Study Shows Ethanol Energy Efficiency Is Growing 41 comments
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A new study by the University of Nebraska shows that current ethanol production technology is 2 to 3 times more efficient than previously thought. Earlier studies focused on older, less efficient technologies and this new study helps allay the fears that corn ethanol production uses more energy than it provides.
Here are some of the initial results from the study:
- Ethanol has a positive net energy balance: 1.5 to 1.6 units of energy for every unit of energy used to produce it.
- 13 gallons of ethanol are produced for each gallon of petroleum used in the ethanol production life cycle.
Ethanol producers continue to increase their efficiencies and over the last 5 years have been able to produce more ethanol from a bushel of corn and reduce the energy necessary in the process. Ethanol doubters who use past results to bolster their arguments are doing the industry a disservice.
I will close with a quote from Alan Tiemann, a Nebraska Corn Board member:
"We’re talking about energy security and energy diversity, and keeping more of our energy dollars in this country,” he said. “Those kinds of positives are good for the United States as a whole, and specifically for rural America, where renewable ethanol is produced.”
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This article has 41 comments:
I think I like better algae-based biofuel as an alternative fuel down the road.
And nuclear power is even better than oil. You dont need to tell me you are an al gore fan.
are you willing to get rid of all subsidies? We could start by getting rid of the subsidies oil and natural gas receive.
> jack
If your goal is to promote renewable vegetable based fuels to replace our dependence on foreign oil, then, you should be touting sugar, NOT corn for this purpose. But you WON'T, which means you're all about the corn industry, NOT energy independence.
Some folks think so
Clean Air Performance Professionals
I agree with Duude, of course, when he writes, "So then, let's get rid of the subsidy and see how it works." Wheels 14 writes, "Are you willing to get rid of all subsidies? We could start by getting rid of the subsidies oil and natural gas receive."
Of course we should. But let's compare apples with apples. According to a recent study by Friends of the Earth, "Big Oil, Bigger Giveaways",
www.foe.org/pdf/FoE_Oi...
oil companies will receive around $33 billion from the federal government over the next five years. That comes to $6.6 billion per year, divided over 75 billion gallons (1.8 billion barrels) of production, or $0.088 per gallon.
tonto.eia.doe.gov/dnav...
By contrast, the federal volumetric ethanol excise tax, starting next year, will be $0.45 per gallon (or $0.67 per gallon of gasoline equivalent). Assuming average production of 11 billion gallons a year over the next five years, that will come to a total of just under $5 billion per year, just for that one subsidy. Add in other federal subsidies (e.g., the small ethanol producer tax credit and subsidies for R&D and demonstration plants), and total federal outlays in support of ethanol will easily come up to parity with oil ... but for 1/10th the amount of energy.
Oil companies do not need federal subsidies. Some ethanol producers might "need" subsidies to survive. But why should we keep them dependent on the public teat? And why should ethanol producers have priority over other sectors for government hand-outs during these austere times?
Nuclear power is the worst choice. Please read the pdf The Lean Guide to Nuclear Energy. Please read what cleanwisconsin.org has to say about nuclear power. It as many problems than oil has. In a dangerous world with terrorists and rogue nations, the last thing we need is to build thousands of nuclear power plants all over the world, further spreading the availability of fissionable material. Look at the angst over Iran's pursuit of supposedly peaceful use of nuclear energy.
Argonne national labs says that an airliner crashing into a nuclear power plant could cause a complete meltdown, even if the containment building isn't compromised. Think the twin towers was bad?
Nuclear power plants need billions of gallons of water each to cool. Each reactor will cost over $500 billion to clean up and dismantle when it is used up. Each reactor's share of Yucca mountain storage is $200 million.
The entire process of aquiring uranium has a huge carbon footprint and is generally very dirty. Nuclear power takes much longer to get up and running than solar and wind. Nuclear plants cost three times as much to build per kilowatt than wind farms. If you read the proposals by T Boone Pickens and setamericafree.org and the proposal published in Scientific American called A Solar Grand Plan, you will see that we could easily have 80% of our grid powered by solar and wind by 2050.
We are being dis-informed about the potential of these renewable sources. Don't believe the lies.
You equate subsidies for corn ethanol with subsidies for renewable energy generally. When so much non-renewable resources (eroded soil, fossil water in the western Great Plains, phosphate, energy to produce the N fertilizer, fossil energy used in farming and processing the ethanol) are used in its production, calling it "renewable" is stretching the definition.
The reason these numbers are not well known is that it takes a Sherlock Holmes to uncover all the tax credits and subsidies that oil and gas have received over so many years, often tucked into bills as earmarks.
I did make a mistake about getting rid of subsidies. I wasn't so much thinking about ethanol. It was just my reaction to the often heard complaints that say "oh but solar and wind can't survive without subsidies". So, I mispoke. I'm not a big advocate of ethanol unless it proves to be economical and environmentally makes sense.
> jack
As for the $84 billion a year estimate from the "Set America Free Foundation", I can't find in the document. The figure I find is $43 billion in lost local, state and federal tax revenues. That figure is $10 billion higher than the $33 billion reported by Freinds of the Earth, and is presumably explained by the inclusion of state and local tax breaks and subsidies.
The report also enumerates numerous other costs of oil, some of which would be hard to confirm or refute without looking at the original studies from which teh data are derived.
But back to the comparison with ethanol subsidies, the figures I referred to above were just federal subsidies for ethanol. Throw in state and local tax breaks and subsidies, and the total value comes to over $1 per gallon currently.
www.earthtrack.net/ear...
Of course, if one were to expand ethanol use on the basis of (U.S. produced) cellulosic ethanol, then you're looking at $1.01 per gallon ($1.50 per gallon of gasoline equivalent) just in federal tax credits, not to mention subsidies for related infrastructure and (at least in the near term) for plant construction. Add to that various state sales-tax and fuel-tax exemptions for ethanol (or E85) and the total cost could exceed $2.00 per gallon of gasoline equivalent in a number of states.
Of course, as the Set America Free Foundation document points out, there are indirect costs associated with oil dependency. So to are there from biofuel use, especially biofuels made from cropland. Higher prices for food and other agricultural materials is just one. Economic losses due to supply disruptions could also be high: witness the panick that preceded this year's corn crop before the floods finly subsided.
Again: the country needs to wean itself off of oil, and stop subsidizing it, but it is hardly a winning strategy to try to buy itself freedom from that dependency by creating a new industry that itself is massively dependent on subsidies.
You still need to subtract the savings of farm subsidies not spent against the ethanol subsidy. If in fact you believe ethanol caused the price of grains to increase.
My car gets better mileage when I use 10% ethanol.
www.ase.tufts.edu/gdae...
Rather than speaking of "savings" in crop subsidies, however (which I do not think should be treated as entitlement), when we count the contribution of corn-ethanol subsidies to increases in the cost of corn, we should count only the increase above the price that would have obtained in the absence of crop subsidies -- i.e., which would at least have covered production costs. Sorry, but I can't provide that figure at the moment.
Farmers were dumping corn for $1.85 and getting reimbursed by the government to a sale price of $2.95. With 13 billion bushels of corn grown, that is $14.3 Billion dollars per year. And that is only corn, are price supports for wheat, soybeans...etc
Starting another topic. The subsidies would be better spent going to companies building infrastructure, than to the blenders.
The point about ethanol subsidies (unlike the crop payments), is that the USA has committed to reducing crop subsidies as part of the WTO's Agreement on Agriculture, whereas in the case of ethanol subsidies, the sky's the limit. And the annual expenditure is growing fast.
A "Typical Year?" Corn has been under $3/bushel in 8 of 10 years prior to 1996. And the years it was up we were bailing them out of flood loses. The university of Illionis shows corn prices growing at half the rate of inflation dating back 30 years.
Corn prices going up made us compliant with the WTO wishes. I am hoping it has the effect they wanted, ie production increasing in other parts of the world..
Of course, subsidies played a role in depressing prices also. But, I maintain, 2005 was not a typical year. Marketing loan payments for crops during that year were TWICE what they were in 2004. And ad hoc and emergency payments were 10 times what they were in 2004.
All in all, federal government payments to farmers in 2005 were almost twice ($24.3 billion) what they were in 2004 ($13.0 billion). In 2008 they are expected to be $13.4 billion -- i.e., no lower than what they were in 2004, and a bit higher than what they were in 2002 ($12.4 billion).
fpc.state.gov/document...
What are you talking about. My point was: Farm subsidies/price supports kept corn prices below $2.95/bushel for years. (years 2000-2007) If ethanol raises corn prices, it saves us tax dollars we would have spent on farm supports.
14 billion bushels of corn per year with an average support cost of 50 cents per bushel is more than this years ethanol subsidy.
I was refuting Wheels' specific point, which was that 2005 was not an aberrant year. S/he may not understand how the marketing-loan payments work, which depend more on how low the price dips in the year than the average price in the year. In the case of 2005, the closing of the Gulf Ports in the aftermath of Hurricane Katrina coincided with the new harvest. Prices plummeted and marketing-loan payments soared.
My larger point is that, if one is going to "credit" ethanol subsidies for reducing farm subsidies, you have to compare with a more average year, or construct a realistic counter-factual.
Point 1: Ethanol subsidies are not part of the envelope of farm payments that are limited under the USA's commitments to the WTO. Hence, as long as those payments are under the limit, Congress will find a way to keep the money flowing. When you look at total payments over the last several years, expected payments in 2008 are close to the average, assuming that 2005 was an outlier. (See my numbers, above.) Hence, it is hard to make the case that there have been any significant savings overall in farm payments.
Point 2: In saying that "14 billion bushels of corn per year with an average support cost of 50 cents per bushel is more than this years ethanol subsidy". It is more than what will be paid out in the volumetric ethanol excise tax credit (perhaps $4 billion this year ... but rising every year, and it is not the only subsidy benefiting ethanol), but 3-4 billion of those bushels are themselves due to ethanol support policies. Hence, the quantity for comparison should be the amount of corn that would have been produced in the absence of ethanol.
Looking at the trend in recent years (before ethanol production started expanding rapidly), annual U.S. production was fairly stagnant, at around 250,000 metric tonnes (around 10 billion bushels):
farm4.static.flickr.co...
With rising world demand, and therefore U.S. exports, production in the absence of ethanol would have risen to perhaps 11.5 billion bushels. But, that leads me to point 3 ...
Point 3: With that rising world demand, corn prices would have risen -- not by the same degree that they have with the additional demand for ethanol, but by at least $1.50 per bushel. Even the World Bank's Donald Mitchell, whose estimate of the contribution of ethanol to the rise in commodity prices is the highest among the major studies,
papers.ssrn.com/sol3/p...
allows that some 1/3 of the rise (between 2002 and April 2008) was due to rising energy prices and factors such as increased world demand for food and feed and the fall in the value of the dollar against other currencies.
So, to complete our counter-factual, even in the absence of support for ethanol, corn prices would have risen above the levels that would trigger price-support payments.
Conclusion: ethanol subsidies have not saved taxpayers money. They have, and will continue to be, an additional burden on top of the already existing farm payments.
What is the $ value of American jobs created by the ethanol industry compared to buying oil from terrorist?
I guess that means we agree that ethanol subsidies have not saved taxpayers money. Good, at least we have that settled.
Have ethanol subsidies, on balance, created more jobs than they have cost the economy? That would be quite a feat for a heavily subsidized industry. Mostly they have driven up commodity prices (affecting food prices for everybody), which in turn means increasing the price of farmland:
www.extension.iastate....
Got some figures to back up your assertion that ethanol has substantially reduced U.S. imports of petroleum from, say, Iran? (Which, in your opinion, are the "terrorist" suppliers?) Because, according to the latest figures from the Energy Information Administration, year-to-date imports of petroleum (crude plus products) are DOWN from Canada and Mexico (our No.1 and No. 3 suppliers), but UP from Saudi Arabia (our No. 2 supplier).
www.eia.doe.gov/pub/oi...
Our oil use is down because the price went through the roof.
Ethanol replaced around 6 billion gallons of oil.
Subby, are you short ethanol or do you have a vested interest in big oil?
In short, you can't show that ethanol (which replaced more like 4.8 billion gallons of oil in 2007, not 6 billion gallons, though it may be at that higher rate today) has specifically displaced oil imports from "terrorist" suppliers. Of course not: the world oil market doesn't work that way. And, in any case, even if it did, other countries would come in to fill the gap created by reduced U.S. imports. Unless somebody organizes a naval blockade targetted at nasty oil regimes, they will keep exporting at whatever is the world price ... and keep raking in the dollars.
Does that make me an oil supporter? Hardly. And, no, I own no shares in either ethanol or oil companies.
But I do have an interest in good public policy -- which ethanol booseters seem to find quaint. By the way, nobody here challenged the fact that "ethanol efficiency is improving." What I did challenge was Tim Plaehn's twisting of the numbers from the original story to announce that studies had shown that ethanol production is "2 to 3 times more efficient" than originally thought. Tim has shown himself to shoot from the hip whenever he (somebody who DOES own ethanol stocks) defends his favorite industry, often seeming to pull numbers out of thin air.
By the way, I'm glad that you at least acknowledge that high prices induce reductions in demand. That's progress of a sort.
Can I get you opinion on this.
The U.S. government's recent $700 billion bailout could help. It includes a 50 percent tax break for the building of refineries that process oil shale, as well as tar sands.
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My opninion on including a 50% tax break for the building of refineries that process oil shale, as well as tar sands, in the bail-out bill?
How's, "Outrageous, stupid, but not surprising."
As the late, , Brian J. Finegan wrote in, "The Federal Subsidy Beast: The Rise of a Supreme Power in a Once Great Democracy", there is no longer a Democratic Party and a Republican Party in the U.S. federal government. There is only one party, the Subsidy Party.
www.abebooks.co.uk/pro.../
(I'm not sure, by the way, what the other stuff in your message is supposed to refer to.)
I liked your comparison of subsidies/unit of fuel produced.
The jibberish included in my quote was a highlighting error. Sorry.
Is it safe to assume that you thik the whole carrot/stick methodology of our tax system is wrong? If we don't like something,"tobacco, alcohol," we tax it. It we want to promote something, "ethanol, wind power," we give it tax breaks or credits."
Apparently the amount of corn used to make ethanol was not enough to raise the price of corn. The last time I looked corn was $3.72/bushel. Keep in mind, ethanol does not remove the corn from the food chain. The ethanol plant removes the starch and sells the rest back into the food chain. Evan if 100% of US corn went to ethanol plants first, we would only have to increase production by 30% This increase would be easier than most of you think. Growing corn has not been profitable since the late 1970s. It has been kept alive with gov subsidies. Imagine how much they would grow if it were profitable.
You ask: "Is it safe to assume that you thik the whole carrot-and-stick methodology of our tax system is wrong? If we don't like something,"tobacc... alcohol," we tax it. It we want to promote something, "ethanol, wind power," we give it tax breaks or credits."
Well, first of all, you are mixing tax systems. Tobacco and alcohol are subject to excise (product-specific, per unit) taxes. Ethanol benefits at the federal level from something called an excise tax credit, but which is actually a subsidy provided through the IRS -- i.e., through reducing corporate income taxes. That means that it is not subject to budgetary limits, which it would be if the subsidy were provided through the USDA or the USDOE. It also means that somebody who walks or rides a bicycle to work is subsidizing people who drive.
The way that ethanol is supported in the United States also has very poor equity characteristics. Moreover, taxpayers pay the highest ethanol subsidies to people driving the least-efficient vehicles -- big, E85-guzzling flex-fuel SUVs and trucks -- to the tune of $1000 per year PER VEHICLE in the case of a typical FFV, the Chevy Tahoe.
Second, sound tax policy calls for taxing what what we know to be bad -- e.g., pollution. If one of the justifications behind supporting biofuels is to reduce greenhouse gas emissions, it would make more sense to provide a tax differential in the gasoline tax based on its life-cycle GHG emissions. The current rate of subsidization is far higher than the tax differential one would allow at a typical carbon tax of, say, $50 per metric ton of CO2-equivavlent.
It is much more hazardous to directly subsidize the production of something we think to be good, especially a product (as opposed to say, a service like health care for the needy). For one, if subsidizing that product lowers the price of both it and its close substitute (in ethanol's case, gasoline), then what the subsidy amounts to is, essentially, a subsidy for consumption. And we know how self-defeating such subsidies can be.
If the public policy goal is to discourage gasoline use, then why not raise the federal excise tax on gasoline to something closer to the excise taxes levied on gasoline in most other industrialized countries. (Even Turkey charges a far higher tax on gasoline than does the United States.)
That goes, by the way for wind power and other renewables. By providing tax credits to those renewables we are hiding the true cost of producing clean electricity from consumers. In other countries (and in some U.S. states), renewable portfolio standards give preference to wind and solar power, but at least in so doing they force the higher cost of the renewable-generated electric power to be borne by electricity consumers, not taxpayers (and especially not taxpayers from another part of the country).
None of the above applies to subsidies for research. There are plenty of good reasons for governments to support research, and some development and demonstration. But even there, R&D money is not unlimited, so the more neutral or performance-based governments can be in deciding who, and what technologies, benefit from R&D support, the better.
So you are in favor of this taxing/social medeling methodology. Me too.
I also agree with you that raising the taxes on gasoline would be an improvement.