More and more frequently, there are references made in the press regarding ethanol and energy independence. Just the other day Thomas Friedman of the NY Times was informing his readers of the wonderful fact finding trip he took to Brazil to look into how they achieved energy independence. Brazil is often cited as an example of a country that through a combination of agriculture and industry, they achieved this remarkable goal. While Brazil has achieved energy independence to a large degree, the situation in South America is much different that the situation in the US.
For one thing, Brazil has improved its energy situation by making ethanol from sugar cane. Sugar cane is grown in sub-tropical areas, not the temperate regions such as the US. The only states that have any sugar industry to speak of is Louisiana and Florida. So even if more sugar cane could be grown in the lower 48, the question is, would we really want to grow it?
Sugar has several downsides to growing it on a large scale. The first is that it is relatively labor intensive, and relies on a large workforce of unskilled labor to maintain and especially harvest the crop. Most of this workforce is poorly paid, and the low wages are one thing that keeps Brazil's sugar production economical.
Besides this, sugar is known for depleting the soils it is grown on. There are huge tracts of land in the Caribbean Islands that once were sugar plantations and are now barren. Between the depleted soils and the loss of slave labor to harvest the sugar, these island plantations were forced to close.
In the U.S., there are documented health impacts from burning the cane crop before harvesting. This practice reduces the biomass that needs to hauled to the processing plant. It also make the canes easier to harvest. There are incidents of increased asthma and other health effects from being exposed to the smoke and ash from burning sugar cane fields. Brazil has been at the forefront of developing means to harvest green, unburnt, cane. This technology has not transferred to the US, a producers have been resistant to the increased cost of harvesting.
Furthermore, many of the supporters of Brazil's ability to meet domestic energy demands, including Mr. Freidman, leave out several important points.
Number one is that the US uses an astounding 20 times more gasoline than Brazil does per person. This means that Brazil had an easier time producing the 20 to 25 percent replacement of gasoline by ethanol that they achieved.
The second little noticed fact about Brazil is that it runs more on diesel fuel than gasoline. At least 53 percent of the motor fuel used in the country is diesel fuel. By contrast, the U.S. uses 4 times as much gasoline as diesel fuel. Brazil has not replaced this diesel fuel with biofuels, in fact, what they have done is increased domestic production of petroleum. A case could be made that the whole of the energy independence achieved by Brazil was through increased domestic oil production.
In total, about 10 percent of Brazil's transportation fuel needs measured on a net energy basis are derived from ethanol. In order to achieve this, the Brazilians are farming about 13 million acres of cropland. Any increase in this amount will mean that more rainforest acres must be logged and converted to cane fields. In fact, the cooler southern regions of Brazil where most of the cane is grown now can produce only one crop per year. If production is ramped up in the Amazon basin, two crops per year can be grown. This is a tempting prospect for farmers.
The other problems of cane growing, including water for irrigation, increased pesticide use, and centralization of production by agri-business, are repeated with the competitor for ethanol production in the US, corn farming.
But the problems associated with producing ethanol from corn don't just start down on the farm. Corn itself is not an ideal plant to produce ethanol from. The plant does not manufacture simple sugars or alcohol, these are produced by biological action on the corn mash by yeasts. This process yields a lower amount of ethanol return on the biomass used. The typical yield from a corn field in the US is about 130 bushels per acre. From this corn, about 370 gallons of ethanol can be produced. By comparison, the sugar cane in Brazil produces almost 600 gallons of ethanol per acre.
If all the 74 million acres of corn raised in the US were used to produce ethanol, this would mean a production of 27.4 Billion gallons of ethanol, which has the energy equivalent of 18 billion gallons of gasoline. At the rate we burn gasoline in the U.S., that supply would get us through less than two months.
In order to produce enough motor fuel to last all year, the corn farming families would have to multiply in number like Mormons, and the ethanol plants would need to spread like mushrooms on the bog. More that a quarter of the total land area of the contiguous U.S. would be needed to be planted in corn.
The presidents goal of increasing ethanol production by using new processes to derive fuel from plants such as switch grass is still a ways off. Unless some breakthrough is found, the process generally is acknowledged to be 10 years away from industrial production. In order to maintain interest in the development of this technology, ethanol demand, and prices, will have to remain high. In order to the ensure that ethanol use expands, the government has been subsidizing ethanol by giving tax incentives for its use.
States such as Minnesota hand out direct subsidies to ethanol producers to the tune of 20 cents per gallon, this has resulted in the payment of millions of dollars to plants that already produce enough ethanol to pay for themselves in one year. Even the startup cost for the plants are subsidized through economic development grant money to the tune of millions of dollars. In addition, the federal tax on fuel is a nickel less per gallon on 10 percent ethanol gas blend (E10) compared to pure gasoline. This price advantage, if passed on to the consumer, helps to spur demand.
Although many of the initial ethanol plants were started with a cooperative of farmers pooling resources and sharing risks, lately the larger players have moved in seeking a share of the burgeoning profits.
The agriculture giant Archer Daniels Midland Company (ADM) now controls 25 percent of ethanol production in the US. With increasing outside investment in ethanol production, this is actually down from a whopping 50 percent share in production, with the other half being controlled by farmers. Increased demand for ethanol has doubled prices for the fuel, and in the last few years, ADM has had record profits, jumping nearly $100 million in just the first quarter of this year. ADM also has transportation arm for distribution of ethanol and its by-products, the principal one being dry distillers grain which is used as cattle feed.
Another agricultural giant, Cargill Inc., manufactures 120 Million Gallons per year (MMGY) of ethanol at two plants in NE and IA. It has one third ownership in three plants that will produce 300 MMGY in NE, IN, and IA. These new plants are located adjacent to the grain elevators that are also owned by Cargill. Along with its transportation and distribution arms, Cargill and ADM control or have interest in nearly half of all biofuel production in the U.S.
Both of these firms but especially ADM, benefited greatly from the Bush/Cheney Energy Bill that calls for increased ethanol production. Perhaps it is coincidence, but ADM gave $7000 in donations to the Bush campaign, and $400,000 to Republican soft money funds.
As more investment firms and banks move in to create production capacity, the local farmers now represent a smaller piece of the corn fuel pie. Less that 25% of ethanol plants are now owned by farmers. More consolidation is likely to occur, as smaller and weaker producers are bought out by cash heavy firms and investment companies.
Instead of forging a new energy future based on sustainable and renewable energy sources and conservation, we are helping ADM harvest a new crop of dollars from the taxpayers. Even worse, this comes with increased loss of cropland from overproduction, and less food security for our nation. The energy independence claim for ethanol production is just a smoke screen for increased profits for Wall Street and the largest agri-business firms, and will get us no closer to telling the oil merchants in the Middle East to stick it.
Selling the whole deal by pointing to Brazil is part of the public relations scheme being sold by Washington and the big money interests. The facts don't support what we are being told, but that won't stop corporate America from trying.
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