Adam Klestadt is a senior at Washington University in St. Louis studying economics. He spent the summer of 2012 at the Environmental Defense Fund working on issues and models related to energy and environmental economics. He is pursuing a career in energy consulting or finance.
In this article, Adam Klestadt discusses the impracticality of corn-ethanol as a legitimate fuel source. Combined with the effects of natural occurrences such as drought, devoting corn to biofuel production causes unnecessary increases in prices felt by every American, particularly farmers themselves.
The summer of 2012 was one of the hottest on record. Over 50% of the nation was devastated by one of the worst droughts since the infamous Dust Bowl of the 1930s, withering crops and causing food prices to skyrocket. Farmers watched as their livelihood died prematurely, leaving them with little to no hope of turning a profit this year. Frantically, some harvested during the summer to protect what corn they could salvage, but there did not seem to be enough to go around. Those who could locate corn found it too expensive to afford. Where was all of America’s surviving corn going? The answer is that it went to your gas tank.
As the result of federal government mandates and subsidies, the little corn that survived the heat did not end up on dinner plates or on other farms, rather it ended up in factories built to produce ethanol for cars. Though originally commissioned with good intentions, the push to use corn to produce ethanol for fuel has caused much more damage than good for the people and environment of the United States. Instead of using our abundant food source to feed our cars, the government should fulfill its obligation to protect and feed its citizens by abandoning the corn ethanol mandate, allowing consumers, non-corn farmers, corn farmers and even the environment to survive more comfortably. Corn is food, not fuel; we need to abandon the production of ethanol from corn immediately if we hope to better our society.
In some circles, including those around the U.S. government, it appears as though fueling our cars efficiently is a more pressing issue than feeding our poor. Within those circles, many people look to ethanol as a potential energy savior, one that will wean society completely off of gasoline. To be fair, there is some validity to that hope. Ethanol, an alcohol that can be added to gasoline or burned independently, is a cleaner, more energy efficient source of fuel than conventional gasoline. Including it in a tank of gas allows a car to go further before having to refuel while releasing fewer greenhouse gases in the process. In Brazil, where ethanol became a viable fuel source in the mid-1980s, nearly 85% of all cars sold can burn exclusively ethanol (Bourne pp. 3). I will not dispute that ethanol has the potential to change the energy game; I do, however, argue that the way in which it is produced in this country, and the way in which that production is supported by the government, is economically, morally, and environmentally irresponsible.
Ethanol can be produced from three different sources: sugarcane, cellulosic materials, and corn. It is important to understand that the end product -- ethanol -- is the same in every case, but the processes to reach the final stage vary substantially. Brazil, with its abundance of sugarcane, has finally mastered converting its massive stocks into ethanol after 30 years of trying, and as a result they are considered energy independent. Álcool, as the fuel is referred to, is produced cheaply and cleanly throughout the entire country. Cellulosic ethanol can be produced cleanly and efficiently from undesirable biomasses such as woodchips and switchgrass, although the technology to do so has not yet been mastered. The key difference between these first two production processes and that of corn is the amount of harm they cause the environment, with corn being the most detrimental, since “corn is an energy intense crop and requires a great deal of either natural gas or fossil fuels to break it down into ethanol” (Isenhouer pp. 17). Unfortunately, due to the current state of technology and the inability of sugarcane to exist in non-tropical climates, the only viable option for ethanol production in the United States comes from corn. Given our country’s massive corn stocks, it seemed only inevitable that any desire to produce ethanol would require the use of our precious maize.
Seven years ago, the United States government decided to make a push to become energy independent and to sever our ties with Middle Eastern oil barrens. As a result, the Bush Administration passed multiple laws that offered subsidies and tax credits to American energy producers in the hope of spurring an energy revolution. Part of that push included the passage of the Energy Independence and Security Act of 2007, which was devoted to promoting the development of clean technologies that would be more energy efficient and release fewer greenhouse gases. The EISA mandated that, by the year 2022, 36 billion gallons of renewable fuels had to be used in cars, most of which being ethanol fuel (Isenhouer pp. 17). That’s roughly 2.25 billion full tanks of gas. Understandably so, Bush and his aides thought to use resources that the U.S. has an abundance of -- corn-- to meet that daunting number in the form of corn ethanol. The act subsidizes farmers to grow corn, meaning that more farmers are paid to plant it and more of the crop will end up going to ethanol production. According to USDA data, in the five years since the passage of EISA, the percentage of American corn that goes towards ethanol production has nearly doubled, with close to 45% going to feed our cars in 2012.
In theory, the government’s push to promote corn ethanol to supplement and eventually replace gasoline in America’s vehicles is a good idea. At the core of the mandate, subsidies exist to encourage farmers to plant more corn in exchange for money; essentially, farmers are to be guaranteed a profit for growing more corn. In addition, as more corn comes out of the marketplace and is diverted to ethanol production, the price of corn rises due to the laws of supply and demand. As a good becomes less abundant in the presence of constant demand for that same product, people will be willing to pay more to obtain it, therefore prices will rise. Increased corn prices means corn farmers will receive more money for their product, so they will, in theory, earn higher profits as a result of the mandate. In the seven years since the initial Energy Policy Act of 2005, the price of corn has gone from $2 a bushel to over $8 a bushel, creating the potential for corn farmers to make a lot of money (Eyermann). At the same time, the notion that ethanol, a cleaner and more efficient substitute for gasoline, would help reduce America’s carbon footprint is admirable. On the surface the ethanol mandate looks like a no-brainer, one that would create widespread benefits for the U.S. on our road to energy independence. The fact of the matter, though, is that the government mandate actually harms society and leads to environmental degradation, focusing on a way to improve engine performance while overlooking the welfare of its citizens.
While corn farmers stand to benefit from the legislation, increased prices pose a burden to the rest of society. Though the profits for corn farmers will, in theory, increase, somebody has to pay the higher prices for the corn, and the majority of those people are other types of farmers. Currently, 41% of American corn is purchased by farmers who use it as feed for animals in the production of other foods (USDA). This could be cattle herders, pig farmers, chicken farmers, or even horse breeders; any producer of natural food like meat, eggs, cheese or milk uses corn to feed the animals. And while corn farmers potentially benefit from the mandate, they only represent 7% of all American farmers, meaning that 93% of the agricultural/livestock industry has to pay higher prices to feed their animals. That increased cost diminishes profits unless those farmers charge more for their products, meaning that they pass along the price increase so that the average consumer faces higher prices on more than just corn. In fact, “associated with the use of corn for ethanol are increases in the price of U.S. beef, chicken, pork, eggs, breads, cereals, and milk of 10% to 100%” (Pimentel pp. 36). Since less than two percent of Americans now work on farms, over 99% of the population (non-corn farmers included) is faced with more expensive goods as a result of the ethanol mandate while only a sliver of Americans benefit.
Economics aside, the most important role of the ethanol mandate is to help the United States reach energy independence by reducing our reliance on foreign oil. To an extent we have seen this result. According to the U.S. Energy Information Agency, oil imports peaked in 2006, right after the passage of the first Energy Policy Act, and have been declining since. The truth of the matter, though, is that corn ethanol production has very little to do with that trend. According to David Pimentel, the amount of corn crop that is currently converted into ethanol has only replaced between one and three percent of oil consumption. Even “if the entire corn crop were converted, it would replace a mere 7% of oil consumption – and certainly would not make the U.S. independent on foreign oil” (Pimentel pp. 35). It should be abundantly clear from these statistics that our corn ethanol production does very little to offset our oil consumption and dependence on foreign oil. In fact, when considering the entire process of harvesting the corn, transporting it, and breaking it down into ethanol, it actually requires almost one and a half times more energy to make ethanol than the final product will release because the technology used needs energy as well, mostly in the form of oil and natural gas (Pimentel pp. 35). This means that our production of ethanol further contributes to our need to import oil, contrary to popular belief and to the original goal of the mandate. Additionally, the recent decline in oil imports is due not to ethanol but to a dramatic increase in natural gas production as the result of technological advances and the discovery of massive deposits in the U.S. Beginning in 2006, domestic natural gas production has increased steadily, contributing directly to the decline in foreign oil imports (EIA). Corn ethanol has nothing to do with it.
Finally, proponents of the ethanol mandate may claim that the use of ethanol in our engines helps the environment by limiting the production of greenhouse gases, thus fulfilling one of its intended goals. As previously discussed, though, corn ethanol production has proven to be extremely detrimental to the environment. Because the production process requires fossil fuels to run the tractors and power the refineries, corn ethanol actually contributes more greenhouse gases to the environment during its life cycle than it removes in your gas tank. The scientific process of converting the corn into ethanol alone contributes to environmental problems, as “during the fermentation process about 25% of the carbon from the sugars and starches is released as carbon dioxide into the atmosphere. These major releases of carbon dioxide significantly contribute to global warming” (Pimentel pp. 36).
The ethanol mandate included in the Energy Independence and Security Act of 2007 that requires an increasing amount of American corn be put to producing ethanol, rather than food, has resulted in economic distress as well as environmental harm. Although the evidence shows that the corn ethanol mandate falls short in its goals, the government refuses to eliminate it.
This past November, the Environmental Protection Agency rejected a proposal from several states to relax its requirement on the use of corn ethanol in gasoline. Many argued “[i]f the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make the E.P.A. act, it falls on Congress to provide relief from our senseless federal support for corn ethanol” (Wald pp. 1). The E.P.A responded by saying that their analysis made it “clear that Congressional requirements for a waiver have not been met” (Wald pp. 1). Just how much more damage does the government need to see before they change their minds? Congressional waiver or not, no government policy should directly result in increased prices for the majority without valid justification, and in the case of corn ethanol, there is none — there is only further damage. Until the corn ethanol mandate is eliminated and all of America’s corn ends up in American mouths, not our engines, the government will continue to economically and morally harm its people and environment in search of a pipe dream.
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