Last Post on Corn Ethanol Boondoggle

OK, for a while. I am trying to work on a post on energy subsidies in general, but ethanol has been a hot topic today. A newspaper in Lincoln Nebraska published a story in which a skeptic discussed what he foresees for the ethanol industry:

Ethanol skeptic sees painful realities ahead

There is also a lively debate going on after the story. Some excerpts:

What he can’t see coming from his seventh-floor office window in downtown Lincoln, Doug Carper can usually piece together on the four, super-sized computer screens at his desk.

Having pored over all the charts and graphics, and having weighed the numbers against his many years as an agricultural commodities broker, the 56-year-old Carper sees trouble coming for Nebraska’s ethanol industry.

He sees more of the same for much of the agricultural economy that supports ethanol.

“I’m not posturing. I have no agenda,” Carper said in a Tuesday interview in his office. “I see trouble looming here in the American heartland and a lot of good, well-intentioned people facing some terrible and ruinous losses.”

“For what constructive purpose are we disrupting agriculture in this manner?” he asked. “For what constructive purpose have we embarked on this dangerous public policy initiative?”

Even if every bushel of corn in the United States were turned into ethanol, it wouldn’t make much of a dent in overseas oil dependence, he said.

“It’s a delusion that somehow we are solving the country’s energy needs when, in fact, at the extreme, ethanol could never be a substantial solution to the nation’s energy requirement. It’s patently wrong and absurd to think we can.”

On this topic, I had an exchange with an ethanol supporter at The Oil Drum. He wrote in part:

Jobs galore, new rail development, increased land prices, increased grain prices, increased rural incomes, strengthened rural communities, increased skill and labor set, positive (albeit minimal) environmental/GHG impact, net decrease in petroleum usage…

My response to this:

So, you support this fiasco? I thought you were a gasification guy. Let’s run some numbers. Right now, we are making around 4.3 billion gallons per year of ethanol. At an energy return of 1.3, that means we only net 0.3 BTUs of output for 1 BTU of input. Therefore, you consumed 3.3 billion gallons worth of ethanol to produce 4.3 billion gallons. So, the net of the 4.3 billion gallons is only 1 billion gallons. Of course that net includes massive amounts of animal feed co-product, which you can’t burn in a car. In reality, the fossil fuel input is almost equal to the ethanol output. That’s per the USDA’s most recent estimates.

But I am going to give the benefit of the doubt and give you 1 billion gallons of net ethanol. Since ethanol has 65% of the BTU content of gasoline, the energy equivalent number is 650 million gallons of gasoline. We use about 140 billion gallons of gasoline, so the gasoline displacement is only 0.46%. Apply that only to our oil consumption, and the displacement is down around 0.3%.

But wait, there’s more. We paid a $0.51/gal direct subsidy on the ethanol. Not the net, mind you, but the gross which is mostly recycled fossil fuels. So the direct ethanol subsidy, from taxpayer pockets, is $2.2 billion dollars a year. Of course we also have a multi-billion dollar per year corn subsidy. To be extremely generous, we are paying taxpayer costs of $3 billion a year to displace less than half a percent of our gasoline usage. That’s about $3.60 in federal subsidies (of course most corn states throw in their own subsidies) for each gallon of gasoline displaced.

But you get bonuses: Like depleted water tables, increased pesticide and herbicide runoff (responsible for a large dead zone in the Gulf of Mexico), increased soil erosion (wait til we have a drought – Can you say “Dust Bowl”?), and the kicker: Higher food prices for everyone and reduced corn exports. (Hope nobody needs extra corn this year). All of this to displace 0.46% of our gasoline consumption and line the pockets of some farmers, ethanol producers, and ag conglomerates! And that’s presuming you could burn animal feed in your car.

For that kind of money spent and those kinds of externalities, I would sure hope some jobs have been created.

And people wonder why I get worked up over this boondoggle.

The sad thing is that I see no end in site to this madness. But this is a trajectory that simply can’t continue.

OK, taking a break from ethanol. But this will continue to be a hotly discussed topic in the media.

9 thoughts on “Last Post on Corn Ethanol Boondoggle”

  1. A newspaper in Lincoln Nebraska published a story in which a skeptic discussed what he foresees for the ethanol industry.

    Robert,

    I was going to point you towards this story, but you beat me to it.

    I thought Doug Carper made some good points and seemed to be rational and analytical, but the reaction from the corn ethanol cartel is that Carper went off on a tirade, has an agenda agaisnt farmers, and doesn’t know what he is talking about: Domestic Fuel

    I particularly thought some of the comments of many of the readers were perceptive, much more open-minded and knowledgeable about the downside of corn ethanol than I would have expected for people living in Nebraska. It gives me hope that not everyone has been buffaloed by the ethanol cartel.

    1. The “benefits” of ethanol have nothing to do with energy security or the environment. Few ethanol backers care about those things – and certainly no Nebraska politicians. Ethanol is just a scheme to make money – a scheme by corn-growers and everyone else who’s jumping on the ethanol bandwagon – and government subsidies are the only reason even that is feasible. In the short-term, some people will make money from ethanol. In the long-term,… well, who cares about the long-term, right?

    2. Not many are old enough to remember the controversy called the “military/industrial complex”, where the defense department was in bed with the industries that produced materials needed by the defense department? (This guy made an excellent point — the current “political/agribusiness complex” has a great many parallels with the “military/industrial complex.”)

    3. If ethanol is so great, why do we subsidize it? If ethanol is so great, why do we mandate it? If ethanol is so great, why don’t the ethanol plants run on it instead of natural gas or electricity? A great scheme and scam by a relative few with our politicians leading the way. (You and I have said this many times in the past.)

    I just posted this as a comment on your previous post, but will post it here again as well:

    The driving force behind the current momentum for corn ethanol is an interlocking matrix of subsidies, tax credits, mandates, and protective tariffs backed by Corn Belt politics, agribusiness, and lobbyists.

    If corn ethanol had to make its way in a free market without the benefit of that matrix, the only people making corn ethanol would be the distilleries in Kentucky and Tennessee making bourbon and Tennessee sippin’ whiskey.

    Cheers,

    Gary Dikkers

  2. Hey rapier, this isn’t exactly related to your field but how much do you know about the feed and how it affects the animals? Cows are designed to eat cellulose. The problem is the feed produced is starch based. I’ve heard the high starch diet acidifies their stomachs. The starch makes them fat and tears apart their livers. So you have to inject them with antibiotics just to keep them alive.

    Just wondering if you know where to find more information on this. I can’t seem to figure out the right search phrase via google.

  3. Cows are designed to eat cellulose. The problem is the feed produced is starch based. I’ve heard the high starch diet acidifies their stomachs. The starch makes them fat and tears apart their livers. So you have to inject them with antibiotics just to keep them alive.

    Wacki,

    You are right. Cows evolved to eat grass, not distillers grains from ethanol plants. They can survive on DG, but it’s not an optimum food for them — and as you said it requires antibiotics an other supplementals to keep them from getting sick on DG. Cattle ranchers didn’t need any of those in the days when they fed their cattle on grass.

    I ony found out recently that the E. coli O157:H7 virus that people die from by eating undercooked beef only exists in meat from corn and DG fed cattle, not in grass-fed beef.

    A massive shift to corn ethanol will only increase those problems in the beef industry since using the distiller’s grains as cattle feed is the only way anyone can make the case that corn ethanol has a postive EROEI.

    The livestock industry is also learning there are problems feeding hogs and poultry on DG.

    Best regards, and enjoy your next hamburger,

    Gary Dikkers

  4. Gasoline prices go up immediately after Nov 7 elections:

    http://www.eia.doe.gov/emeu/ebr/ebrcop.html

    Weird that isn’t it? Of course, it is sheer co-incidence because the real reason gasoline prices goes up in the fall/winter is all explained by our gracious host.

    Others of course know what a lot of crap that is.

  5. Of course, it is sheer co-incidence because the real reason gasoline prices goes up in the fall/winter is all explained by our gracious host.

    Others of course know what a lot of crap that is.

    The fact is, gasoline inventories were falling sharply leading up to the election. Now of course that means that prices are going to have to rise, and I pointed that out. Didn’t matter who won the elections, prices were going up. I guess supply and demand and market economics is just “a lot of crap” where you come from. But where I come from, you can watch what’s happening with gasoline inventories to see what’s going to happen with prices.

    And of course as has been pointed out many times before, prices rose sharply leading up to the 2004 elections. Conspiracy nuts don’t like to hear that one.

    Cheers, RR

  6. increased soil erosion (wait til we have a drought – Can you say “Dust Bowl”?)

    A little info on how bad things are waterwise in the heartland: US Water News Archives. If we can’t get the food that’s grown out…

    And even worse is that we are going through that water much faster than it’s being replenished: US Water News Archives. If we can’t get water out of the ground to grow the food or satiate ourselves…

    The (im)possibilities are scary. I had always planned on going home to Louisiana and placing a well with a hand pump to get fresh water for me and my family. But if there’s no water there to pump up…

    Regards… Todd

  7. I ony found out recently that the E. coli O157:H7 virus that people die from by eating undercooked beef only exists in meat from corn and DG fed cattle, not in grass-fed beef.

    Do you have a source for this? It would be a big help.

  8. Wacki said, “Do you have a source for this? It would be a big help.”

    Wacki,

    I first heard it in September during the e coli-contaminated spinach flare-up. I was walking home from work listening to NPR and heard a scientist mention that the deadly form of e coli comes from grain-fed beef, and doesn’t exist in grass-fed beef. Then a couple of days later I saw this story in the New York Times:

    New York Times, 21-Sep-06

    Apparently the person who wrote that article learned it from a Cornell University study done in 1998. Haven’t yet found the original study, but here is the press release:

    Cornell study press release

    Regards,

    Gary Dikkers

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