Saturday, December 08, 2007

Is sugar the sweet solution?

Xanthippas forwarded me this blog post from Balloon Juice which links to a post over at The Agitator which finally results in a link to a WaPo article about the Sugar Lobby. If the idea that there is a lobby specifically for the sugar industry surprises you, it shouldn't. Every major area of agriculture has their own lobby, and you probably have heard of the corn lobby. So anyway, I do suggest reading those blog posts and the original article. If I have time, I'll get around to writing up a post about the evils of the sugar lobby (and the corn lobby), but what I want to respond to is some of the issues raised by Michael D. in his post. (Please don't sue me for copyright infringement for copying and pasting your whole post!)

Radly Balko has some issues with U.S. sugar lobby (they’ll create a lobby for anything, won’t they?) I encourage you to read it and the accompanying Washington Post article. Radly sums it up as follows:

If an “alternative energy” source is so efficient that it needs massive government subsidy to event (sic) exist, much less survive, it’s not a viable long-term source of energy.

No kidding (and, by the way, it’s exactly what’s happening with the corn-based ethanol industry here.)

But look to Brazil – they’re doing just fine with sugar cane ethanol. In fact, Brazil has achieved what has eluded us forever – energy independence. In fact, three-quarters of its automobiles are able to run on ethanol, and there is an ethanol pump at just about every fuel station. Cane ethanol now accounts for 40% of Brazil’s transportation fuel. And one thing Brazil has figured out that we have not: corn-based ethanol (the type we produce here) is not energy efficient. It takes nearly as much energy to produce corn ethanol as it saves (cane ethanol doesn’t need to make the transformation from carb to sugar) – not to mention the adverse effects that increasing corn prices will have on the world economy.

All this leads me to ask a question, because I have not been able to find an answer. Maybe I’m not looking hard enough. Can we produce sugar cane here? And, even if we could, would enough people have the guts to stand up to the corn lobby to make anything happen anyway?

Or, are we all just that apathetic?

Now, if you read the comments left on this post there's already been a lot of enlightening discussion. There are a lot of pros and cons on these issues, but I feel that in general there's a lack of informed debate going on. On the one hand you have people writing how corn ethanol is a boondoggle. Their arguments are that it'll raise food prices, it's not efficient enough, it's only profitable because of government subsidies, people aren't factoring in the pollution caused by growing the corn, etc, etc. On the other hand you have the corn lobby telling us that corn-based ethanol is the way of the future with less pollution, will give us energy independence, bring more money back to America, etc, etc.

But when I hear individuals talk about it they usually have either decided to be for it or against it based on no more than a couple of points. What annoys me the most is those who have decided that biofuels are a bust because they're currently expensive to produce and are not a magic solution that makes everything better in one go. Anyhow, I'll get back to that later. Let's address the first point that Radly Balko brought up:

If an “alternative energy” source is so efficient that it needs massive government subsidy to event (sic) exist, much less survive, it’s not a viable long-term source of energy.

No kidding (and, by the way, it’s exactly what’s happening with the corn-based ethanol industry here.)

According to this article published in 2006:

[O]ne major subsidy is the ethanol program, currently with a $0.51 per gallon subsidy, which will in the near future amount to a bill of over $3 billion annually on 6 billion gallons of production.

The last time I was at the gas station near here that has an E85 pump, it was selling for nearly a dollar less than regular unleaded. Take away that subsidy and you still get a price nearly a half-dollar less than the cheapest grade of gas. Not to mention that the price of corn isn't nearly as volatile as the price of gas. It varies some, but not really week to week or day to day. Does corn ethanol need a subsidy to exist? No, not really. Furthermore, as I pointed out in my post that I linked to, oil is massively subsidized.

There is growing awareness in this country that the full cost of using oil for transportation is "subsidized" -- that is, gasoline prices paid by consumers do not reflect the full economic cost to society. The true cost is hidden by myriad direct and indirect public subsidies, which include

  • reduced corporate income taxes for the oil industry

  • lower than average sales taxes on gasoline

  • government funding of programs that primarily benefit the oil industry and motorists

  • "hidden" environmental costs caused by motor vehicles, namely air, water, and noise pollution

You can read the full article for yourself, but basically we're talking about hundreds of billions of dollars per year. And what would we be doing in the Middle East if not for oil? If not for oil, we'd pretty much treat that area of the world like we do Africa. How much has the war in Iraq cost us now? To me, the idea that somehow there's something more wrong with corn ethanol than with oil simply because there's a per-gallon subsidy for ethanol whereas oil's is hidden away is just wrong-headed. The corn subsidy is not an argument against ethanol, despite the fact that I favor getting rid of corn subsidies.

Then some opponents attack the energy efficiency of corn based ethanol and declare it to be energy negative. Someone has already done the job of refuting that for me, so I quote Wikipedia:

Opponents of corn ethanol production in the U.S. often quote the 2005 paper of David Pimentel, a retired Entomologist, and Tadeusz Patzek, a Geological Engineer from Berkeley. Both have been exceptionally critical of ethanol and other biofuels. Their studies contend that ethanol, and biofuels in general, are "energy negative", meaning they take more energy to produce than is contained in the final product.

A 2006 report by the U.S. Department Agriculture compared the methodologies used by a number of researchers on this subject and found that the majority of research showed that the energy balance for ethanol is positive ('1.24 for corn ethanol). A 2006 study published in Science analyzed six studies, normalizing assumptions for comparison; Pimental and Patzek's studies still showed a net energy loss, while four others showed a net energy gain. Furthermore, fossil fuels also require significant energy inputs which have seldom been accounted for in the past.

Not that I'm questioning their authority, but how did an entomologist and geologist get into this anyway? So look, most people agree that corn ethanol is energy positive. Not incredibly energy positive to be sure. But it's viable.

Let me bring the point about corn subsidies back up, because perhaps some people misunderstand what that subsidy does. Corn is America's #1 crop, both in acreage under cultivation and sales. From the Christian Science Monitor, an interview with Michael Pollan:

And we subsidize this overproduction. We structure the subsidies to make corn very, very cheap, which encourages farmers to plant more and more to make the same amount of money. The argument is that it helps us compete internationally. The great beneficiaries are the processors that are using corn domestically.

Now who would that be, and why?

• Of 10,000 items in a typical grocery store, at least 2,500 use corn in some form during production or processing.

• Your bacon and egg breakfast, glass of milk at lunch, or hamburger for supper were all produced with US corn.

• Besides food for human and livestock consumption, corn is used in paint, paper products, cosmetics, tires, fuel, plastics, textiles, explosives, and wallboard – among other things.

• In the US, corn leads all other crops in value and volume of production – more than double that of any other crop.

• Corn is America's chief crop export, with total bushels exported exceeding total bushels used domestically for food, seed, and industrial purposes.

In short, the price of corn in the world is determined by America's corn subsidy, which keeps us overproducing this crop. Which, you may say, is great for people in third world nations that need our food. Hopefully they can get it. But that's also the reason it makes sense to use corn for ethanol. Corn is plentiful. Corn is grown in truly vast quantities. This is for political reasons that have nothing to do with whether we want or need that much corn. I strongly recommend reading Michael Pollan to understand why we actually need not to produce that much corn. On the one hand, we need to quit making corn artificially bounteous and cheap because the uses we put it to such as cattle feed and hfcs are absolutely terrible. On the other hand, without the subsidy, there simply wouldn't be as much corn to go around. So you have a choice, get rid of the corn subsidy to discourage corn ethanol production (since the low price of corn is the main reason for ethanol's profitability, not the ethanol subsidy) and dramatically cut back the amount of corn for world food consumption, or keep the subsidy which will only encourage more profitable uses for the corn than selling it at rock-bottom prices to third-world nations, namely ethanol production. The best argument against corn ethanol is this artificial over-production of corn, but no one wants to face the reality of what ending that over-production would mean.

I'm going to leave that alone for now and move on to the next point. As Michael D. points out in his post:

But look to Brazil – they’re doing just fine with sugar cane ethanol. In fact, Brazil has achieved what has eluded us forever – energy independence. In fact, three-quarters of its automobiles are able to run on ethanol, and there is an ethanol pump at just about every fuel station.

Can we produce sugar cane here? And, even if we could, would enough people have the guts to stand up to the corn lobby to make anything happen anyway?

There are several answers here, all of which lead pretty much to the fact that the US cannot rely on sugarcane as a source of ethanol.

The US does produce sugar. Nowhere near on the scale that Brazil does, but sugarcane only grows in tropical or subtropical environments. Sugar beets produce slightly more than half of US sugar production (excluding hfcs, that is). Unfortunately, sugar beets require four times as much land as sugar cane to produce the same size crop. Sugar beets are also a rotational crop, which means that averaged over a period of years, their production is going to much lower than sugar cane because they have to take some years off. The USDA puts US sugar production at 7,665,000 tons for 2007. Brazil's is 32,100,000 tons. You can already see that the environment is partially responsible for this huge disparity in production. Brazil can grow that much and probably more. There's no way the US could hope to match that production. Now to put to rest the idea that sugar prices are depressed in the US, thus discouraging sugarcane and sugar beet growth, the US lays tariffs on all sugar imports to keep prices up. The USDA manages all sugar production and they only allow domestic sugar producers to make so much, and they only let so much come in from the world market. In short, they're artificially keeping all sugar producers profitable instead of making them compete (so much for laissez faire, eh?).

Basically, even if it there was a substantial profit motive, not enough sugar can be cultivated in the US to meet even a small fraction of ethanol demand. That's another reason corn is far more prevalent right now. And of course, lastly there's the USDA study which opines that sugar ethanol is unprofitable at current gas and corn ethanol prices:

Producing ethanol from sugar beets and sugarcane is estimated to be profitable at current ethanol spot prices and at about breakeven over the next several months, excluding capital replacement costs, based on current futures prices for ethanol. Over the longer term, the profitability of producing ethanol from sugarcane and sugar beets depends on the prices of these two crops, the costs of conversion, and the price of gasoline. A moderation in the price of gasoline and a return in ethanol prices to their historic relationship with gasoline prices could push the price of ethanol well below breakeven levels for converting sugar beets and sugarcane into ethanol. However, the market for crude oil remains very volatile and highly sensitive to events in the Middle East, making it very difficult to forecast future trends in crude oil and gasoline prices.

The "now" of the quote is during 2006, when their estimated cost of gas was $4/gallon. Not that that won't happen again, but that's their calculated break point for profitability. So until we reach that again, there's not a lot of incentive for sugar producers to contribute to ethanol.

All well and good, but what if we ended the tariffs and imported sugar for use as corn ethanol? The question there is whether there's enough world capacity to actually supply us with the quantities of sugar we need to make ethanol in an amount substantial enough to replace gasoline. While there is excess capacity in the world market, it's really not enough. I read somewhere that if all of America's corn were devoted to ethanol, it would replace 12% of total gas consumption. Borrowing from wikipedia again, the US had 243,023,485 passenger vehicles registered in 2004. Now quoting the Michael D's post again, "Cane ethanol now accounts for 40% of Brazil’s transportation fuel." I can't seem to find a solid answer for how many cars Brazil has, but given that Brazil's population is about 183 million, and that the US has the highest per-capita ownership of cars, I'd have to say there can't possibly be any more than 150 million Brazilian cars. 40% of that would 60 million vehicles. That's a wild guess but if anything it's high, so let's just stick with it. Now Brazil might be able to provide enough sugar to fuel twice that many cars. Or even three times that many. But Brazil has an output of sugar roughly 4.5 times higher than the US. The US doesn't have the extra capacity to use sugar for fuel at all. Besides that it makes more money for farmers to sell it as sugar. Basically sugar's a no-go just for economic reasons.

People tend to get dogmatic about their arguments and I try not to fall into that. Corn ethanol is not the best solution. But that doesn't mean we shouldn't use it. Sugar ethanol simply can't provide much ethanol. Cellulosic ethanol is by far the best, but current technologies do not allow mass production or cost-effective production. And because of this there are people who say that biofuel is not the answer. But you know, technologies come along, especially with a little government help (like the railroads, highways, phones, computers, etc). Corn ethanol will never be the perfect solution, but that doesn't mean we shouldn't use it. Couple any biofuel with hybrid cars and you get a powerful answer to oil. And the more we start to use them, the better they'll become. We can use corn ethanol as a transitional state to get us started on the path to clean fuels. There's no real reason not to. Anything is better than the pollution and war that oil brings.

Someday we'll get to the point where we derive most electricity from sunlight. Someday our cars will run on switchgrass and batteries that we charge at home off of sunlight. But we can't make that leap in one generation of vehicles. We can't avoid the problems that transitional technologies will bring. That doesn't mean there's a reason not to embrace them whole-heartedly in the meantime, and always be looking down the road at better options. We have to start somewhere, right?

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