Jason Barton

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Biofuels Are Not Limited to Corn Ethanol

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It’s true that if we attempt to meet George Bush’s Renewable Fuel Standards (RFS) (36 Bgals of renewable fuels by 2022) only with corn ethanol, food prices will rise as a result. But, as has been written before on this site, the rise in food prices in 2008 had more to do with petroleum prices than with ethanol.

So, if we fail to diversify our energy matrix, food prices and much of the economy as a whole will be subject to the high volatility in petroleum prices. Developing other ways of fueling our transportation fleets, and reducing the amount we transport ourselves and our goods, will go much further in terms of protecting ourselves from this volatility than will eliminating our biofuels efforts.

I’m not a proponent of corn ethanol, but I am a big proponent of objective, accurate information. So it’s also important to note that the RFS caps corn ethanol at 15B gals in 2015 (we’re now producing about 12B gals/yr). That’s still a lot, and I’m not convinced it’s a great idea, but, ceteris paribus (it means, all things being equal–Latin is fun), food prices will not likely rise much more due to corn ethanol. The rest of the biofuels we produce to meet those federal standards are supposed to come from grasses, trees, and agriculture residues. There’s still plenty that can go wrong with that, but other issues aren’t addressed in the article below, so I’ll end here.

Thanks for reading.

ps, I both dig and am disturbed by getting information from a source that provides news only if I can profit from it.

January 28, 2011

By Kerri Shannon, Associate Editor, Money Morning

U.S. Clean Energy Investment Puts Upward Pressure on Rising Food Prices

In U.S. President Barack Obama’s State of the Union address Tuesday, he highlighted clean energy investment as a key component of America’s future, one that will be reflected in his budget proposal for fiscal 2012.

“With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015,” the president said in his speech to members of Congress. “[I]nstead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”

This commitment to clean energy investment increases the importance of biofuels like ethanol, made from corn and other agricultural products. About 40% of U.S. corn is used to make ethanol, and increased ethanol production leads to higher corn and food prices.

Read the entire article here.

Written by Jason

January 31st, 2011 at 7:31 pm

Confusion on the Future of Energy

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Well this article is puzzling. The first paragraph is tongue in cheek (I hope), and yet it has some important and accurate points, as well as some dubious ones.

Gilbert seems to be making some sort of a comment on the proceedings in Davos, but it’s not clear what his comment is, or even if he knows very much about the energy issues he’s discussing. Bloomberg is a trusted media channel, but there appears to be little to trust in Mr. Gilbert’s article.

No, oil disasters are not good. I get the point that when one happens we tend to pay more attention to safety, but it shouldn’t take that. I also get the sarcasm, but would appreciate some clarity.

Yes, our appetite for energy does threaten to compete with food and water. Biofuels can compete with food not only when we divert corn or sugar from food to fuel, but also when we divert land used for food to produce non-food crops such as grasses for cellulosic ethanol, though there are definitely ways to avoid having to make this Hobson’s choice. I’ve written about the validity and exaggeration of the competition between these two at other times, so will leave it for now, but you can read more here if you like.

Traditional fuels such as natural gas and petroleum can also stress our water supplies. Read more about water used in the tar sands for petroleum here, or about natural gas and the potential impacts of fracking on water here.

So it’s tough to know from that first paragraph what Gilbert’s take is on the developments n Davos.

He continues to obfuscate the situation further in the paragraphs that follow.

He goes on to talk about China and their use of coal, proposing they use more hydro power (see paragraph excerpted below). I wonder if Mr. Gilbert is familiar with the Three Gorges Dam. It’s not a small project.

Yes, China will use a lot of coal as they grow their economy in the coming decades, but they are also doing an admirable job of investing in and implementing renewable energy. Read more about that here.

Next is nuclear energy.  Gilbert seems to deride it, but, again, it’s unclear. He mentions the possible security concern, which is a very credible threat, since the technology used for plants such as breeder reactors brings more use and awareness of  the technology used in nuclear weapons. Risky, but potentially worth it since nuclear power can bring energy to disenfranchised people who are at risk of being wooed by terrorist organizations. We can put political or religious faces on the fights, but they are most often between the haves and the have-nots, and helping more people to be haves reduces the motivation to attack. It’s also a nice thing to do, reducing the number of have-nots, just on moral grounds.

Back to energy, Gilbert moves on to biofuels, grossly over-simplifying the issue I touched on above. Yes, the competition with energy can raise food prices, but if energy supplies are constricted, because of dwindling supplies of non-renewable energy resources or geopolitical events in the Middle East or any number of other issues, food prices will rise as well. In fact, the rise in food prices we saw in 2008 had less to do with biofuels than it did with petroleum prices (See Abbot, Hurt, and Tyner, 2009).

It takes energy to fertilize, irrigate, process, package, and transport our food, so if we resign ourselves to the current, non-renewable energy matrix, those ever-decreasing supplies will continue leading to ever-increasing food prices. Diversifying our energy matrix, prudently over time, will help to mitigate if not eliminate this threat. Bread wars could come much more easily from rising energy prices than rising energy prices could be caused by biofuels.

So, thank you, Mr. Gilbert, for giving us all of this food for thought.

Green-Energy Future Looks Black as Recession Bites: Davos Diary

By Mark Gilbert – Jan 26, 2011 6:07 AM MT
Gilbert

The future is black, not green. Get used to oil trading at $100 a barrel. Drilling disasters are good because they focus the oil industry’s attention on safety. Oh, and our insatiable thirst for yet more energy sources threatens to deplete the world’s food and water supplies.

That’s the bleak message from the World Economic Forum’s opening discussion on global energy at its annual meeting in Davos, Switzerland. Fatih Birol, the chief economist of the International Energy Agency, led a panel that delivered a somber outlook for renewable energy.

[…]

Hydropower, for example, would be a great way to meet China’s future needs, especially during demand peaks in the morning and early evening, because you can switch on water- generated supply in eight minutes, whereas coal takes 32 hours to come on line, while a nuclear power reactor takes 56 hours. The problem is the huge capital-expenditure cost because the hydropower plants are typically far away from where the electricity is needed, demanding transmission networks.

[…]

The gloomiest aspect of the energy debate is the impact on agriculture. As governments champion the use of biofuels, diverting agricultural resources to producing energy raises food prices. That’s a worrying trend for those of us who reckon food and water security will be the world’s most pressing issue in the coming years.

Read the entire article here.

How to feed the world

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As evidenced by the other comments on this site about their articles, I very much respect and enjoy The Economists’ coverage of the news, particularly food, energy, and environmental issues. But I take exception to this week’s article on how to feed the world for a couple of minor issues and one major disagreement. The minor issues are the reasons they fail to consider in the spike in food prices in 2007-2008. Most leading analysts[1] pointed to five factors that caused this spike: The high price of oil; several poor harvests from major grain providers such as Australia and Russia; the increasing income in places like China and India, leading to more food consumption, particularly meat, which is much more resource intensive; the increasing use of food and agricultural land to produce biofuels; and the declining U.S. dollar. The Economist described the first four in an article last year, but did not include the devaluation of the dollar. In this week’s article, they state, “None of the underlying agricultural problems which produced a spike in food prices in 2007-08 and increased the number of hungry people has gone away.” But oil prices have fallen considerably and this year’s harvests were much better, as they even point out a few sentences later. But this is nit-picking, especially given the fact that oil prices will likely indeed rise again, and several ecological issues threaten global harvests even more severely in the coming decades.

Slightly larger problems exist in the explanation of lack of research into agricultural productivity. It’s true that public expenditures have been on the decline, but much of this is due to trade liberalization and attempts at having private industry            provide services once offered by government. So the reduced government spending is true, but a bit of a half truth. The decline in productivity gains could also be a sign that we are maxing out the potential in soil for those grain crops we have been breeding and improving over generations now.

The glaring problems with the article, though, are the contradictions between calling for increased government intervention and even giving away seed while also touting free markets, and that they neglect a central truth so clearly illustrated by the Nobel Prize winning economist, Amartya Sen: There is not a food production problem; there is a food distribution problem[2]. In the case of the former, it’s difficult to reconcile those two, at least the way it’s explained here.

Nov 19th 2009
From The Economist print edition

Business as usual will not do it

IN 1974 Henry Kissinger, then America’s secretary of state, told the first world food conference in Rome that no child would go to bed hungry within ten years. Just over 35 years later, in the week of another United Nations food summit in Rome, 1 billion people will go to bed hungry.

This failure, already dreadful, may soon get worse. None of the underlying agricultural problems which produced a spike in food prices in 2007-08 and increased the number of hungry people has gone away. Between now and 2050 the world’s population will rise by a third, but demand for agricultural goods will rise by 70% and demand for meat will double. These increases are in a sense good news in that they are a result of rising wealth in poor and middle-income countries. But they will have to happen without farmers clearing large amounts of new land (there is some scope for expansion, but not much) or using up lots more water (in parts of the world, water supplies are stretched to their limit or beyond). Moreover, they will take place while farmers also wrestle with the consequences of climate change, which, on balance, will do more harm than good to farmland round the world.

Read the entire article here.


[1] Such as Abbott, P.C.; C. Hurt, and W. E. Tyner. “What’s Driving Food Prices?” Farm Foundation Report, March, 2009.

[2] Sen, A. “The Ingredients of Famine Analysis.” Qtrly Jrnl of Economics, 1981.

Written by Jason

November 19th, 2009 at 6:01 am