at only around eight cents a gallon, including such factors as a federal tax credit refiners get for using it. He expects ethanol’s influence won’t fully abate until sometime in 2008, when supplies are expected to increase.
Now, don’t get me wrong – I am not arguing that we should not be making ethanol, as it gasoline that is blended with ethanol is friendlier to the environment. It’s clear, though, that by richly subsidizing an industry that would not exist without government help, we have exacerbated the pain being felt in our pocketbooks. When investing in new technologies, start-up costs will obviously exist, making the initial price quite hefty. The problem with artificially creating a market, though, is that this is inevitably going to lead to the bankruptcy of companies that jump into the game, only to find at some point that demand for the additive is reached. What’s more, it’s clear that firms that produce ethanol are raking in huge profits. Do we really need to give them any more money at this point?
Welcome to the ethanol boom, the closest America’s farmers may get to an investment bubble. Since the pro-ethanol State of the Union address in January, shares of Fresno-based Pacific Ethanol Inc. (PEIX ) have doubled, to 37. Green Plains Renewable Energy has risen 40%, to 46, since it began trading in March.
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The fuel, renewable and more environmentally friendly than gasoline, is already being used as a gas additive, replacing another additive that was found to pollute groundwater. The result: a squeeze on supplies that has doubled ethanol’s wholesale price, to $2.75 a gallon, about what gasoline costs at wholesale. With corn prices low and gas prices high, ethanol’s profit margin per gallon is at a record of more than $1. “You don’t need Willie Nelson organizing concerts for these farmers,” jokes Tom Kloza, an analyst for the Oil Price Information Service.
The kicker is this little nugget – so much for fuel efficiency…
What of the promise of ethanol replacing gas? Don’t count on it. General Motors Corp. (GM ) and Ford Motor Co. (F ) have made a push this year to promote vehicles that can run on gas or E85, a fuel that’s 85% ethanol and 15% gasoline. But E85 gets worse mileage than gas, a problem if ethanol is costlier. And right now there are only about 600 E85 pumps nationwide.
Minnesota, which has its own state-run subsidy program, faces a similar problem as well:
But taxpayers are still being billed $26 million a year to subsidize the state’s 11 privately owned ethanol plants, even though they’re generating unprecedented profits.
Wally Tyner, a Purdue University economist, calculated that at today’s fuel prices, an ethanol plant that cost $100 million could be paid off in a year. “They’re hugely profitable, that’s why so many of them are being built,” Tyner told the St. Paul Pioneer Press.
While it’s become increasingly clear that we’re giving away money to ethanol producers instead of providing useful assistance to a nascent industry, there’s an unpleasant dilemma that ethanol has created. Producing ethanol requires energy to begin with, and to cut down on high energy prices (and maximize their profits, of course), companies are turning to the worst polluter of all: coal.
Coal is cheaper than natural gas, the fuel used most to make ethanol. A coal-fired ethanol plant can also generate electricity that can be sold onto the grid, which increases the efficiency of both ethanol and electricity production.
In the most striking example of this efficient combination, Blue Flint Ethanol, a North Dakota producer, is building a plant next to Coal Creek Power Station, a 1,200-megawatt facility owned by Great River Energy. The plant will rely on excess heat from Coal Creek’s boilers to run the ethanol plant. The heat will be used to create the steam necessary to refine corn into 50 million gallons of ethanol each year. Blue Flint Ethanol is a joint venture between Great River and Headwaters Inc.
“This whole concept of having an energy complex is a very efficient way to minimize carbon-dioxide emissions and take advantage of the waste heat from a power plant,” said Bob McIlvaine, president of energy consulting firm McIlvaine Co.
Any sort of contribution that ethanol makes to decreasing air pollution will be negated many times over by coal. This may be an inconvenient truth to many of us, who thought that E85 and other hybrid energy solutions could at least slow down the problem of global warming. Without any sort of regulations on how ethanol can be produced, we may have opened a Pandora’s Box in letting coal be considered a viable energy source again, even though it is the dirtiest of the fossil fuels. In addition, businesses see a side business that could be very profitable for them.
Other companies are pursuing a similar strategy of building small coal-fired boilers that will run ethanol plants and generate electricity. Great River is helping build a 40-megawatt coal-fired boiler in Spiritwood, N.D., that will sell electricity and power a 100-million-gallon-a-year ethanol plant. A group of investors in Goodland, Kan., is building a 20-megawatt boiler that will generate electricity and power ethanol and biodiesel plants. Coal-burning ethanol plants are also under construction in Illinois, Iowa, Minnesota and Missouri.
For the short-term benefit of ethanol – let’s face it, blending ethanol with gasoline does not solve our larger problem of depending on oil; it just makes the time we can depend on oil even longer – we could be incurring a deadlier risk of seeing more and more coal-fired power plants eject massive amounts of pollution into the atmosphere. And the reason? We have given corporations a few too many points of making a profit. You’ll see various taxpayer watchdog groups and right-leaning think tanks rail against ethanol purely from a fiscally conservative point of view. But we failed to defend any sort of environmental standards when it came to producing the additive. Now, we face a situation where gas prices are higher, corn prices are higher, corporations are raking in record profits (both gasoline and ethanol producers), and our air pollution could stand to get much worse before it gets any better.
It’s an inconvenient truth, but ethanol is going to hurt us more than it will help us.
Another inconvenient truth. We don’t have enough food to feed the 6 Billion plus humans on the planet now. If we continue to divert food produced into fuel for our cars, it would appear to this observer that famine will only become more likely.
(in England) sheep ate people. Now, at its end, (in the US) cars will be eating people.
This is false. We can grow far more food than is currently needed to feed every person on the planet. In fact, we already DO grow enough food to feed the entire planet. There are two main problems
Can’t argue with your view. Key word in #2 is If. It certainly would be a lot more efficient to stop relying on livestock for part of our food supply. This could be achieved If we all became vegetarians. In addition, understand that left to follow its current rate of growth, the human population on the planet could double (to 12 Billion) within the lifespan of someone in their 30’s now. Should this growth actually occur, it will obviously add additional demand for food production on what available land is left.
Folks are dieing in Africa now because we can’t get (or won’t get, because we lack the political will) significant food supplies to these people. All I’m saying is that it seems rather short sighted to assume ethanol is going to provide a significant portion of the solution to our “energy needs” long term. As we provide more fuel, one could argue that we simply delay coming to grips with lifestyles that contribute to the climate crisis, desertification and urban sprawl.
A big part of the solution I believe is changing our way of living. Lots of ways to use the land better and more efficiently as you have indicated. Political leaders need to become independent thinkers, not merely shills for their corporate sponsors. One could say the same about the MSM.
BTW I love your Carlin Quote!
I’ve actually been a vegetarian for about 3 months now because of some of the reading I’ve been doing on things like aquifer draining, ethanol production and poverty in developing nations. I sort of realized that I was basically a hypocrite for saying “someone really should do something about this” and never doing anything about it myself. I feel better, I’ve lost weight and feel like I’ve made a bit of a difference. Between that and cycling to work, I’ve dramatically reduced my personal ecological footprint.
It’s a shame about starvation in other countries, but it’s also a shame that we subsidize people to not grow any food to prevent oversupply. What a colossal waste that is.
I agree that turning corn into fuel is not the most promising idea. Planting sugar cane and sugar beets would be far more effective because it’s more energy dense. One biofuel that seems to never be talked about is hemp. It can be grown in terrible soils in all sorts of climates and can be used in many ways. One more way that conservative US drug policy harms the health of the nation.
All of this needs to be prefaced by saying that agricultural methods need to be drastically changed because they are too dependent on energy-intensive practices like fossil fuel consumption and abundant irrigation.
Ultimately, I think the big technological breakthrough will be with nanotechnology. They’re engineering little microbes that will one day be able to turn all sorts of waste into usable fuels. The significant breakthrough will be when we live in a more sustainable fashion and not expect the same level of consumerism we currently do.
The part you got right is that grain-based ethanol is a waste of time, money, and resources.
The part you got wrong is that ethanol is not a viable alternative energy source.
It depends on the SOURCE of the ethanol.
There is one nation on earth that has a successful ethanol-based fuel program: Brazil.
How did Brazil make its program successful? It used the stalks from its sugar cane harvest, which ordinarily went to waste.
In the United States, we would substitute switchgrass for sugar cane. Switchgrass is a native grass of the Great Plains and Rocky Mountain states, does not interfere with agricultural production, and yields far more energy than it requires to extract the ethanol from it (so it’s a net energy gainer instead of a loser).
THIS blog explains the potential of switchgrass:
http://thefraserdomain.typepad.com/energy/2006/02/switchgrass_is_.html