Guest guest Posted May 28, 2007 Report Share Posted May 28, 2007 At 09:42 AM 5/28/07, you wrote: >1. How Biofuels Could Starve the Poor Mark Graffis >View All Topics | Create New Topic Message >1. How Biofuels Could Starve the Poor >Posted by: " Mark Graffis " mgraffis mgraffis >Sun May 27, 2007 6:44 pm (PST) >Burning food > > " A recent paper in the US journal Foreign Affairs estimates that filling a >95-litre fuel tank with pure ethanol will require about 200 kg of corn, >which has enough calories to feed a person for a year. " >http://tinyurl.com/26f425 > >How Biofuels Could Starve the Poor >By C. Ford Runge and Benjamin Senauer http://tinyurl.com/3c6dlt > > From Foreign Affairs, May/June 2007 > >Summary: Thanks to high oil prices and hefty subsidies, corn-based ethanol >is now all the rage in the United States. But it takes so much supply to >keep ethanol production going that the price of corn -- and those of other >food staples -- is shooting up around the world. To stop this trend, and >prevent even more people from going hungry, Washington must conserve more >and diversify ethanol's production inputs. > >C. Ford Runge is Distinguished McKnight University Professor of Applied >Economics and Law and Director of the Center for International Food and >Agricultural Policy at the University of Minnesota. Benjamin Senauer is >Professor of Applied Economics and Co-director of the Food Industry Center >at the University of Minnesota. > >THE ETHANOL BUBBLE > >In 1974, as the United States was reeling from the oil embargo imposed by >the Organization of Petroleum Exporting Countries, Congress took the first >of many legislative steps to promote ethanol made from corn as an >alternative fuel. On April 18, 1977, amid mounting calls for energy >independence, President Jimmy Carter donned his cardigan sweater and >appeared on television to tell Americans that balancing energy demands >with available domestic resources would be an effort the " moral equivalent >of war. " The gradual phaseout of lead in the 1970s and 1980s provided an >additional boost to the fledgling ethanol industry. (Lead, a toxic >substance, is a performance enhancer when added to gasoline, and it was >partly replaced by ethanol.) A series of tax breaks and subsidies also >helped. In spite of these measures, with each passing year the United >States became more dependent on imported petroleum, and ethanol remained >marginal at best. > >Now, thanks to a combination of high oil prices and even more generous >government subsidies, corn-based ethanol has become the rage. There were >110 ethanol refineries in operation in the United States at the end of >2006, according to the Renewable Fuels Association. Many were being >expanded, and another 73 were under construction. When these projects are >completed, by the end of 2008, the United States' ethanol production >capacity will reach an estimated 11.4 billion gallons per year. In his >latest State of the Union address, President George W. Bush called on the >country to produce 35 billion gallons of renewable fuel a year by 2017, >nearly five times the level currently mandated. > >The push for ethanol and other biofuels has spawned an industry that >depends on billions of dollars of taxpayer subsidies, and not only in the >United States. In 2005, global ethanol production was 9.66 billion >gallons, of which Brazil produced 45.2 percent (from sugar cane) and the >United States 44.5 percent (from corn). Global production of biodiesel >(most of it in Europe), made from oilseeds, was almost one billion gallons. > >The industry's growth has meant that a larger and larger share of corn >production is being used to feed the huge mills that produce ethanol. >According to some estimates, ethanol plants will burn up to half of U.S. >domestic corn supplies within a few years. Ethanol demand will bring 2007 >inventories of corn to their lowest levels since 1995 (a drought year), >even though 2006 yielded the third-largest corn crop on record. Iowa may >soon become a net corn importer. > >The enormous volume of corn required by the ethanol industry is sending >shock waves through the food system. (The United States accounts for some >40 percent of the world's total corn production and over half of all corn >exports.) In March 2007, corn futures rose to over $4.38 a bushel, the >highest level in ten years. Wheat and rice prices have also surged to >decade highs, because even as those grains are increasingly being used as >substitutes for corn, farmers are planting more acres with corn and fewer >acres with other crops. > >This might sound like nirvana to corn producers, but it is hardly that for >consumers, especially in poor developing countries, who will be hit with a >double shock if both food prices and oil prices stay high. The World Bank >has estimated that in 2001, 2.7 billion people in the world were living on >the equivalent of less than $2 a day; to them, even marginal increases in >the cost of staple grains could be devastating. Filling the 25-gallon tank >of an SUV with pure ethanol requires over 450 pounds of corn -- which >contains enough calories to feed one person for a year. By putting >pressure on global supplies of edible crops, the surge in ethanol >production will translate into higher prices for both processed and staple >foods around the world. Biofuels have tied oil and food prices together in >ways that could profoundly upset the relationships between food producers, >consumers, and nations in the years ahead, with potentially devastating >implications for both global poverty and food security. > >THE OIL AND BIOFUEL ECONOMY > >In the United States and other large economies, the ethanol industry is >artificially buoyed by government subsidies, minimum production levels, >and tax credits. High oil prices over the past few years have made ethanol >naturally competitive, but the U.S. government continues to heavily >subsidize corn farmers and ethanol producers. Direct corn subsidies >equaled $8.9 billion in 2005. Although these payments will fall in 2006 >and 2007 because of high corn prices, they may soon be dwarfed by the >panoply of tax credits, grants, and government loans included in energy >legislation passed in 2005 and in a pending farm bill designed to support >ethanol producers. The federal government already grants ethanol blenders >a tax allowance of 51 cents per gallon of ethanol they make, and many >states pay out additional subsidies. > >Consumption of ethanol in the United States was expected to reach over >6 billion gallons in 2006. (Consumption of biodiesel was expected to be >about 250 million gallons.) In 2005, the U.S. government mandated the use >of 7.5 billion gallons of biofuels per year by 2012; in early 2007, 37 >governors proposed raising that figure to 12 billion gallons by 2010; and >last January, President Bush raised it further, to 35 billion gallons by >2017. Six billion gallons of ethanol are needed every year to replace the >fuel additive known as MTBE, which is being phased out due to its >polluting effects on ground water. > >The European Commission is using legislative measures and directives to >promote biodiesel, produced mainly in Europe, made from rapeseeds and >sunflower seeds. In 2005, the European Union produced 890 million gallons >of biodiesel, over 80 percent of the world's total. The EU's Common >Agricultural Policy also promotes the production of ethanol from a >combination of sugar beets and wheat with direct and indirect subsidies. >Brussels aims to have 5.75 percent of motor fuel consumed in the European >Union come from biofuels by 2010 and 10 percent by 2020. > >Brazil, which currently produces approximately the same amount of ethanol >as the United States, derives almost all of it from sugar cane. Like the >United States, Brazil began its quest for alternative energy in the >mid-1970s. The government has offered incentives, set technical standards, >and invested in supporting technologies and market promotion. It has >mandated that all diesel contain two percent biodiesel by 2008 and five >percent biodiesel by 2013. It has also required that the auto industry >produce engines that can use biofuels and has developed wide-ranging >industrial and land-use strategies to promote them. Other countries are >also jumping on the biofuel bandwagon. In Southeast Asia, vast areas of >tropical forest are being cleared and burned to plant oil palms destined >for conversion to biodiesel. > >This trend has strong momentum. Despite a recent decline, many experts >expect the price of crude oil to remain high in the long term. Demand for >petroleum continues to increase faster than supplies, and new sources of >oil are often expensive to exploit or located in politically risky areas. >According to the U.S. Energy Information Administration's latest >projections, global energy consumption will rise by 71 percent between >2003 and 2030, with demand from developing countries, notably China and >India, surpassing that from members of the Organization for Economic >Cooperation and Development by 2015. The result will be sustained upward >pressure on oil prices, which will allow ethanol and biodiesel producers >to pay much higher premiums for corn and oilseeds than was conceivable >just a few years ago. The higher oil prices go, the higher ethanol prices >can go while remaining competitive -- and the more ethanol producers can >pay for corn. If oil reaches $80 per barrel, ethanol producers could >afford to pay well over $5 per bushel for corn. > >With the price of raw materials at such highs, the biofuel craze would >place significant stress on other parts of the agricultural sector. In >fact, it already does. In the United States, the growth of the biofuel >industry has triggered increases not only in the prices of corn, oilseeds, >and other grains but also in the prices of seemingly unrelated crops and >products. The use of land to grow corn to feed the ethanol maw is reducing >the acreage devoted to other crops. Food processors who use crops such as >peas and sweet corn have been forced to pay higher prices to keep their >supplies secure -- costs that will eventually be passed on to consumers. >Rising feed prices are also hitting the livestock and poultry industries. >According to Vernon Eidman, a professor emeritus of agribusiness >management at the University of Minnesota, higher feed costs have caused >returns to fall sharply, especially in the poultry and swine sectors. If >returns continue to drop, production will decline, and the prices for >chicken, turkey, pork, milk, and eggs will rise. A number of Iowa's pork >producers could go out of business in the next few years as they are >forced to compete with ethanol plants for corn supplies. > >Proponents of corn-based ethanol argue that acreage and yields can be >increased to satisfy the rising demand for ethanol. But U.S. corn yields >have been rising by a little less than two percent annually over the last >ten years, and even a doubling of those gains could not meet current >demand. As more acres are planted with corn, land will have to be pulled >from other crops or environmentally fragile areas, such as those protected >by the Department of Agriculture's Conservation Reserve Program. > >In addition to these fundamental forces, speculative pressures have >created what might be called a " biofuel mania " : prices are rising because >many buyers think they will. Hedge funds are making huge bets on corn and >the bull market unleashed by ethanol. The biofuel mania is commandeering >grain stocks with a disregard for the obvious consequences. It seems to >unite powerful forces, including motorists' enthusiasm for large, >fuel-inefficient vehicles and guilt over the ecological consequences of >petroleum-based fuels. But even as ethanol has created opportunities for >huge profits for agribusiness, speculators, and some farmers, it has upset >the traditional flows of commodities and the patterns of trade and >consumption both inside and outside of the agricultural sector. > >This craze will create a different problem if oil prices decline because >of, say, a slowdown in the global economy. With oil at $30 a barrel, >producing ethanol would no longer be profitable unless corn sold for less >than $2 a bushel, and that would spell a return to the bad old days of low >prices for U.S. farmers. Undercapitalized ethanol plants would be at risk, >and farmer-owned cooperatives would be especially vulnerable. Calls for >subsidies, mandates, and tax breaks would become even more shrill than >they are now: there would be clamoring for a massive bailout of an >overinvested industry. At that point, the major investments that have been >made in biofuels would start to look like a failed gamble. On the other >hand, if oil prices hover around $55-$60, ethanol producers could pay from >$3.65 to $4.54 for a bushel of corn and manage to make a normal 12 percent >profit. > >Whatever happens in the oil market, the drive for energy independence, >which has been the basic justification for huge investments in and >subsidies for ethanol production, has already made the industry dependent >on high oil prices. > >CORNUCOPIA > >One 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. Corn has become the prime raw material even though >biofuels could be made efficiently from a variety of other sources, such >as grasses and wood chips, if the government funded the necessary research >and development. But in the United States, at least, corn and soybeans >have been used as primary inputs for many years thanks in large part to >the lobbying efforts of corn and soybean growers and Archer Daniels >Midland Company (ADM), the biggest ethanol producer in the U.S. market. > >Since the late 1960s, ADM positioned itself as the " supermarket to the >world " and aimed to create value from bulk commodities by transforming >them into processed products that command heftier prices. In the 1970s, >ADM started making ethanol and other products resulting from the >wet-milling of corn, such as high fructose corn syrup. It quickly grew >from a minor player in the feed market to a global powerhouse. By 1980, >ADM's ethanol production had reached 175 million gallons per year, and >high fructose corn syrup had become a ubiquitous sweetening agent in >processed foods. In 2006, ADM was the largest producer of ethanol in the >United States: it made more than 1.07 billion gallons, over four times >more than its nearest rival, VeraSun Energy. In early 2006, it announced >plans to increase its capital investment in ethanol from $700 million to >$1.2 billion in 2008 and increase production by 47 percent, or close to >500 million gallons, by 2009. > >ADM owes much of its growth to political connections, especially to key >legislators who can earmark special subsidies for its products. Vice >President Hubert Humphrey advanced many such measures when he served as a >senator from Minnesota. Senator Bob Dole (R-Kans.) advocated tirelessly >for the company during his long career. As the conservative critic James >Bovard noted over a decade ago, nearly half of ADM's profits have come >from products that the U.S. government has either subsidized or protected. > >Partly as a result of such government support, ethanol (and to a lesser >extent biodiesel) is now a major fixture of the United States' >agricultural and energy sectors. In addition to the federal government's >51-cents-per-gallon tax credit for ethanol, smaller producers get a >10-cents-per-gallon tax reduction on the first 15 million gallons they >produce. There is also the " renewable fuel standard, " a mandatory level of >nonfossil fuel to be used in motor vehicles, which has set off a political >bidding war. Despite already high government subsidies, Congress is >considering lavishing more money on biofuels. Legislation related to the >2007 farm bill introduced by Representative Ron Kind (D-Wis.) calls for >raising loan guarantees for ethanol producers from $200 million to $2 >billion. Advocates of corn-based ethanol have rationalized subsidies by >pointing out that greater ethanol demand pushes up corn prices and brings >down subsidies to corn growers. > >The ethanol industry has also become a theater of protectionism in U.S. >trade policy. Unlike oil imports, which come into the country duty-free, >most ethanol currently imported into the United States carries a >54-cents-per-gallon tariff, partly because cheaper ethanol from countries >such as Brazil threatens U.S. producers. (Brazilian sugar cane can be >converted to ethanol more efficiently than can U.S. corn.) The Caribbean >Basin Initiative could undermine this protection: Brazilian ethanol can >already be shipped duty-free to CBI countries, such as Costa Rica, El >Salvador, or Jamaica, and the agreement allows it to go duty-free from >there to the United States. But ethanol supporters in Congress are pushing >for additional legislation to limit those imports. Such government >measures shield the industry from competition despite the damaging >repercussions for consumers. > >STARVING THE HUNGRY > >Biofuels may have even more devastating effects in the rest of the world, >especially on the prices of basic foods. If oil prices remain high -- >which is likely -- the people most vulnerable to the price hikes brought >on by the biofuel boom will be those in countries that both suffer food >deficits and import petroleum. The risk extends to a large part of the >developing world: in 2005, according to the UN Food and Agriculture >Organization, most of the 82 low-income countries with food deficits were >also net oil importers. > >Even major oil exporters that use their petrodollars to purchase food >imports, such as Mexico, cannot escape the consequences of the hikes in >food prices. In late 2006, the price of tortilla flour in Mexico, which >gets 80 percent of its corn imports from the United States, doubled thanks >partly to a rise in U.S. corn prices from $2.80 to $4.20 a bushel over the >previous several months. (Prices rose even though tortillas are made >mainly from Mexican-grown white corn because industrial users of the >imported yellow corn, which is used for animal feed and processed foods, >started buying the cheaper white variety.) The price surge was exacerbated >by speculation and hoarding. With about half of Mexico's 107 million >people living in poverty and relying on tortillas as a main source of >calories, the public outcry was fierce. In January 2007, Mexico's new >president, Felipe Calderón, was forced to cap the prices of corn products. > >The International Food Policy Research Institute, in Washington, D.C., has >produced sobering estimates of the potential global impact of the rising >demand for biofuels. Mark Rosegrant, an IFPRI division director, and his >colleagues project that given continued high oil prices, the rapid >increase in global biofuel production will push global corn prices up by >20 percent by 2010 and 41 percent by 2020. The prices of oilseeds, >including soybeans, rapeseeds, and sunflower seeds, are projected to rise >by 26 percent by 2010 and 76 percent by 2020, and wheat prices by 11 >percent by 2010 and 30 percent by 2020. In the poorest parts of >sub-Saharan Africa, Asia, and Latin America, where cassava is a staple, >its price is expected to increase by 33 percent by 2010 and 135 percent by >2020. The projected price increases may be mitigated if crop yields >increase substantially or ethanol production based on other raw materials >(such as trees and grasses) becomes commercially viable. But unless >biofuel policies change significantly, neither development is likely. > >The production of cassava-based ethanol may pose an especially grave >threat to the food security of the world's poor. Cassava, a tropical >potato-like tuber also known as manioc, provides one-third of the caloric >needs of the population in sub-Saharan Africa and is the primary staple >for over 200 million of Africa's poorest people. In many tropical >countries, it is the food people turn to when they cannot afford anything >else. It also serves as an important reserve when other crops fail because >it can grow in poor soils and dry conditions and can be left in the ground >to be harvested as needed. > >Thanks to its high-starch content, cassava is also an excellent source of >ethanol. As the technology for converting it to fuel improves, many >countries -- including China, Nigeria, and Thailand -- are considering >using more of the crop to that end. If peasant farmers in developing >countries could become suppliers for the emerging industry, they would >benefit from the increased income. But the history of industrial demand >for agricultural crops in these countries suggests that large producers >will be the main beneficiaries. The likely result of a boom in >cassava-based ethanol production is that an increasing number of poor >people will struggle even more to feed themselves. > >Participants in the 1996 World Food Summit set out to cut the number of >chronically hungry people in the world -- people who do not eat enough >calories regularly to be healthy and active -- from 823 million in 1990 to >about 400 million by 2015. The Millennium Development Goals established by >the United Nations in 2000 vowed to halve the proportion of the world's >chronically underfed population from 16 percent in 1990 to eight percent >in 2015. Realistically, however, resorting to biofuels is likely to >exacerbate world hunger. Several studies by economists at the World Bank >and elsewhere suggest that caloric consumption among the world's poor >declines by about half of one percent whenever the average prices of all >major food staples increase by one percent. When one staple becomes more >expensive, people try to replace it with a cheaper one, but if the prices >of nearly all staples go up, they are left with no alternative. > >In a study of global food security we conducted in 2003, we projected that >given the rates of economic and population growth, the number of hungry >people throughout the world would decline by 23 percent, to about 625 >million, by 2025, so long as agricultural productivity improved enough to >keep the relative price of food constant. But if, all other things being >equal, the prices of staple foods increased because of demand for >biofuels, as the IFPRI projections suggest they will, the number of >food-insecure people in the world would rise by over 16 million for every >percentage increase in the real prices of staple foods. That means that >1.2 billion people could be chronically hungry by 2025 -- 600 million more >than previously predicted. > >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. > >THE GRASS IS GREENER > >And for what? Limited environmental benefits at best. Although it is >important to think of ways to develop renewable energy, one should also >carefully examine the eager claims that biofuels are " green. " Ethanol and >biodiesel are often viewed as environmentally friendly because they are >plant-based rather than petroleum-based. In fact, even if the entire corn >crop in the United States were used to make ethanol, that fuel would >replace only 12 percent of current U.S. gasoline use. Thinking of ethanol >as a green alternative to fossil fuels reinforces the chimera of energy >independence and of decoupling the interests of the United States from an >increasingly troubled Middle East. > >Should corn and soybeans be used as fuel crops at all? Soybeans and >especially corn are row crops that contribute to soil erosion and water >pollution and require large amounts of fertilizer, pesticides, and fuel to >grow, harvest, and dry. They are the major cause of nitrogen runoff -- the >harmful leakage of nitrogen from fields when it rains -- of the type that >has created the so-called dead zone in the Gulf of Mexico, an ocean area >the size of New Jersey that has so little oxygen it can barely support >life. In the United States, corn and soybeans are typically planted in >rotation, because soybeans add nitrogen to the soil, which corn needs to >grow. But as corn increasingly displaces soybeans as a main source of >ethanol, it will be cropped continuously, which will require major >increases in nitrogen fertilizer and aggravate the nitrogen runoff problem. > >Nor is corn-based ethanol very fuel efficient. Debates over the " net >energy balance " of biofuels and gasoline -- the ratio between the energy >they produce and the energy needed to produce them -- have raged for >decades. For now, corn-based ethanol appears to be favored over gasoline, >and biodiesel over petroleum diesel -- but not by much. Scientists at the >Argonne National Laboratory and the National Renewable Energy Laboratory >have calculated that the net energy ratio of gasoline is 0.81, a result >that implies an input larger than the output. Corn-based ethanol has a >ratio that ranges between 1.25 and >1.35, which is better than breaking even. Petroleum diesel has an energy >ratio of 0.83, compared with that of biodiesel made from soybean oil, >which ranges from 1.93 to 3.21. (Biodiesel produced from other fats and >oils, such as restaurant grease, may be more energy efficient.) > >Similar results emerge when biofuels are compared with gasoline using >other indices of environmental impact, such as greenhouse gas emissions. >The full cycle of the production and use of corn-based ethanol releases >less greenhouse gases than does that of gasoline, but only by 12 to 26 >percent. The production and use of biodiesel emits 41 to 78 percent less >such gases than do the production and use of petroleum-based diesel fuels. > >Another point of comparison is greenhouse gas emissions per mile driven, >which takes account of relative fuel efficiency. Using gasoline blends >with 10 percent corn-based ethanol instead of pure gasoline lowers >emissions by 2 percent. If the blend is 85 percent ethanol (which only >flexible-fuel vehicles can run on), greenhouse gas emissions fall further: >by 23 percent if the ethanol is corn-based and by 64 percent if it is >cellulose-based. Likewise, diesel containing 2 percent biodiesel emits 1.6 >percent less greenhouse gases than does petroleum diesel, whereas blends >with 20 percent biodiesel emit 16 percent less, and pure biodiesel (also >for use only in special vehicles) emits 78 percent less. On the other >hand, biodiesel can increase emissions of nitrogen oxide, which >contributes to air pollution. In short, the " green " virtues of ethanol and >biodiesel are modest when these fuels are made from corn and soybeans, >which are energy-intensive, highly polluting row crops. > >The benefits of biofuels are greater when plants other than corn or oils >from sources other than soybeans are used. Ethanol made entirely from >cellulose (which is found in trees, grasses, and other plants) has an >energy ratio between 5 and 6 and emits 82 to 85 percent less greenhouse >gases than does gasoline. As corn grows scarcer and more expensive, many >are betting that the ethanol industry will increasingly turn to grasses, >trees, and residues from field crops, such as wheat and rice straw and >cornstalks. Grasses and trees can be grown on land poorly suited to food >crops or in climates hostile to corn and soybeans. Recent breakthroughs in >enzyme and gasification technologies have made it easier to break down >cellulose in woody plants and straw. Field experiments suggest that >grassland perennials could become a promising source of biofuel in the future. > >For now, however, the costs of harvesting, transporting, and converting >such plant matters are high, which means that cellulose-based ethanol is >not yet commercially viable when compared with the economies of scale of >current corn-based production. One ethanol-plant manager in the Midwest >has calculated that fueling an ethanol plant with switchgrass, a >much-discussed alternative, would require delivering a semitrailer >truckload of the grass every six minutes, 24 hours a day. The logistical >difficulties and the costs of converting cellulose into fuel, combined >with the subsidies and politics currently favoring the use of corn and >soybeans, make it unrealistic to expect cellulose-based ethanol to become >a solution within the next decade. Until it is, relying more on sugar cane >to produce ethanol in tropical countries would be more efficient than >using corn and would not involve using a staple food. > >The future can be brighter if the right steps are taken now. Limiting U.S. >dependence on fossil fuels requires a comprehensive energy-conservation >program. Rather than promoting more mandates, tax breaks, and subsidies >for biofuels, the U.S. government should make a major commitment to >substantially increasing energy efficiency in vehicles, homes, and >factories; promoting alternative sources of energy, such as solar and wind >power; and investing in research to improve agricultural productivity and >raise the efficiency of fuels derived from cellulose. Washington's >fixation on corn-based ethanol has distorted the national agenda and >diverted its attention from developing a broad and balanced strategy. In >March, the U.S. Energy Department announced that it would invest up to >$385 million in six biorefineries designed to convert cellulose into >ethanol. That is a promising step in the right direction ****** Kraig and Shirley Carroll ... in the woods of SE Kentucky http://www.thehavens.com/ thehavens 606-376-3363 --- Outgoing mail is certified Virus Free. Checked by AVG anti-virus system (http://www.grisoft.com). Version: 6.0.859 / Virus Database: 585 - Release 2/14/05 Quote Link to comment Share on other sites More sharing options...
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