The American Bio-fuel Strategy: The Curious Case of Ethanol

Whether it provides an opportunity, or compromises our right to food, many of the currently used bio-fuel crops such as soybean, sugarcane and corn are traditionally used as staples. These staple food crops also have various other uses, such as animal feed, and for all intents and purposes, occupy the same soil or agricultural land. The flexibility of such crops has given rise to the ‘food vs. fuel’ debate, which has introduced a moral and pragmatic dimension hitherto not thought of. This has been especially acute in the United States, where alternative energy sources are viewed with a fair amount of apprehension even at the best of times.

Corn production gives key insight into the competition between fuel and food as it struggles to balance the demands of the ethanol plants and food stock usage. The global economic shift over the last five years or so, and rising oil prices have put more pressure on corn producers to make a profit. In addition, the sharp price fluctuations in agro-based industries have led many to diversify their markets. In the United States, farms have been adapting for a long time now, with livestock farmers eschewing corn as a typical animal feed due to its added value. There is also a marked price increase in flour, grain and many other corn derivatives, which is doing nothing to alleviate growing fears over food security. This trade-off has certainly raised a few concerned voices, with Jean Ziegler infamously declaring the situation a ‘crime against humanity’ back in 2008. The World Bank has been the most vocal opponent, its 2008 report pinned over two-thirds of the food price rise on bio-fuel production alone. The OECD joined in with criticism of the questionable ability of ethanol to significantly reduce Green House Emissions, among many other criticisms.

Of course, using corn as bio-fuel is old news, but the use is steadily increasing, taking up valuable acreage for food stocks. Its value is perhaps reflected in the thinking that its crop residue could also lend to boosting ethanol production stocks. Almost all the ethanol in the United States is produced using corn grain as the feedstock and it is unlikely that ethanol will lose its prominence at the top of the pile any time soon.

Now this is where it gets interesting. Extremely generous U.S. government subsidies for corn based ethanol production and the 10% blend mandate for all gasoline, applied during the 90s boom years, practically tied up the commodity within the burgeoning bio-fuel scene. This has been a major contributor to the large scale increase in prices over the last five years. The figures back this up. The U.S. produced 13.2 billion U.S. liquid gallons (50.0 billion liters) of ethanol fuel in 2010, which makes it the world’s largest ethanol producer. U.S. ethanol production this year will consume 15 percent of the world’s corn supply, up from 10 percent in 2008- impressive figures.

This brings us back to the issue of apportionment. Corn, the flexible devil that it is, has found itself exploited. The mechanics of political grandstanding and investor-friendly proclamations are always grandiose when connected to future technologies. The success of ethanol production was cemented through hype even though it is probably not the best suited for bio-fuel production in light of newer alternatives- something that has slowly been dawning on the corn states of Ohio and Wyoming in light of recent election campaigns. Even the U.S. Environmental Protection Agency has pointed out that ethanol production is a relatively resource-intensive process that requires the use of water, electricity, and steam. This is not particularly encouraging, given that ethanol has a smaller energy density than gasoline. It is altogether a rather poor show for the industry.

Perhaps it is time to re-imagine the contours of the corn–ethanol industry complex, or at the very least put more emphasis on diversification. One thing is certain: there are enough reasons to suggest that the U.S. government has been shortsighted in its reliance on ethanol derived from corn stock. This has led to a lopsided and expensive approach to achieving energy security. There are not enough voices linking food prices and ethanol production. Even though the issue has been gathering force since the economic crisis, we are not likely to see a reverse in the ethanol mandate. The industry is well built, attracting strong sales from China. It also fulfills the rather sparse U.S. government requirements to be seen as pro-active in renewables. This is a shame, because there are other options out there, especially with increasing future demand for food and advances in next generation bio-fuel research.