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Betting on Biofuels: Opportunities and Implications

May 15, 2008 // 9:00am12:00pm
Event Co-sponsors: 
Brazil Institute
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This event was cosponsored by the STAGE Program and the United Nations Office in New York.

On May 15th, 2008, leading scientists met with agricultural economists at the Woodrow Wilson Center to present a well-rounded discussion on biofuels. They covered not only the current and potential technological developments, but also the implications that biofuels have for energy use and agriculture. The Program on Science, Technology, America, and the Global Economy at the Woodrow Wilson Center especially thanks The William and Flora Hewlett Foundation and The Joyce Foundation for their generous funding and support of this conference.

Stephen Kresovich, a professor and Vice Provost for Life Sciences at Cornell University, opened the panel discussion with an overview of utilizing biofuels as an energy resource, noting that it offers both opportunities and risks. He explained that biofuel use and food security have a complex relationship, but expressed his concern over the bad press surrounding the issue. He discussed the nuances that are often left out: the need to think strategically at a regional level, the need to understand pre-existing problems of resource management, and the need to be aware of the potential for biofuels that are not corn-based.

He pointed out that "the maize that's being converted to biofuels right now...may not be what you ultimately want," but added that there is "plenty of opportunity to adjust the material." As scientists look for other biological energy sources, they should consider their efficiency, including such factors as nutrient content, perennial re-growth potential, water and fertilizer needs, pest resistance, etc. Kresovich emphasized that we should not let short-term difficulties prevent long-run gains.

A clarification of the benefits that can come from biofuels development, especially in the fight to prevent global warming, came from Steve Hutcheson, a professor of microbiology at the University of Maryland. He explained that the petroleum carbon cycle, which materialized the resources we use for 150 billion gallons of gasoline per year, took 100 to 300 million years. On the other hand, the biofuel carbon cycle, which allows us to harvest energy from biomass directly, only takes 1 year. The potential, then, for biomass as a sustainable and efficient fuel source is great.

Hutcheson turned to discuss corn-based ethanol specifically, saying that "ethanol from grain is wasteful," because it produces only a 30% net energy gain, after subtracting the fossil fuels used to grow and harvest the corn. Additionally, it's not profitable – it costs $2.50/gallon to produce and currently sells for just $2.50/gallon.

Cellulosic ethanol, on the other hand, could be much more efficient, but the current challenges are many. Hutcheson explained that the "problem really has to do with infrastructure" and support, resulting in the fact that, today, the technology is underdeveloped. The main hurdle to development and commercialization is determining how to make the process of extracting sugars from biomass more economical. Perhaps, termites or certain bacteria can be utilized to digest biomass effectively in the future, Hutcheson projected.

Paulo Sotero, the director of the Brazil Institute at the Wilson Center, picked up the discussion with a focus on biofuels development in Brazil. He asserted that it is an experienced and mature industry in Brazil, owing its success to "location, location, location" – conditions are ideal for sugarcane growth. Sotero notes that sugarcane is the number one source of renewable energy in the country, almost all vehicles are flex fuel (able to run on gas, ethanol, or a combination of the two), and there is an option for ethanol at virtually all fuel stations. The most impressive display of Brazilian success is that, so far, just 1.5% of arable land has been used to replace 50% of the country's fossil fuel use. Moreover, Sotero explains that most of the biofuels production occurs 2,500 km from the rainforest, leaving the Amazonian ecosystem unaffected. Finally, many developing countries are well-suited for growing sugarcane, so biofuels also have the potential to drive economic growth in many parts of the world.

In the second panel of the conference, however, this optimism over the potential for biofuels was dampened by a realistic assessment of the consequences of corn-based ethanol production occurring now. Two presenters gave critical commentary, speaking from their newest paper, titled "The Browning of Biofuels."

C. Ford Runge, a professor of applied economics and law at the University of Minnesota, began by explaining the policy structure of biofuels in the United States today. Corn-based ethanol is propped up by a $0.51/gallon "blenders' credit" to producers, a $0.54/gallon tariff on imported ethanol, and a mandate which says that 36 billion gallons must be in use by 2022. Ultimately, there is a total of $6 billion of U.S. support for the industry in the form of combined subsidies. Runge further stated that it is "impossible to account for increasing food prices" without looking at the effects of biofuels. He described the situation: as corn prices rise, land is diverted away from other crops, such as soybeans, and their prices rise too, leading to a fall in the global cereal supply. Subsidies and tariffs obscure the natural tendencies of the market.

Following Runge, Robbin S. Johnson, a teaching fellow at the Humphrey Institute for Public Affairs, University of Minnesota, discussed the "costs and consequences" of biofuels globally. He asserted that there are 82 low-income, food-deficit countries that import both food and fuel. As their populations are doubly affected by rising prices, Johnson pushed us to look at both the effects of biofuels and the entire U.S. policy system. There are many contradictions: the blenders' credit stays the same regardless of increases in oil prices, the import tariff on ethanol hinders energy security, and meeting the gallon mandate limits the ability to export energy surpluses. Johnson summarized his argument by emphasizing that U.S. "biofuels policies are undermining food security."

Runge added to these issues the fact that the nitrogen and phosphorus byproducts of increased corn production are ending up in the watershed in areas that have been set aside for conservation. Finally, he cited a Science Magazine Policy Forum article from August 17, 2007, which explained that, in substituting just 10% of fossil fuels with renewable ethanol and biodiesel, the U.S. would use 43% percent of its cropland area.

Runge and Johnson outlined a few ideas to change the policies that create these problems and contradictions. They said that the subsidy should be linked to the price of corn so that prices are only subsidized during a surplus; import duties should be phased out; pollution taxes should be implemented; and monetary savings from these changes should go to the research and development of cellulosic ethanol.

The multidimensional analysis provided at the conference was thus fueled by both a sharp economic analysis of agricultural trends and the creative scientific thought that presents an optimistic outlook for biofuels technological development. As Kresovich noted, biologists, engineers, and economists need to work together to develop a clearer picture of the opportunities and implications of biofuels, so that developments in both food and fuel markets in coming years can be positive ones.

Drafted by Jacqueline Nader, STAGE Program
Kent H. Hughes, Director, STAGE Program

  

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