At an energy business conference in Athens, former vice president Al Gore said, “It is not a good policy to have these massive subsidies for first generation ethanol… First generation ethanol I think was a mistake. The energy conversion ratios are at best very small.” (Thomson Reuters) While some have applauded this statement as long overdue, others argue that corn ethanol has made several important contributions to the process of moving away from fossil fuels. This paper will explore both sides of the issue, viewing the opinion of both those who agree with Mr. Gore and those who do not. From those who are pro-corn ethanol, we will hear that ethanol is a domestic energy source that improves national security and reduces dependence on foreign oil, that ethanol is good for the environment and sustainable, and that ethanol creates jobs for farmers in the Midwest. From those against corn ethanol, we will hear that corn ethanol causes food shortages, that massive corn production is polluting, that the net energy of corn ethanol is negative meaning that more oil is used than would be just to use gasoline, and that second generation ethanol sources should be the new focus of our attention. However, we will ultimately see that, while saying that subsidies need to be re-evaluated may be accurate, the blanket statement that first generation ethanol was a mistake is misguided.

History

The history of ethanol is as long as the history of the automobile itself. The inventor of the internal combustion engine, Samuel Morey, used a blend of ethanol and plant-based oils to power his first engine in 1826. (ICM, Inc)

In the first recorded instance of government policy on ethanol, and in perhaps a world-changing decision, the United States imposed a tax on all alcohol (including ethanol) at a rate of $35 per gallon (in 2007 dollars) to pay for the Civil War. Ethanol, which had been competitively priced with petroleum-based alternatives, could no longer compete. Abraham Lincoln enacted this bill in 1862, but it was not until 44 years later that the Free Alcohol Bill removed this tax for fuels, and ethanol was once again cheaper than gasoline. (American Druggist Publishing Company)

[caption id=”attachment_809” align=”aligncenter” width=”525”] Image source: Library of Congress.[/caption]

Ethanol and gasoline vied for market share for a time, with new oil discoveries decreasing gasoline’s price and new plants lowering the price of ethanol. The death knell for ethanol came with the 1919 national prohibition of alcohol. (Mount) Although denatured, or undrinkable, ethanol fuel was still allowed, federal agents commonly destroyed stills used by farmers to create ethanol.

Despite the stigma that followed ethanol during Prohibition, Henry Ford said that ethanol is “the fuel of the future”, continuing “There is fuel in every bit of vegetable matter that can be fermented. There’s enough alcohol in one year’s yield of an acre of potatoes to drive the machinery necessary to cultivate the fields for a hundred years.” (NY Times) To this end, Ford designed his famous Model T to run on either ethanol or gasoline. (Associated Press)

Even after Prohibition was repealed in 1933, ethanol was unable to come to prominence due to the incredibly low price of gasoline. It was not until the oil embargo of 1973 that America becomes aware of its vulnerability to changes in the availability of cheap foreign oil. The Energy Tax Act of 1978 created a four cents per gallon tax credit for motor fuel blends containing at least 10 percent biomass fuels. (US GAO)

The recent surge in vehicles that can run on 85% ethanol (also known as E85 or FlexFuel) can be attributed to the 1988 Alternative Motor Fuels Act, which allows automakers to receive credit towards their product line’s average fuel economy by making their vehicles E85 compatible. (Consumer Reports) Unfortunately, these vehicles often do not run on E85, negating any benefits that may arise from this legislation. (Weiss and Gryll)

In 1990, the Clean Air act mandated the production and use of renewable fuels like ethanol, and mandated research into alternatives to MTBE, which had been used to boost the octane rating of fuels but was found to be contaminating groundwater. One product that was a popular gasoline additive that boosted octane: ethanol. (EPA) The Energy Policy Act of 1992, along with several executive orders at the time, required that federal vehicle fleets purchase a significant amount of gasoline with ethanol added. (EERE)

Recently, the 2005 Energy Policy Act and 2007 Energy Independence and Security Act have set annual requirements for renewable fuel production. The level of first-generation ethanol is set to plateau in 2015, and will be outpaced by advanced biofuels (which includes cellulosic ethanol, biodiesel, and “other advanced biofuels”) in 2020. (EERE) It is these two last pieces of legislation that establish current federal policy for ethanol.

Energy Independence

Perhaps the most obvious feature of the corn ethanol in this debate is that it comes from crops grown in the United States, rather than oil fields in regions such as the Middle East. According to the most recent estimates, 51% of America’s oil comes from foreign sources, for a total of 4.3 billion barrels in 2009. (US EIA) (US EIA) Of these foreign sources, “[n]early 40 percent of all U.S oil imports come from potentially hostile or unstable regimes”, putting the reliability of these source in question. (Weiss and Gryll)

The oil crisis of the 1970s showed the issues that can arise when the steady stream of oil we enjoy – currently some 18.8 million barrels of oil every day – is suddenly slowed to a trickle. Back then, attempts were made to ration oil via license plate numbers. (Time Magazine) The sudden shortages also sparked an interest in fuel efficiency in automobiles. However, little was done in the long term to reduce dependence on foreign oil.

The 2005 oil crisis was similar, sparked by a wide range of factors ranging from hurricanes to ethically dubious investment strategies that drove up the price of oil. (US EIA) (Herbst) The need to reduce dependency on foreign oil has been announced as a national priority by every American president since Richard Nixon. This was demonstrated in fine form by The Daily Show.

Nonetheless, little has actually been done to reduce dependency. The current renewable fuel standard (RFS) included in the EPAct requires that 13.95 billion gallons of ethanol be created annually. This is actually only equivalent to less than 10% of the 135 billion gallons of gasoline consumed annually. (US EIA) While this program is a good way to promote alternatives to fossil fuels, it is a drop in the hat. In any case, the use of some ethanol to replace gasoline is a step in the right direction, although as we will see later, ethanol production itself may prove to require a lot of fossil fuels.

Fuel Use and the Environment

When we consider the source of ethanol versus gasoline, there is an obvious difference. While gasoline must be retrieved as crude oil from reserves deep underground, and often underwater, and then transported to a refinery, refined, and sent to a gas station, the process is much different for ethanol. First generation ethanol begins as simple corn, grown in farms in the Midwest. This corn is harvested, and sent to a plant usually elsewhere in the Midwest. The corn is broken down, fermented, and distilled to create something very much like grain alcohol. It is, as with gasoline, then shipped to stations or sent to be blended with gasoline, but the difference in source makes a difference in the carbon life cycle of ethanol as well.

With increasing concern over carbon dioxide in the atmosphere, anything that can reduce the amount of carbon we are putting into the air is seen as a good investment. With traditional gasoline, the carbon within comes from the underground reserves, which were plants long ago buried and compressed into carbon-dense oil. When we remove this oil from the ground and burn it, we are putting long-sequestered carbon back into the atmosphere. Alternatively, ethanol is made from corn, which absorbs carbon as it grows. When ethanol is burned, it does release carbon, but this carbon can be re-absorbed by the next crop of corn, and so on. In this way, ethanol is carbon neutral. Again, this argument is not without its detractors, as many say that more carbon is released in the production of ethanol than would ever be absorbed by the corn.

Jobs

Of course, in today’s economy, many people are quick to talk about jobs in any policy debate. In fact, Al Gore claimed that a big part of his support for first generation ethanol was his desire to garner support from voters and farmers in the Midwest. A study by the ethanol industry’s cooperative organization, the Renewable Fuels Association, found that an ethanol plant producing 100 million gallons of ethanol annually could produce 1,540 jobs across all sectors of the economy. (RFA) Given the total number of plants in America, RFA estimates that the ethanol industry supported 400,000 jobs in 2009. (RFA)

However, the Director of Renewable Energy Policy for the Natural Resources Defense Council refutes these claims, saying that the data used by RFA is not valid. (Greene) By the NRDC’s calculations, federal subsidies to the ethanol industry come at a cost of $2.5 million per job. On the other hand, the RFA believes that all federal subsidies to the ethanol industry are a source of net income to the federal government in the form of reduce unemployment rates and the increased demand of corn increasing the price of corn, thus lowering the amount of money that the government must give to farmers to sustain their business. The opinions can vary wildly, but anyone within the ethanol industry is likely to give the most positive estimate of their contribution to the economy.

Food or Fuel?

The most common refrain against corn ethanol is often called the “food vs. fuel” debate. Essentially, every bushel of corn that is turned into ethanol is corn that is not made available to people or livestock, causing food prices to increase. This is especially relevant in America, where corn is a common ingredient in many foods in a variety of forms, such as high fructose corn syrup. The debate is often a hotly contested issue, with the United Nations Special Rapporteur on the Right to Food demanding a five-year moratorium on the production of all biofuels to help provide access to food for the poor. (swissinfo) However, the United Nations Secretary General was quick to counter this perspective, pointing out that the moratorium would hamper progress in understanding the potential of bioenergy. (Aguilar) One central tenet of the food vs. fuel debate revolves around increased prices being passed to consumers. This was especially evident during the mid-2000s, when food prices rose dramatically. However, some claim that increased food prices around that time was because of increasing oil prices, not because of the growth of the ethanol industry. The COO of Growth Energy, a pro-ethanol coalition, argued just that, even going so far as to claim that the Grocery Manufacturer’s Association had launched an aggressive campaign blaming rising food costs on biofuels. (Nussle)

Those who do believe that ethanol is causing increased prices can point to a wide variety of economic issues. The most obvious of which is the central philosophy behind economics: as supply goes down, prices go up. If more agricultural crops are being diverted to fuel, there is less available for food, and the prices will rise. Whether or not this is a valid argument, there is a very simple matter of logistics to consider. If the United States were to completely replace gasoline with ethanol, it would, by some estimates, require twice as much cropland as is currently available in the U.S. (Carey, Carter and Shameen) Another loss for the ethanol crowd came in the form of a recent study by Michigan State University, as the exhaustive 17 year project showed that in all cases, growing corn for food is more energy-efficient than growing corn for fuel. However, this study and another preceding it together show that using corn stalks and leaves is a very cost-effective way to provide a feedstock for ethanol. (Michigan State University) As we can see, the food vs. fuel argument is far from settled.

Agriculture and the Environment

One major reason to switch to ethanol is to get away from environment-damaging fossil fuels; however, if the growing of corn has serious negative effects on the environment, then it may be difficult for some of the most ardent biofuel supporters to defend ethanol. One must consider the entire life cycle of corn before, during, and after ethanol production in order to properly analyze the effects.

[caption id=”attachment_822” align=”aligncenter” width=”525”] Image source: Department of Ecology, State of Washington[/caption]

When corn is planted, fertilizer of some sort is almost always added to the soil. Runoff from farms in the Midwest frequently drains to the Mississippi River. The nitrates and phosphorous in fertilizer can travel as far as the Gulf of Mexico, where algae blooms feed on the nutrients and deprive the water of oxygen, causing a massive dead zones as large as 7,000 square miles. (Bruckner) This is a well-documented phenomenon that has been the subject of many governmental studies. (USGS) The Gulf of Mexico dead zone is the most notable consequence of agricultural pollution, but even worse may be the damage to our atmosphere caused by high-yield agriculture.

The Energy Balance

It may be difficult to argue for certainty that corn ethanol is worth the energy investment. Planting, fertilizing, harvesting, shipping, and processing corn can be quite energy intensive. Complicating the matter is that nearly all the energy used to create ethanol comes from fossil fuels, whether it is to provide the heat in processing plant or to power the tractor the plants the corn. However, there is energy added to the system in the form of sunlight, which corn uses to grow the stalk and produce ears. If this energy input is not greater than the fossil fuel energy used in other parts of the system, than we are using more fossil fuels than are being abated by the switch to ethanol.

One study found that the energy content in a gallon of ethanol is much less than that which is required to produce it, showing that ethanol is a bigger drain of petroleum than gasoline would be. (Patzek) Alternately, researchers at the Argonne National Laboratory state that the production of 1 million BTUs of ethanol requires 0.74 million BTUs of fossil fuels. (Halperin) There is no single consensus on this topic, and much like the food vs. fuel debate, has dedicated people on either side.

Second-Generation Biofuel

We know that gasoline is available, but the debate and common scientific consensus on environmental issues such as global climate change drive us towards other fuel options. Other sources of ethanol are commonly referred to as second-generation ethanol. This will come from sources such as switchgrass, which can be grown on marginal land with higher yield at less energy expense. Switchgrass is especially promising since it only needs to be planted once and can be harvested year after year. Recent research shows that it can provide an energy return of 540%, as compared to the approximately 25% estimated for corn ethanol. (Biello) The International Energy Agency stated that while ethanol from cellulosic sources such as switchgrass can be a promising source for the future, but would require massive investments by government in order to make it viable. (Sims, Taylor and Saddler) Essentially, the next generation of ethanol products is not yet available. For now, it seems that the choices are corn or nothing.

Conclusion

Now that we know the pros and cons, so to speak, was first generation corn ethanol a mistake? I would argue that it was not. Firstly, the massive government subsidies spurned technological growth and allowed for new investment in an area that was not a viable commercial venture two decades ago. Many companies such as Dow, British Petroleum, and Archer Daniels Midland have been able to turn a profit in an industry that would have not been viable without subsidies. This has caused massive investment into corn ethanol, created jobs in research and development as well as production of ethanol, and caused the ethanol production process to be much more efficient than it was only a few years ago. It has also caused many, many studies on the topic, which have allowed us to have a clearer picture on the topic of ethanol production.

However, the time for investment in corn ethanol may have passed. While corn ethanol has shown promise, at the moment it seems to have plateaued. Industry has had every incentive to increase efficiency of its process, but has not made significant gains in recent years. Rather, we should direct our attention to the next generation of ethanol, which is likely to come from cellulosic sources such as switchgrass grown in marginal lands. This would provide a massive energy return, and if nationwide federal mandates are made available to the new switchgrass industry, the same successful innovation would take place as benefitted the corn ethanol industry. This would finally give us a low-cost, high-yield source of alternative fuel.

[caption id=”attachment_785” align=”aligncenter” width=”525”] Former Vice President Al Gore.[/caption]

Al Gore’s comments sparked a national debate on ethanol policy in the United States. Some believed, as he did, that supporting corn ethanol was bad public policy, fostered for less than scientific reasons. Others argued that corn ethanol had spurned a vital industry and helped out farmers. In reality, corn ethanol has both pros and cons. Corn ethanol may decrease dependence on foreign oil, be more environmentally friendly than fossil fuels, and create jobs. It may also cause pollution, remove vital food from the global supply, use more fossil fuel than it could possibly replace, and be outdated in the face of second-generation ethanol. Unfortunately, there is no consensus opinion on any of these topics. I believe that the massive subsidies in place for ethanol – which are nowhere near the size of those available for the fossil fuel industry – were a good investment in a burgeoning technology. Now, we must look to the future, instead of arbitrarily continuing the policies of the past.

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(Header image credit thetrapezium via flickr.)

Government Subsidies and Corn Ethanol by Steve Richey is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

This post was originally submitted for a Renewable Energy Capstone class.