The massive biofuel mandate embedded in the 2007 Energy Act, signed amid much bipartisan hoopla, is coming under heavy fire.
The Wall Street Journal reported recently that two dozen Republican senators have formally asked the EPA to lower the mandate in response to heightened food prices (a power granted to the agency in the Energy Act). Perhaps not coincidentally, the food-processing giants now competing with biofuel plants for corn — think Kraft and Kellogg — have been sending hordes of lobbyists to Washington to badmouth corn-based fuel, the Journal reports.
For its part, the Bush administration — erstwhile champion of the free market as the answer to the food crisis — is clinging fast to its position that the government must rig up a market for biofuel. “As you know, I’m a ethanol person,” Bush declared last week. “It makes sense for America to be growing fuel.”
Surprisingly, Bush’s (casually defended) position got a boost from the latest BusinessWeek, which normally casts a skeptical eye on biofuel. Judging from his spirited, multi-pronged defense of biofuels, BW senior reporter John Carey is, like Bush, apparently “a ethanol person.”
Carey makes two main arguments in defense of crop-based fuels:
- The U.S. biofuel mandates aren’t significantly implicated in the runup in global food prices — in fact, the ethanol gusher may actually be lowering food prices!
- Corn is a “mediocre” feedstock anyway; the real future of biofuel lies with non-food crops like switchgrass. In other words, cellulosic — perpetually five short years from commercial viability — is the answer! Carey implies, without stating it outright, that corn-based ethanol is merely a bridge to a bright cellulosic future — one in which we can “have our biofuels and eat our crops, too.”
Both assertions look sketchy under inspection.
First, biofuel and food prices. Carey acknowledges that the U.S. ethanol mandates have led to the doubling of corn prices since 2005. But he assures us that “higher corn costs add [just] 2 cents to a box of corn flakes, or 11 cents to a gallon of milk from corn-fed cows.”
He doesn’t cite a source for those numbers; then he comes up with this, also unsupported:
Corn prices have little to do with the increases in rice and wheat, and only a small connection to soybean price jumps.
Of course, he’s right on rice; corn doesn’t compete with rice for acres. For wheat, Carey is on shakier ground. Australia’s drought clearly caused the bulk of last year’s wheat-price surge; but surely ethanol-influenced planting decisions by U.S. farmers played a role. As the Washington Post reported last week:
A big reason for higher wheat prices, for instance, is the multi-year drought in Australia, something that scientists say may become persistent because of global warming. But wheat prices are also rising because U.S. farmers have been planting less of it, or moving wheat to less fertile ground. That is partly because they are planting more corn to capitalize on the biofuel frenzy.
As for Carey’s claim that the jump in soy prices bears only a “small connection” to the ethanol boom, he’s just wrong — so wrong that it calls the rest of his analysis into question. Here is the USDA, from January:
Increased biofuels production is also underlying the dramatic increase in soybean prices. The rapid rise in U.S. ethanol production boosted corn prices last year leading to an unprecedented shift in planted acres from soybeans to corn in 2007. This past spring, U.S producers reduced planted soybean area by 16 percent, or 11.9 million acres. In addition, the expanded use of biodiesel around the world, especially in Europe and the U.S., is having a dramatic impact on global vegetable oil markets. As a result, soybean and other vegetable oil prices have risen sharply.</strong
Carey also errs by citing the jump in fertilizer prices as an independent factor causing food prices to rise, without acknowledging that the biofuel boom has led to a massive surge in fertilizer use — corn being a heavy feeder of nitrogen, potash, and phosphate.
Globally, the International Food Policy Research Institute reckons that the biofuel surge has caused between a third and a quarter of the run-up in ag commodity prices. Whether Carey wants to believe it or not, people — particularly in the global south — are paying more for food because food crops are going into our gas tanks.
Carey acknowledges that biofuel mandates may have something to to do with higher food prices and misery in the global south, but claims that “over the long haul, ‘it’s not obvious that high grain prices are inherently bad,’” quoting my old friend Nathanael Greene of the Natural Resources Defense Council.
Leaning on Greene and another old pal of mine, David Morris of the Institute for Local Self-Reliance, Carey makes the case that higher commodity prices will benefit farmers in the global south. But governments there — pressured by the IMF, World Bank, WTO, and free-trade treaties — have been actively pulling out of the agriculture sector for decades. They’ve shuttered ag infrastructure or allowed it to decay, making it difficult for farmers to reach their nearby markets, much less global commodity markets. Who’s going to make the investments for, say, Haitian agriculture to become robust again?
Rather than revive local-food production in the global south, the commodity rally seems more likely to further consolidate the position of input-intensive industrial farming in places like the United States and Brazil. Who needs the Amazon rainforest? Indeed, Carey has nothing to say about the dire ecological effects of the ethanol-inspired corn boom.
Then Carey shifts gears. The whole food vs. fuel debate is about to become academic, because cellulosic ethanol is going to take off, and soon!
Oh, right — cellulosic ethanol, which for decades has been "five to ten years away" from commercial viability, and which has been drawing a chorus of high-level doubters lately.
Carey adds what for me is a new twist to the cellulosic hype. He envisions a "new commercial strain" of switchgrass sprouting up in "on former tobacco, cotton, and rice fields across the Southern U.S.” (Hmmm — won’t moving from rice to switchgrass cause rice prices to spike?)
Well, this new Southern strategy certainly addresses the most recent knock on switchgrass as cellulosic feedstock — that it would crowd out corn and soy in the Midwest.
But it completely obliterates the corn-ethanol-as-bridge-to-cellulosic trope. See, the nation’s ethanol plants are tightly concentrated in the Corn Belt. If cellulosic feedstock production takes place in the South, that will either mean hauling tons of bulky hay (i.e, dried switchgrass) hundreds of miles north (simply not possible), or building out a whole new infrastructure of ethanol plants down South. That simply won’t happen without yet billions more in taxpayer cash.