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In 2006 I attended a BIO meeting in Toronto focused on the new bio-based economy. Oil had just risen to $70/barrel and it was a time when environmental NGOs, biotech companies and even oil companies seemed to be on the “same page” in terms of their enthusiasm for moving to plant-based feedstocks as the perfect alternative to oil dependency. With the very obvious international security costs of the oil economy, and what were then thought to be unimaginable energy costs, it was a remarkable sort of celebration event for all the alternative energy and materials folks who has suffered under the decades of cheap oil. As much as I was happy to see such “multi-stakeholder” agreement, I was sad because anyone with an agricultural perspective could see a train-wreck coming.
People were making presentations about cool second generation innovations like “Cellulosic” ethanol from sources like switchgrass or Miscanthus and also about ethanol alternatives like butanol. People were talking about bio-materials for even things like the auto industry. However; the side conversations were about the huge boom underway in the corn ethanol industry. Orders for stainless steel tanks were back-logged two years. What had started as a local, farmer-cooperative funded industry had become a venture capital frenzy. I could see that long before the promise of “second generation” biofuels could be realized, corn ethanol would get to be big enough that it would end up fracturing the amazing consensus about the bio-economy that was functioning at that conference.
The Food Crisis of 2007/8
Soon (2007/8) there was an unprecedented spike in global food commodity prices. The significant diversion of food crops (corn, soy, palm oil) to biofuel got much of the blame which is exactly what I feared back in 2006. Biofuel might have deserved some blame but not nearly as much as it got. The food crisis of 2007/8 was actually a “perfect storm” that was driven by:
- Increasing world population
- Increasing standards of living in the developing world
- Unprecedented energy costs (which make fertilizer very expensive)
- Droughts in major exporting regions like Australia (Climate change?)
- Biofuel demand for food crops
There was some excellent news coverage about this in the New York Times (of all places, not exactly an Ag publication). Still, what basically never came up in the press about this situation was that when corn is used for making ethanol, 40% of the nutritional value remains after the fermentation process and becomes a high protein feed for cattle called DDGS. The famous “20%” of US corn going to ethanol was really only 12% – still significant, but not quite as disruptive as it seemed. By the way, all those factors still exist and could come back together when this recession is over.
Some Historical Perspective
Interestingly this is a very old debate. I stumbled across a paper from 1926 by E.N. Transeau that said, “The suggestion that our liquid fuels, petroleum and gasolene, may some day be replaced by alcohol made from plants is quite unreasonable. A little figuring will show that to substitute the energy of alcohol for the energy now being developed from gasolene would require all the corn now being grown in the United States.” Average corn yields in 1926 were less than 1/6 of what they are today and acreage is down, so at its peak corn ethanol might actually have been using as much corn as was grown in Transeau’s time. This proves two things: crop yields have increased dramatically and we are using a lot more transportation fuels.
The Indirect Emissions Discussion
Another argument arose against “first generation” biofuels. Searchinger et al published a paper in Science that pointed out that if biofuel demand for crops seriously competed for current supply, it drove the expansion of farm land into previously natural areas, for instance in South America. When an existing forest or grassland is converted to farmland, there is a substantial release of the carbon dioxide that had been sequestered in the soil of the natural system. Once the farm was in place there were more greenhouse gas emissions/hectare than when it was natural.
Getting global, macro-economic calculations right on this issue is certainly complicated, but the issue cannot be ignored. There is only so much farm land. If yield gains can’t keep up with growing demand for food (which will be harder in the future), there will be inevitable pressure for farming more land. Biofuels, to the extent that they compete for land, have the indirect potential to drive land-use-change.
Applying the Indirect Emissions Issue to Other Food-Limiting Decisions
What is interesting is to apply this same logic to other “land use” issues. Japan and most countries in Europe have chosen not to apply biotechnology solutions in their crops. Because of this their agricultural is less productive than it could be by a significant percentage. This is not a food supply problem for them, because they simply import more food from around the world, but in the process they are exerting more pressure for land-use change than they would if they had allowed the biotech crops. A far less significant example is that of the Organic movement. Organic farms generally have lower yields. That has always been the justification for the “Organic Premium” that is paid by the Organic consumer. Even though Organic farming uses less costly inputs in terms of fertilizers and chemicals, it needs a higher price because of it’s labor costs and it’s typically lower yields. Organic is still so small that it isn’t really a pressing issue for land-use-change, but if it were ever to be a significant part or our farming system, it would lead to land-use-change pressure.
So, flash forward to 2009 and biofuels are now virtual pariahs to some sustainability advocates. In a subsequent post I’ll talk about some trends that could hopefully restore some of the consensus we once had around this issue.
Biofuel image from TheTruthAbout…
You are welcome to comment on this site or email me at [email protected]
Brendan McLaughlin
It is great to see folks connecting the dots on this issue. while there is indeed a lot of promising technology out there, and it’ll allow us to develop more advanced fuels, first generation fuels like corn ethanol cost us more than we get in return (as the Tim Searchinger study referenced here shows).
Steve Savage
Brendan,
I agree, but it is good to consider the counter argument from Bruce Dale via the link that says “certainly complicated”
iip albanjary
recent biofuel demand has contributing to the expansion of oil palm plantation in southeast asia, thus leading more deforestation cases. In some extent, the plantation has provide economic benefit to local development.
I think, both UE and US have to move forward in selecting biofuel from southeast asia. Develop fair standard on biofuel trading will benefit all parties.
Russ
Some quibbles on your section about the food crisis:
“..That 20% going to corn was really only 12%..”
The 20% figure often quoted already accounts for distillers grains. I just made a spreadsheet to verify this.
According to the USDA, corn for grain production in 2008 was estimated at 12.1 billion bushels with an estimated average yield of 154 bushels per acre.
Sources: http://www.usda.gov/nass/PUBS/TODAYRPT/cropan09.txt http://www.nass.usda.gov/QuickStats/index2.jsp
According to the EIA, 9.3 billion gallons of ethanol was blended in 2008.
Source: http://tonto.eia.doe.gov/dnav/pet/hist/m_epooxe_yop_nus_1m.htm
It takes 56 pounds of corn kernels to produce 2.8 gallons of ethanol, 11.4 pounds of distiller’s grain., 3 pounds of Glutan meal, and 1.6 pounds of corn oil. So, 56 – 11.4 -3 -1.6 = 40 pounds of corn lost that cannot feed people (or the cows that people eat). In other words, about 70 percent of a bushel of corn is lost to the food chain when you use it to make ethanol.
Using the above values and doing the math you find that 20% of our corn crop was turned into ethanol after accounting for distiller’s grains. That equates to about 25 thousand square miles.
We planted about a million more acres of corn this year than last year.
The five causes you listed are also incorrect. This was a sudden spike in food prices. The slow, annual increase in population and living standards could not cause a sudden spike and drought is a problem somewhere in the world almost every year.
According to a World Bank report that was first leaked and then later officially released:
“..Biofuels have forced global food prices up by 75% – far more than previously estimated – according to a confidential World Bank report obtained by the Guardian …Even successive droughts in Australia, calculates the report, have had a marginal impact. Instead, it argues that the EU and US drive for biofuels has had by far the biggest impact on food supply and prices..”
Source: http://www.guardian.co.uk/environment/2008/jul/03/biofuels.renewableenergy?fb_page_id=6176732491&
Spikes in energy cost and in biofuel production were the drivers of a speculation bubble driven primarily by the fact that massive amounts of grain were being burned as fuel instead of becoming food reserves to smooth out oscillating yields and crop failure as is normal.
Steve Savage
Russ,
Your detailed response deserves a better response than I can give late at night. I’ll respond in the morning, but you do make good points that I hope to address in my next post.
Steve
Steve Savage
Russ,
You may be right that the famous “20%” did factor in DDGS – there are variations in the efficiency of different processes and there have been many detailed analyses. Droughts do occur randomly, but the the one in Australia has been atypical. If you will remember, rice and wheat prices also spiked.
Some of the wheat effect could come from displacement by corn, but that has been happening in the US starting long before biofuels got big (see my “orphan crop” series). Rice shortage was definitely not attributable to displacement by corn but rather to being thinly traded, the growing demand (which is more of an issue than you think because it combines population and income growth), and extensive conversion of Australian rice land to less thirst and more valuable crops like wine grapes. So I don’t know that the “75% of the cause assertion works”, but as I said at the beginning of the post, some sort of train wreck is inevitable if you have food and fuel competing for the same acre to any large extent.
I can completely understand why the corn industry wanted to have ethanol as a hedge against low prices, and as I said, corn ethanol was a farmer-lead investment. The problem was when the venture capitalists jumped in and took it too far too fast. It also didn’t help that the oil companies were able to slip in a tariff against Brazilian ethanol from sugarcane. That sort of thing always screws up the functioning of markets.
Still, the best path forward is to move to feedstocks that are not fundamentally competitive with food. That is what I will talk about next
Russ
I can get long-winded sometimes.
Some more historical perspective
Attempts to get consumers to use corn ethanol as a fuel have a long history in our country. It has been marketed under the names Alcoline, Agrol, Gasohol, and finally, E-85. Remember Gasohol? It was a 10 percent blend of ethanol sold in the eighties. Buying it was optional. The ag and biofuel lobbyists (RFA spent just short of a quarter million on lobbying last quarter) got together with our politicians and found a way to fix that. They simply blend it into our gas without our permission, which we then pay about an extra dollar a tank for via a blending subsidy and attendant mileage penalty.
Source: http://www.history.com/encyclopedia.do?vendorId=FWNE.fw..ga017100.a#FWNE.fw..ga017100.a
You mention that “People were making presentations about cool second generation innovations like “Cellulosic”…”
Cellulosic isn’t as innovative as we have been led to believe. The Germans had commercialized cellulosic ethanol back in 1898. In 1910 a U.S. company was producing 7000 gallons of cellulosic ethanol a day from waste wood and did so for many years. There have been dozens of ongoing research projects looking for a way to make cellulosic alcohol competitively for many decades.
Source: http://i-r-squared.blogspot.com/2009/09/first-commercial-cellulosic-ethanol.html
Russ
Many good points, Steve
By thinly traded, I think you mean that food riots caused many countries to halt food exports to protect their own citizens from high food prices. Global food trade interdependency in time of food crisis was tested and it failed. That should have been a valuable lesson learned.
That was the point of the World Bank report. Biofuels stimulated the speculation bubble that caused the high prices that caused the riots that caused countries to stop exporting wheat and rice that caused the price of both to spike as well.
A few weeks ago an article in the Times with the headline “Hunger for biofuels will gobble up wheat surplus” said:
“…Britain’s self-sufficiency in wheat will end next year, because a giant new biofuel refinery needs so much of the staple crop that home-grown supplies will be exhausted feeding both the factory and the nation…”
Source: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6860936.ece
I didn’t quite follow your reasoning related to the following comment:
“..It also didn’t help that the oil companies were able to slip in a tariff against Brazilian ethanol from sugarcane…”
That tariff is to protect American producers of corn ethanol, not oil companies. Oil company blenders would love a cheaper source for the ethanol they must by law blend into the gas supply.
Brendan McLaughlin
Steve–
You’re not kidding about it being complicated–especially indirect land use change. I still have a hard time getting my head around it. And as Bruce’s post says, we can’t forget that rural development and energy security were motivating forces behind the big ramp up on corn ethanol, along with environmental concerns.
I can’t speak to the first two, but thinking only in terms of environmental impact, I think it is safe to say corn ethanol has failed to live up to billing. One example the Dead Zone in the Gulf of Mexico, which is created in large part by fertilizer runoff from the Midwest (studies show that corn is a very “leaky” crop, and much of the fertilizer applied to corn fields ends up in rivers and streams).
James
Russ, one thing that you said caught my attention. “This was a sudden spike in food prices. The slow, annual increase in population and living standards could not cause a sudden spike and drought is a problem somewhere in the world almost every year.”
Because of the economics of the situation, slow steady increases in demand can cause sudden spikes in food prices. It all comes down to demand for food being inelastic. i.e. When rice prices go up, the people who’re buying rice won’t buy less rice because they need it to feed them and their families. Similarly in the developed work, food prices are such a small proportion of people’s budgets that when prices go up across the board, they usually just pay the higher price instead of switching to less expensive foods.
What that means is when demand suddenly exceeds supply, even by a small amount, prices have to go up a LOT to shrink demand to meet supply and demand only shrinks when people are priced out of the market. (A clean euphemism but what it really means is human beings who can’t afford to buy the food to feed their starving families.)
Two other questions. Your calculations on ethanol energy use seem to be based on weight rather than energy density. A pound of distillers grain is not equivalent to a pound of raw corn kernals. Am I misreading you?
And what did you mean when you said global food interdependency has been tried and failed? Sure it has problems, but isn’t the alternative, leaving each country dependant solely on its own food production, going to create more starvation, rather than less? Individual countries have droughts or hurricanes or pathogen attacks that will destroy critical amounts of their food more often than a globalized system which requires a perfect storm of events to spike food prices. Or am I misreading you here as well?
Steve Savage
Brendan,
The dead zone is a big issue and you can’t really get around the link to corn with 80MM acres of it in the drainage. There are things that can be done and which are increasingly being encouraged through “green payments.” The largest single advance would be to grow the corn without tillage (“no-till and some variations). This dramatically reduces the loss of soil and fertilizer through erosion. Adding a cover crop in the winter takes that essentially to zero and also mops up nitrate that could move to ground water or through tile drains to watersheds. The problem is that it is not easy to do corn no-till and so many farmers no-till their beans but till for their corn. The thing is that it can be done – 5-10% of farms are in continuous no-till for their full rotation. The reasons more farmers don’t do it are really very complex and understandable. The challenge is how to get around those barriers and that is exactly what I am working on in my real job right now.
Steve Savage
Russ, good historical background. yes, cellulosic is old – just not big yet. By thinly traded I mean that the vast majority of rice is consumed in the countries where it is produced with only a small volume of international trade. Wheat in contrast has a huge international trade volume.
As for Europeans using other food crops for biofuel…. I may defend many unpopular things, but I just don’t get the Europeans on many issues so someone else can explain that.
Russ
Good points James,
Population growth and standard of living increases certainly do exacerbate resource demands and in theory, another way to decrease food prices would be to drop people back into poverty or let them starve, increasing supply relative to demand. We are of course trying very hard to avoid that scenario. It is easy to see how the additional demand oin biofuels isn’t going to help matters, just as a spike in fertility rates would not.
Not sure why units of energy would be a much better measure of where a bushel of corn goes when processed into its various end products (corn oil, DDG etc.) than weight. It’s true that processing can input weight but it can also input energy.
I agree with you that global trade, particularly for food is a wonderful thing for humanity. I was just pointing out how this price bubble flushed out a flaw few saw coming. Countries would stop exporting food in times of severe price spikes/shortages, making things worse.
James
Russ, thanks for your great response.
My point about weights is that corn kernels are made up of three primary components, carbohydrates, proteins, and oil. The three have different calories/pound and nutritional profiles and the ratios of the three will be different in distillers grain than in the corn that gets input into the process. I honestly don’t know if that makes the picture better or worse but it does make it different.
stuart
I am reading Transeau’s paper from 1926 in The Ohio Journal of Science and he claims his calculations are based on 100 bushels per acre and further claims that is not the maximum for the corn belt. From any other source i can find, at that time the yields should be only 20 to 40 bushels – am I missing something?