People who do not work for ADM, Deere, Cargill and Monsanto recognize that the rapidly growing corn ethanol industry is causing some unintended consequences. There has been a “corn rush” with rising prices for land, an increased demand for fertilizers, reduction in crop rotation schemes, and production cost increases for a wide array of food items. The breadth of the impact on food prices has surprised some people because there is not always a first order connection to corn, but the competition for land and fertilizers can bleed into a diverse range of crops and meat products.
Corn ethanol is also causing some very interesting political discussions that result in strange bedfellow alliances on all sides of the argument. Conservative and liberal labels have no real meaning in this discussion; even regional boundaries are being made fuzzy by the varying impacts of the market changes.
Some pundits, like former Reagan Administration national security advisor Robert McFarlane, have pointed south to Brazil and other Latin American countries for a way to ease some of the issues associated with corn ethanol. Their claim is that sugar cane based ethanol – like that which is produced in Brazil – could come to the rescue if the U. S. would simply eliminate the 54 cent tariff on ethanol imports.
Ben Bernanke of the Federal Reserve seems to agree. Investors like Vinod Khosla, Steven Case, and Ronald Burke are investing in Brazilian sugar cane plantations approaching a million acres in size. They are also putting pressure on Congress to reduce or eliminate the tariff.
A common thread running through literature supportive of cane based ethanol is that it solves many of the problems associated with corn because it is “more efficient” to produce. There are many ways to measure efficiency, including cost, energy balances, and overall system inputs from plantation to tank. Before simply accepting the notion that cane ethanol is far superior to corn, it is worth determining if there are unintended consequences associated with that alternative to petroleum.
My “questioning attitude” radar about Brazilian ethanol was alerted based on a few bits of personal knowledge that I gained over the years.
- Ethanol – aka ethyl alcohol – is made by chemically converting solid sugar into a compound made up of hydrogen, carbon and oxygen (CH3-CH2-OH)
- Corn sweeteners – at least before the ethanol craze – replaced cane sugar in a number of food products because they cost less.
- Belle Glade, Florida, a place populated by cane cutters, was one of the poorest towns I have ever visited.
- Mechanical harvesters do not work well in the cane fields because of the boggy soil.
After doing some deep reading, I have learned a bit more about Brazilian ethanol that is worth sharing.
- There are about 300,000 cane cutters employed in the industry.
- The best areas for growing cane in Brazil are near the equator
- Cane cutters earn about $300-$400 per month if they cut 8-10 tons of cane each day of a six day week. They are paid based on their production
- Some of the cane cutters have poor living conditions, a high rate of on the job injuries, poor health, and sometimes little choice of employment.
- About 25-30% of the automobile fuel in Brazil comes from ethanol.
- The electricity needed to process cane into ethanol comes from burning the stalks and leaves (bagasse). Some bagasse is used as input for paper production.
- In 2007, Brazil produced about 5.6 billion gallons of ethanol from about 550 million tons of sugar cane. (That ethanol has the energy equivalent of about 85 million barrels of oil, roughly as much as one day of world crude oil production.)
What I learned from putting all of these facts in one place is that Brazilian ethanol creates some backbreaking jobs in a very hot climate. It does not use as much fertilizer as corn, but part of the reason is that the land used is still full of rich soil that is slowly being depleted.
It does not use as much external energy input as corn because of the lack of fertilizer and because the 300,000 laborers add an energy input that is not being measured in the energy balance. It does not cost as much as ethanol produced from corn grown in the United States by American farmers, but a big part of the cost advantage is that there are two-three growing seasons and the workers are poorly paid compared to Americans.
It provides some large profit margins (30% or more) for the owners of the mills and plantations. Petrobras, the Brazilian oil company, is one of the largest investors in the cane ethanol industry.
Finally, even with its cost advantages over gasoline, Brazilian production is only enough to provide about 1/365th of the world’s demand for liquid fuel. There are export shipments to the United States (often through Caribbean Basin countries), The Netherlands, Japan and Sweden and a strong desire among the producers to increase those profitable shipments.
My own bottom line is that I see no real reason for a tariff on imported ethanol, but I also see no reason to get excited by the prospects of ethanol solving any of the issues associated with burning fossil fuels. It requires intensive industrial farming, a large shipping and distribution infrastructure, and still releases CO2 when it is burned.
(Note: the molecular formula for ethanol is CH3-CH2-OH. When burned it produces water (H2O) and carbon dioxide (CO2). Since 35% of its mass is oxygen, burning ethanol produces only 2/3 of the energy of burning a similar mass of fossil fuel in an oxygen rich atmosphere.)
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Photo: 91RS via flickr under a Creative Commons License