TCS Daily


The Terror of Ethanol

By John Baden - August 16, 2007 12:00 AM

I write this while preparing for the Foundation for Research on Economics and the Environment's second conference of the summer for federal judges. The first program focused on energy, while this one is on terrorism and civil society. The two seemingly distinct topics intersect as politicians opportunistically seek justifications to curry favors and further the interests of constituents and contributors.

Exploiting fear of terrorism exemplifies political opportunism working in the drive to promote ethanol. U.S. Senator John Thune (R-SD) recently pronounced:

"Countries such as Venezuela currently make a hefty profit from American consumers by forcing us to pay close to $70 a barrel or more for oil. The excessive oil profits enjoyed by these countries constitute a tax which all too often ends up fueling terrorist activities of radical extremists who hate America. It is imperative that our nation slash this terrorism tax and thus stymie petro-funded terrorism."

His cure? Ethanol of course. And he has plenty of company, for successful politicians are ever alert to identify, exaggerate, and then capitalize on fears. U.S. Representative Jean Schmidt (R-OH) reported that she has struck her own blow in the war on terrorism: she bought an ethanol-powered vehicle. "I will be one of the first in line to buy ethanol this month," said Schmidt, the proud owner of a 2007 Chevy Tahoe that runs on either the E85 blend of 85 percent ethanol and 15 percent gasoline or, normally, just gasoline. Her license plate reads, "E85 4 OH." Schmidt said she didn't buy the SUV because ethanol is better for the environment, but to reduce the amount of money being sent to the Persian Gulf.

According to the Wall Street Journal, former CIA chief James Woolsey has been wooing corn growers with extravagant language. "American farmers, by making the commitment to grow more corn for ethanol, are at the tip of the spear on the war against terrorism," he told the annual meeting of the Virginia Soybean, Corn and Grain Association.

This is ethically, ecologically, and economically perverse. Only in politics does it make sense -- and there it is a big winner. Publications as diverse as Foreign Affairs and Rolling Stone explain why the ethanol obsession is idiocy and immorality enshrined as law.

In the June issue of Foreign Affairs, two agricultural economists at the University of Minnesota observed that, "...thanks to a combination of high oil prices and even more generous government subsidies, corn-based ethanol has become the rage." The politics of ethanol is creating an industry dependent on billions of dollars of taxpayer subsidies. An ever-larger share of corn production is going to ethanol factories, and, under current legislation, within a few years these factories will consume half of U.S. domestic corn supplies.

In economics, as in ecology, things are interconnected. Thus, it's hard to do just one thing. The enormous volume of corn consumed by the ethanol industry has broad affect throughout the food system. Not only has the price of corn nearly doubled, the prices of substitutes like wheat and rice are also at decade highs. Further, farmers have planted more acres with corn and fewer acres with other crops<and increased fertilizer, herbicide, and pesticide use.

It takes over 450 pounds of corn, enough calories to feed one person for a year, to produce 25 gallons of ethanol. Pressures on world food crops caused by increased ethanol production mean higher world prices for both processed and staple foods.

While ethanol subsidies and mandates benefit corn producers, consumers, especially those in poor countries, are hit with the shock of much higher food prices. The World Bank estimates that nearly 3 billion people live on $2 a day or less. Consider the devastating impact of the increased cost of staple grains.

Rolling Stone magazine recently nailed the problem in an article by Jeff Goodell, "Ethanol Scam: Ethanol Hurts the Environment And Is One of America's Biggest Political Boondoggles." Goodell says, "The great danger of confronting peak oil and global warming isn't that we will sit on our collective [behinds] and do nothing while civilization collapses, but that we will plunge after 'solutions' that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn."

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35 Comments

Beyond Corn
"...but that we will plunge after 'solutions' that will make our problems even worse. Like believing we can replace gasoline with ethanol, the much-hyped biofuel that we make from corn."

Diversification of transportation fuels serves the interests of Consumers and National Securty. Corn based ethanol is clearly NOT an optimal biofuel. But the sheer scope of competing with oil necessitated expediency...using a known product and known technologies. An effective biofuel industry depends on the replacement of corn with crops customized to optimize biofuel production. The biofuel industry must now build on their successes and take the next steps...beyond corn.

Can we drill now?
Now, can we drill in Alaska? The smart ones would be buying all the oil they could from foreign sources with fiat money (while they can) and pumping into depleted reservoirs on their own soil. Oil is still cheap for the work and products it enables.

Sit around and do nothing?
OK so ethanol isn't the greatest. It has raised world food prices. It is highly subsidized by the government.

OK so oil isn't the greatest, either. It has raised world food prices. It is highly subsidized by the government.

This first foray into bio-fuels isn't the final answer. People who want everything perfect on the first try are STOOOPID.

Everything takes time to develop.

I also find it laughable that an essay here cites "peak oil" and "global warming", even through a quote from another media organ. Peak oil is a myth that may some day come true, but not in my lifetime. We've also seen that while the globe is getting warmer, the idea that the warming is man-made is being increasingly shot full of holes.

Research into cereal grain production in times of increased co2 show that there is greater production, not less.

Ethanol is not perfect. It is a better additive than MTBE.

The Point
is that we don't need this idiotic ethanol step. Oil certainly did not raise my corn prices, and there is plenty to be found still in North America while we develop other kinds of biofuels, and other alternative energies period (biofuels aren't a good answer as anything more than a supplement; I challenge you to try living on your gel cap multivitamins and see how healthy you are).

US farm subsidies raise world food prices more than oil.

Ethanol is a stupid idea based on junk economics and fear. I don't see NASA proposing using erector sets as intermediate steps between spacecraft developments.

Worst of all, if this really takes hold the politicians will be loathe to undo the legislation down the road.

ludicrous
Oil hasn't changed food prices? What planet do you live on?

Oil is a huge component to commercial fertilizer production. Oil is consumed in huge quantities in the production of corn. Oil is consumed in huge quantities transporting corn. More oil is consumed turning that corn into the food on your shelves.

Every time oil goes up or down, it has an impact on the price of corn and all other foodstuffs. And this includes organic foodstuffs, as energy is needed to process and transport even organic food.

Ethanol is not all bad. It can be argued that it is a bridge step to better energy usage for us all. Certainly it's no worse than the situation with oil and all it's subsidies, pollution, etc.

I agree with you that there is plenty of oil in North America. Peak oil is a idea who's time hasn't yet come.

Correction
You say "US farm subsidies raise world food prices more than oil."

Farm subsidies lower world food prices, by allowing exporters to undercut production costs abroad. US cotton farmers, for instance, can supply the mills of India more cheaply than can poor African cotton farmers working with a hoe. How? The US taxpayer pays the difference.

As with cotton, so with our wheat, corn and poultry.

It would be correct, though, to say that US food prices are higher, if you count both the cost at the checkout line and the cost paid through federal taxes.

ethanol
I figure that if Americans are dumb enough to subsidize ethanol, maybe there's a way for me to make money from it. So I bought shares in a foreign company that has at least one refinery so far, and also manages the crops. As soon as I see the subidies stop, I will sell the shares. So not only is ethanol a stupid distortion of that part of the economy, but foreign guys like me will even make money off it.

Beyond corn doesn't matter
None of them work for reasons of land use constraints.

http://www.guardian.co.uk/environment/2007/aug/17/climatechange.energy

If the long term doesn't look much better than the short term, then it's time to admit that biofuels were a hideous mistake where farmland and natural wilderness are sacrificed to produce them.

Not quite
Food prices have in general declined steadily across the last 100 years in North America as the oil component of food production has risen and the mechanization of the food industry has increased. The increase in productivity has usually been disproportionate to any increase in the price of oil.

As for ethanol, it's a bridge to nowhere. It is utterly senseless to sacrifice enormous land areas producing relatively trivial quantities of energy. The only area where biofuels make sense is as a reuse of organic matter that would otherwise be waste, in which case it is a trivial portion of the total energy supply.

Alternative fuels
I agree. No biofuel we can conceive of is likely to replace fossil fuels because of land use constraints. So what would you think we'll be using to power the vehicle fleet of the future?

Keep in mind the increase in demand, as China, India and the rest of the developing world continue coming on line with their intention to drive around in their own cars. Also keep in mind the supply line for petroleum. Do you foresee us going ahead with liquid coal, tar sands and oil shales?

Or do you see us going the nuclear-to-hydrogen route?

Eat corn, drive on oil and nukes
Nuke energy nationwide, along with long-life, efficient batteries, will eventually power half or more of the vehicles in the world. (Plug-in) Let's use our own oil to power the rest, at least until Al-Queda, Taliban and others have given up trying to kill all Jews and Americans.

Corn: On the cob, creamed, in chowder, etc.

E85 vs. E15
Almost 30 years I ago when I lived in Texas and Oklahoma I used gas with 15% ethanol that got better gas mileage than leaded (which was being phased out) or unleaded gas. Ethanol was used as a replacement for lead then. I wonder if it is still available?

Biofuels - a hidden danger
The greatest problem in developing an agriculturally based fuel supply is, where do we get the water? The Ogallala aquifier is the largest fresh water aquifier is the world. It stretches from South Dakota to Texas and is the main irrigation source for the midwest farm belt. Over the last five decades, due to overuse and mismanagement, the level of the aquifier has sunk over 100 feet. The sources that feed the aquifier cannot replenish it at a rate to meet demand. Where will the water come from for a greatly expanded ethanol or soybean crop? The Great Lakes water is a closely guarded and maintained resource, so it is unavailable. Perhaps we should follow the Roman's example and build aqueducts from sources in Canada. After all, if the polar ice cap is melting, there should be plenty of fresh water available.

to WCASEY re water from Canada
You can't build the aquaducts and get water from canada either. It's cosidered one of their particular sacred cows up there, and is against the law to export raw water like that. Once there was a proposed to have super tankers load up on water from some waterfall on the west coast that was just dropping into the sea. Even that was disallowed.

Water from Canade
I've discovered another flaw in my idea to bring water from Canada. North of the Great Lakes, it looks as though most of Canada's natural waterways flow north into Hudson Bay. Almost all of Central-east Canada is at a lower elevation that the land along the border. Another instance of not checking the facts.

You'll never miss your water...
...til your well runs dry.

Right, water won't run uphill. But that's just the engineering problem. Besides that the money's just not in it either.

Surely up in the Canadian Arctic you could run a water pipeline and build a hydro or nuclear plant, or more likely just burn oil shales fresh out of the ground up in the Mackenzie. The technology would be a snap. But even one acre-foot is a lot of volume to pump 1,500 miles. And you'd be delivering it basically at oil or gas delivery costs.

Ever been to Colorado's San Luis Valley? They grow just about the tastiest potatos on earth there, on a bone dry desert basin copiously irrigated by infinite amounts of water-- from aquifers that will one day run dry.

So here are the choices: (A) Stop growing potatos there, and ask American restaurants to take them off the menu; (B) Pull in some Canadian water, build the cost into the price, and McDonald's prices a holster of fries at $19.95, or (C) Just cross your fingers, continue with business as usual, and make boatloads of money until the wells run dry.

Which option do you think potato ranchers will be choosing?

potato farms
Sure, as another kind of 'rent-seeker' they'll lobby for subisidised water. And if people don't pay the real price for any comodity, they'll waste it. It's a governement problem of them distorting prices by their interference. Guess it's the same in calif. too. But re that Canadian water, in addition to it being against the law to export it, and your point re it being costly to pipe it so far, there is also the problem of people going up there to do stuff, like live. It's kinda like they say north dakota has lots of wind for wind mills, but who wants to live in n. dakota, or the mackenzie valley up in the north of canada?

Ethanol may not be just a corn based fuel
Some laboratories are attempting to make it out of coal.
http://news.com.com/8301-10784_3-9759104-7.html?part=rss&subj=news&tag=2547-1_3-0-5

Plant corn seeds to eat corn...
Drive on gas & ethanol mixed. Leave the nukes out of cars, though! Everytime the cars backfire you'd get the mushroom clouds that would leave humongous potholes in the road...

Tractors needs oil to work the fields...
Trucks needs oil to move the corn from the fields to where it will ultimately be eaten. Directly or indirectly your food prices are affected by the cost of oil. Farmers might have to use their corn to make biodiesel if the cost of oil keeps going up. Tractors needs to run before any food gets produced. Priorities!

Roy, it's going to be
all of the above in your list. Petroleum shales, tar sands, coal liquefaction and nuclear to hydrogen. The last will principally occur only with Gen IV technology. According to the IEA, World Energy Outlook 2006, total world population can be expected to grown by about 1% annually between now and 2030. At the same time, total world energy consumption will grow about 1.6% annually from a current total of about 12,000 MTOE to about 17,000 MTOE. Most of this growth takes place in the first half of this 25 year period.

Can all of this demand be met? According to the IEA, yes, but only if all sources of energy are used. It estimates the total investment in energy infrastructure to be about $20 trillion, with $11 trillion into the electricity infrastructure alone, half into generation and half into transmission/distribution.

Givent the anticipated demand, to imagine producing any signficant fraction of 17,000 MTOE from biofuels is utter insanity. The land use impact alone will be devastating.

So what kinds of propulsion fuels does this leave us? In my view, it leaves a combination of more expensive fossil fuels from a variety of sources. The oil won't run out any time soon, just the dirt cheap, easy to get stuff. And, a slow transition to hydrogen fuels extracted from water, probably through nuclear power. However, this will only happen after enough nuclear power is built to deal with electricity infrastructure.

There ARE Fuels Beyond Corn
Willow, Hemp, Swithchgrass and the like are next generation biofuels that will improve on corn and sugar cane. They are being designed to mature quickly with minimal water in many climates. They will be tuned for ethanol production and will not compete with crops sourced for food. If properly designed, these 2dn generation biofuels could meet most US transportation energy needs using currently fallow, unused crop lands. Of course, that much biofuel will be unneeded, since electricy will be the primary fuel of personal transportation by 2030. Biofuels and hydrogen will secondary range extenders.

The increasing electrical and water demands of the next few decades should be primarily addressed with 4th generation peeble-bed nuclear reactors, as secondarily with solar and wind generating sources. And longer term, there is hope for fusion elecrical generation.

Water From Canada
"After all, if the polar ice cap is melting, there should be plenty of fresh water available."

The best source of water from Canada is desalinated water from Hudson Bay. It can be pumped during the summer months into Lake Superior and from the Great Lakes used to maintain the two major acquifiers that support midwest farming. Farmers and consumers must adapt to much higher costs for bulk water...or face eventual economic calamity.

I agree with some of this
with respect to Gen IV reactors. However, the problem with biomass is that it takes up too much land that is better used for either food production or being left in natural condition.

Just one problem
Arctic ice is saline, so it's of no use without desalinization. Probably a better source of water is desalinization plants on the Pacific Ocean and then pipe it inland, but then you have the problem of California's insane allergy to nuclear power.

Or D)
develop large scale water desalinization on the Pacific coast or Texas Gulf coast. This means the growers have to pay the full cost of producing water and their customers the full cost of producing the vegetables rather than just plundering the aquifer. There's no real shortage of water, there's a shortage of potable water and a shortage of potable water in the middle of deserts where for reasons mysterious to me people have chosen to live.

But since
ethanol from coal has higher life cycle emissions and lower net energy than gasoline, why bother with ethanol at all?

No problem
Colin-- I suspect you have some feel for the calculation of how much energy it would take to transform seawater or desert brines into agricultural grade water.

Multiply that by the number of acre-feet Western irrigated fields use each year. Then assume in the future they will only be using more, as we seem to be entering a protracted dry spell out there.

I agree, the Colorado will get tired and stop producing everyone's needs. First dibs may well go to the urbs, like Vegas, Phoenix, Tucson, San Diego, El Paso etc. After that, by my calculation, we will need about one zillion kWh coming on line every year to convert enough water for our needs.

Facing eventual economic calamity
"Farmers and consumers must adapt to much higher costs for bulk water...or face eventual economic calamity."

Farmers will just pass it on, of course. And when consumers get the bill for their groceries grown from desalinated water, our standard of living will plummet-- assuming a constant net income and a greatly higher food bill. Every other facet of our economy will suffer in the precise degree that food costs take away from the consumer dollar.

The best quick source
I could find with some useful numbers is here:
http://www.livescience.com/environment/070625_desalination_membranes.html

It shows that the U.S. consumes about 400 billion gallons of water a day. The amount of power required to produce 100 billion gallons is about 50,000 MW (50 nuclear reactors). Basically you have to boil water. Imagine that three-quarters of the U.S. water supply can be taken from natural fresh water sources, leaving the remaining quarter to be produced from desalination. All right, 50 nuclear plants costs, lets say $4 billion each or $200 billion in total. That means that the cost for each person using desalinated water would be a capital cost of (75 million people) about $2600 each, amortized over 40 years, or about $67 a year before interest charges. Add in say another $60 per person for operating costs including fuel (probably a very, very high estimate).

So, it's not entirely out of reach. It's greatly more expensive than conventional municipal water supply, and it's pretty much a straight addition onto existing water system costs. Is it unbearable? Perhaps it is unaffordable for the lowest income levels, but to a certain extent you can adjust the charges based on consumption. Note that I've lumped in industry and commercial consumption into an all-in per capita consumption here of about 100 gallons/day (all costs ultimately flow back to the final consumer). Sorry, forgot to add 20 per cent because of the necessary maintenance outages for the desalination plants and systems. If you want 50 plants producing water constantly, you build 60.

This is very, very rough, and I stand to be corrected by anyone with greater knowledge than I about desalination systems, but I do think I'm correct to within half an order of magnitude.

Can it be done? Build just two nuclear desalination plants a year and in 25 years, you've switched a quarter of the U.S. water supply. Seems entirely possible to me. Also note that my estimates here do not include any fancy new technology, and I've somewhat highballed the plant construction cost estimate. You can probably get a 1000 MW nuclear plant for a lot less than $4 billion if you build them in organized parks using identical technology and with modern modular construction techniques that have already been demonstrated in France and China. Advantage of modular construction is improved quality control and project construction in parallel rather than in series. Far more reliable and predictable schedule as a result.

What I haven't guesstimated is the cost of the pipeline infrastructure, so that's an added cost to the system.

Final argument, the costs do not appear absurd, and the sooner we stop turning the Colorado into a muddy ditch the better.

The cost of clean water
Thanks for finding the numbers-- that helps.

Add to that data the fact that boiling water is not the cheapest, quickest method to desalinate water, and the fact that you don't have to end up with pure water, only acceptable water for crops.

While you're at it, you could use some of that power to crack water, ending up with hydrogen.

I don't think you've highballed construction costs one whit. If you haven't noticed, construction costs lead just about every other area in inflationary pressures upward. Start a project today and by the time you cut the ribbon, the cost has doubled.

One thing that would be very useful would be to address the real issues with nuclear-- namely what to do with the waste-- and get the pros and the antis on the same side of the fence. That way new plants could be designed and commissioned in a fraction of the time it takes currently-- that is, forever.

BTW thanks for knowing how to construct an actual argument. I could only wish there were more of us here. It would be a more intelligent forum.

A few things
"Add to that data the fact that boiling water is not the cheapest, quickest method to desalinate water, and the fact that you don't have to end up with pure water, only acceptable water for crops."

Quite right, but I wanted a pessimistic estimate using existing technology only. Also, if you've got all water processed to a high degree then you don't have to make a distinction between applications. Yah, yah, I know, it's like wasting fluoridation on industrial process water, but it greatly simplifies distribution systems.

About plant construction: material costs have been rising, but total cost is another matter. Typical nuclear power plants were built in the 1970s for about $2000/kW, rising by the late 1980s to about $3000/kW (in today's dollars, some plants were much more, some were less). This happened despite the fact that the cost of materials declined throughout the period. The reason was rising interest rates and stretched out construction schedules, the latter of which was the real problem. Inflation was not a factor, interest rates are the key, as high interest rates killed inflation.

Interest rates a builder can do nothing about, however, we've been well below 10% prime rates for well over 10 years, and there's no sign that double digit interest rates will be coming back. So, construction schedules. It was not uncommon for nuclear projects to have ridiculously long construction schedules. TVA spent an astounding 19 years building Watts Bar 1, while Seabrook in New Hampshire took 13 years.

However, look around at what's happened in the 1990s. A revolution in construction techniques results in schedules about four years long. Yes, Areva's had some serious slippage in Finland, going from four to six years, but the projects in China and South Korea over the past 10 years done by foreign companie, mostly Areva, AECL and KNP have typically completed their constructions in four. Westinghouse claims they can do it in three, but that can't be taken seriously until they actually build something, and Westinghouse hasn't built anything in 20 years, so I'm only talking about companies that have actually demonstrated this and not just once but consistently in all their last decade of projects.

Schedule and interest rates, those are the two things which are makers or killers for large capital projects such as nuclear plants.

The waste? Take all of those thousands of tonnes of depleted uranium at the enrichment plants (that's most of the waste, combine it with separated uranium from spent fuel waste, and breed it all into plutonium-239. Roy, we've got at least 5000 years worth of fuel for reactors just sitting in waste storage today if its reprocessed and bred. Only risk is proliferation, and that can be eliminated with proper controls and accounting of material. The antis won't like this argument, because it means that nuclear power must continue as a part of the cycle in endlessly consuming its own waste and producing new fuel from it, but it's doable, and all of the technology either exists or has been demonstrated.

In closing, I would suggest this. There has always been great concern expressed over rad waste. To a certain extent this is misleading. Think about it this way. We can with some degree of uncertainty point to the historic casualties from the emissions from burning biomass or fossil fuels. (Wood particularly, as many in the Alaska gold rush could attest). However, it is a fact that civilian nuclear waste has killed or injured no one. The question then becomes, to what degree has the risk of nuclear waste been overblown by some as a false argument in support of their dislike of nuclear power for other reasons.

who cares?
The greens don't care that hydrogen is produced from natural gas or (via electrolysis) from oil, gas, and coal.
So why should we care that ethanol is made from coal if it's a viable alternative?

My point was simply
that ethanol isn't a viable alternative irrespective of the source.

Nukes: lowcost, consistent power for electric vehicles
Use Nuke Power for powering electric vehicles. If you don't like that, drink (enough) ethanol so you don't worry about AGW.

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