By now, you may all have read about or experienced the increase in the price of basic foods. In some parts of the world, mostly very poor countries, riots have broken out in reaction to the significant increase in the price of staples such as bread and rice. And this is all linked to the unintended consequences of government “clean energy” policies in the western world. Some may disagree with my analysis, but what the “H-E-double hockey sticks”, that is what public debate and discourse is all about!
There is considerable evidence that some forms of bio-fuels actually result in an increase in Green House Gases (GHGs). How you may ask? There are basically two major types of ethanol used as vehicle fuel in the world – one derived from sugar cane (mostly from Brazil) and the other from corn. Western governments are now mandating ethanol content in fuel. For example in the US, the Energy Policy Act (2005) required that 7.5 billion gallons of renewable fuel be used by 2012. In December 2007, a new bill was passed in the US Congress that will mandate the use of 36 billion gallons of bio-fuel by 2022. The act also includes substantial financial incentives. According to an article that I read in Time Magazine, in 2007 less than 2% of US gas stations provided ethanol and the subsidies provided to produce 7 billion gallons was $8 billion! The 3 remaining US presidential candidates are espousing increased usage of bio-fuels with Hilary Clinton calling for 60 billion gallons by 2030. In Iowa, according to a Time Magazine article I read (April 7, 2008 edition), there are “so many ethanol distilleries under construction that it’s [Iowa] poised to become a net importer of corn.”
In Canada, various governments have legislated that a certain percentage of gasoline be blended with ethanol. For example, in Ontario “beginning January 1, 2007, Ontario Regulation 535/05 will require that gasoline sold in Ontario contain an annual average of five per cent ethanol.”
The Government of Canada has “Regulations under development by Environment Canada will require 5% renewable content based on the gasoline pool by 2010 and 2% renewable content in diesel and heating oil by 2012, upon successful demonstration of renewable diesel fuel use under the range of Canadian conditions.” (http://ecoaction.gc.ca/ecoenergy-ecoenergie/renewablefuels-carburantsrenouvelables-eng.cfm )
So here we have government programs and subsidy programs that are diverting food crops to bio-fuels. These subsidies cause the normal reaction one would expect – farmers are changing their crops to corn to cash in on these government subsidies. A recent report from the US Department of Agriculture has shown a significant increase in US corn production with a falling or flat production of soybeans and wheat. In the Amazon, rain forest is being converted into cattle pastures and soybean fields. This “deforestation” of the Amazon – one of the “lungs” of our world, is directly linked to the bio-fuel craze.
Let’s address the question of how “green” are these bio-fuels. There are a number of studies that have cast doubt on the efficiency of corn derived ethanol. A UK study showing the carbon intensity of bio-ethanol and fossil fuels indicates that the US corn production method has a higher output of CO2 per mega-joule of energy than does natural gas or gasoline. (see Carbon and Sustainability Reporting Within the Renewable Transport Fuel Obligation report - http://www.dft.gov.uk/pgr/roads/environment/rtfo/govrecrfa.pdf
A recent report from BCStats from January 2008 (http://www.bcstats.gov.bc.ca/pubs/es/es2008-1.pdf ) entitled “It Ain’t Easy Being Green: Why Biofuels May Not Be the Answer” casts “doubt about the validity of claims that ethanol and bio-fuels conserve energy, there is also evidence to suggest that they actually create more greenhouse gas emissions than they remove.” The reason for this was the underestimated impacts of the fertilizer used in the production of corn. If we layer the other consequences – such as the deforestation of the Amazon – then the GHG impact of corn-based bio-fuels is even more significant.
For those who are wondering about this last statement, here is the cycle of how the western world subsidy program for corn-based ethanol is contributing to deforestation in Brazil (from Time Magazine):
1. Food to Fuel: One-fifth of US corn production is diverted to more than 100 ethanol refineries. The increased demand boosts the price of corn to record levels.
2. Field Change: Eager to cash in, many US soybean growers switch to planting corn, which is pricier. Soybean prices rise as supplies shrink.
3. Ripple Effects: To meet global demand for soybean, farmers in Brazil are expanding into fields previously used as cattle pastureland. Displaced ranchers, in turn, clear new grazing lands in the Amazon rain forest or the Cerrado Savanna, releasing carbon.
Let’s now turn our attention to the recent food crisis that is reverberating around the world with riots in many poor countries. Canadian have been somewhat insulated from the increase in the price of food due to the appreciation of the Canadian dollar, but that will likely not last. Recent reports have mentioned that “Ethanol's popularity comes despite charges from environmentalists, livestock farmers, and opponents of subsidies that the move won't meet energy goals and may damage the environment as food prices soar” (http://www.csmonitor.com/2007/1115/p02s02-uspo.html) .
So is there a link between increased corn-based ethanol production and food shortages/increased commodity prices for staples? Let’s follow a simple chain:
1. Governments develop policies to incent the production of corn-based ethanol as a green fuel;
2. Governments create financial incentive systems to move to this green technology;
3. Farmers respond to the incentives (who can blame them) and switch their production to corn, decreasing production of soybean, wheat and other crops;
4. The price of feed for cattle, poultry, etc increases as the supply of corn is no longer available;
5. The price of milk increases as it is more costly to feed the cows; the price of meat increases, and so on, and so on.
I am not saying that diversion of corn to bio-fuels is the major or only reason for the increase in the price of food. For example, rice production is not impacted by bio-fuel production. Other factors such as drought, flooding and increased transportation costs have impacted the price of these staples. As well, the growing middle class in China and India has meant that in these markets the demand for meat, poultry etc has increased. All that being said the diversion of corn to bio-fuel does have an impact on the recent food crisis let’s not pretend otherwise. Is it 10%, 20% or whatever % of the impact – I don’t know. Does anybody?
Governments, such as the Ontario Ministry of Agriculture, are now funding research to use corn husks and stalks, rather than the corn kernels, to create ethanol. I think we need to accelerate this type of innovation.
I think that the story above illustrates the impact of unintended consequences of government policy, to put it kindly. There is much more that I could write about this, but then this blog post would be so long you might get bored! I will come back to this topic in the near future.
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