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Mixed Blessings: Can Biofuel Change the World?

By Lester R. Brown

As the price of oil increases, so does global interest in biofuels—fuels derived from plants rather than petroleum. Biofuels have much to recommend them. They are produced far more cheaply and easily than petroleum products like gasoline, with far less waste and damage to the environment. And yet biofuels are not a perfect solution to the world’s energy demands. Because they are produced from easily grown crops like corn and sugarcane, they often compete with food production for arable land. It is a whole new wrinkle in the question of appropriate land use, especially in countries where farmland is already in short supply or where land that has been preserved as a natural habitat for endangered species suddenly seems more attractive for its income potential. The delicate balance between supply and demand, always a complicated issue, is on the brink of becoming much more complicated. Author and environmentalist Lester Brown, in his new book Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble (2006: W.W. Norton, NY), discusses some of the issues at stake. What follows is a brief excerpt from this book.

Historically, the world’s farmers have produced crops that were used primarily for three purposes: food, feed (that is, food for animals), and fiber, like flax and cotton. Today, farmers are beginning to produce crops for another purpose: fuel. Biofuel, a renewable resource made from plants like corn and sugarcane, is slowly gaining in popularity as the rising price of oil intensifies the worldwide search for cheaper fuel options. While this is generally considered good news for today’s oil-dependent societies, it has not been an entirely positive development.

The growth in biofuel production has increased the competition for crops that were formerly used only for food, with the result that food prices are beginning to increase as well. On any given day there are now two groups of buyers in world commodity markets: one representing food processors and another representing biofuel producers.

As service stations compete with supermarkets for the same commodities, the line between the food and fuel economies has suddenly blurred.

First triggered by skyrocketing oil prices in the 1970s, production of biofuels—principally ethanol from sugarcane in Brazil and corn in the United States—grew rapidly for some years. Soon after, Europe, led by Germany and France, began to extract biodiesel from oilseeds. Biofuel production stagnated during the 1990s, but after 2000, as oil prices edged upward, it began to gain momentum again. And interest in biofuels has escalated sharply since mid-2004, when oil prices reached $40 per barrel.

There are two main types of biofuels: ethanol and biodiesel.  Ethanol, an alcohol-based fuel, has an energy content about two-thirds that of gasoline. Biodiesel, made from plant-derived oils, has an energy content of about 90 percent that of petroleum diesel. Since the end of the 20th century, the use of both types has grown tremendously. From 2000 to 2005, ethanol production worldwide nearly tripled, from 4.6 billion to 12.2 billion gallons. Biodiesel use, at 251 million gallons in 2000, climbed to an estimated 790 million gallons in 2005. By 2005, biofuel use equaled nearly 2 percent of world gasoline use.

Biofuels can be derived from a variety of plants, including corn, sugar beets, soybeans and sugarcane. When deciding which crops to use in biofuel production, there are two key indicators to consider: the fuel yield per acre and the net energy yield of the fuel, figured by subtracting the energy used in both production and refining.

The top production yields for ethanol are 714 gallons per acre from sugar beets in France and 662 gallons per acre for sugarcane in Brazil. U.S. corn produces 354 gallons per acre, or roughly half the beet and cane yields.

With biodiesel production, oil palm plantations are a strong first, with a yield of 508 gallons per acre. Next comes coconut oil with 230 gallons per acre, and rapeseed (also called canola) at 102 gallons per acre. Soybeans, grown primarily for their protein content, yield only 56 gallons per acre.

Which of these fuels yields the highest net energy return? Ethanol from sugarcane in Brazil is in a class all by itself, yielding over 8 units of energy for each unit invested in cane production and ethanol distillation. Once the sugary syrup is removed from the cane, the fibrous remainder, bagasse, is burned to provide the heat needed for distillation, eliminating the need for an additional external energy source. This helps explain why Brazil can produce cane-based ethanol for 60 cents per gallon.

Second is ethanol from sugar beets in France, which produces almost two energy units for each unit of invested energy. Among the three principal feedstocks now used for ethanol production, U.S. corn-based ethanol, which relies largely on natural gas for distillation energy, comes in a distant third in net energy efficiency, yielding only 1.5 units of energy for each energy unit used.

Catching On Around the World
Which countries have really taken the lead in biofuel production? Brazil, using sugarcane to produce ethanol, is emerging as the world leader in farm fuel production. The country produces some 4 billion gallons a year, satisfying 40 percent of its automotive fuel needs. In 2004, half of Brazil’s sugarcane crop was used for sugar, and half for ethanol.

Expanding the sugarcane area from 5.3 million hectares in 2005 to some 8 million hectares would enable it to become self-sufficient in automotive fuel within a matter of years, while maintaining its sugar production and exports. Brazil is also discussing ethanol supply contracts with Japan and China. By producing ethanol at 60 cents per gallon, Brazil is in a strong competitive position in a world with $60-a-barrel oil resulting in $3-a-gallon gasoline. The United States is also one of the primary producers of biofuel worldwide. Using corn, the United States produced 3.4 billion gallons of ethanol in 2004, supplying just under 2 percent of the fuel used by its vast automotive fleet.

Although it took roughly a decade to develop the first billion gallons of U.S. distilling capacity and another decade for the second billion, the third billion was added in two years. The fourth billion will likely be added in even less time.

The production of biodiesel, a relatively new biofuel in the United States, is growing rapidly since the adoption of a $1-per-gallon subsidy that took effect in January 2005. Iowa, a leading soybean producer and an epicenter of soy-fuel enthusiasm, now has three biodiesel plants in operation, another under construction, and five more in the planning stages. State officials estimate that biodiesel plants will be extracting oil from 200 million bushels of the state’s 500-million-bushel annual harvest within a few years, producing 280 million gallons of biodiesel. And the production of biodiesel yields valuable byproducts: What is left of the soybean after the oil is extracted—almost four-fifths of the bean—is a protein-rich livestock feed supplement, worth even more than the oil itself.

In Europe, where biofuels are exempt from the hefty taxes levied on gasoline and diesel, the European Union is attempting to meet 5.75 percent of its automotive fuel needs with biofuels by the year 2010. Currently Europe ranks third in the world in fuel ethanol output. The lion’s share of ethanol production in Europe comes from France, the United Kingdom and Spain, and uses mostly sugar beets, wheat and barley.

Europe is also the leader for biodiesel. Germany, producing 326 million gallons of biodiesel in 2004, is now covering 3 percent of its diesel fuel needs with biofuel. Relying almost entirely on rapeseed (the principal source of cooking oil in Europe), it plans to expand output by half within the next few years. France, where biodiesel production totaled 150 million gallons in 2004, plans to double its output by 2007. Like Germany, it uses rapeseed as its feedstock.

India, the world’s second largest producer of sugarcane, distilled some 80 million gallons of ethanol in 2005 and is projected to distill over 130 million gallons in 2006. China’s four state-sponsored plants are producing 340 million gallons per year, mostly from corn and wheat, an output they plan to double by 2010. Colombia and the Central American countries represent the other biofuel hot spot. Colombia is off to a fast start, opening one new ethanol distillery each month from August 2005 through the end of the year. Within a year of opening its first plant, Colombia is already producing roughly 80 million gallons annually.

Costs and Rewards
Governments support biofuel production because of concerns about climate change and a possible reduction in the amount of imported oil. Since substituting biofuels for gasoline reduces carbon emissions, governments see this as a way to meet their carbon reduction goals. Also, locally produced fuel can create jobs and help keep money within the country. U.S. ethanol production, almost entirely from corn, benefits from a government subsidy (51 cents per gallon).

Private companies have begun supporting biofuel production as well. Even though Brazil has phased out ethanol subsidies from the government, by mid-2005 the private sector had committed $5.1 billion to investment in sugar mills and distilleries over the next five years. In the United States, farm groups as well as corporations are investing heavily in ethanol distilleries.

Looking Toward the Future
In an oil-short world, what will be the economic and environmental effects of agriculture’s emergence as a producer of transport fuels? Current and planned ethanol-producing operations use food crops such as sugarcane, sugar beets, corn, wheat, and barley. The United States, for example, in 2004 used 32 million tons of corn to produce 3.4 billion gallons of ethanol. Although this is scarcely 12 percent of the huge U.S. corn crop, it is enough to feed 100 million people at average world grain consumption levels.

As biofuel production increases, agriculture’s role in the global economy will be strengthened as it faces a vast, virtually unlimited market for automotive fuel. Tropical and subtropical countries that can produce sugarcane or palm oil will be able to fully exploit their year-round growing conditions, giving them
a strong comparative advantage in the world market.

The world price for oil will, in effect, become a support price for farm products. If food and feed crop prices are weak and oil prices are high, commodities will go to fuel producers. For example, vegetable oils trading on European markets on any given day may end up in either supermarkets or service stations. This will bring about a whole new set of economic pressures within a global economy that already fails to adequately distribute its food supplies.

In addition, pressure to clear land for expanding sugarcane production in the Brazilian cerrado and Amazon basin and for palm oil production in countries such as Indonesia and Malaysia will pose a major new threat to plant and animal diversity. In the absence of governmental constraints, the rising price of oil could quickly become the leading threat to biodiversity, ensuring that the wave of extinctions now under way does indeed become the sixth great extinction.

With oil prices now high enough to stimulate potentially massive investments in fuel-crop production, the world farm economy—already struggling to feed 6.5 billion people—will face far greater demands. How the world manages this new and incredibly complex situation will tell us a great deal about the prospect for our energy-hungry 21st-century civilization.