New study from mainstream ag economists at Iowa State
Cellulosic ethanol represents a beacon on the horizon — the justification cited by wiseguys like Vinod Khosla for dropping billions per year in public cash to prop up corn ethanol production.
Corn ethanol, you see, is a bridge to a bright cellulosic future.
But the beacon is looking more and more like a mirage, a ghost, a specter; the bridge we’re hurtling down may well lead to a chasm. A quiet consensus seems to be forming among people you’d think would know the facts on the ground: cellulosic ethanol, touted as five years away from viability for decades now, may never be viable.
Last fall, a researcher from the USDA — an agency that has lavished ethanol with research cash since the ’70s — declared that while cellulosic has “some long-term promise” (some?), we shouldn’t expect it to contribute significantly to fuel supplies before 2013.
Then in January, Colin Peterson — chair of the House Ag Committee and a long-time friend of agribiz — let slip that “I’m not sure cellulosic ethanol will ever get off the ground.” He muttered something about “a lot bigger problem to overcome here than people realize in terms of the feedstocks.”
Now we get a new study (PDF) from a trio of ag economists at Iowa State University. For the record, the authors are conventional ag scholars firmly entrenched within the corporate-dominated research world described so well by Nancy Scola in her recent “Monsanto U.” post.
Indeed, one of the authors holds the Pioneer Hi-Bred International Chair in Agribusiness. (Pioneer is the genetically modified seed arm of the chemical giant Dupont.) The researchers’ patrons — i.e., the agribiz giants — benefit from the corn-as-bridge-to-cellulosic myth; it keeps those highly profitable government goodies coming.
So it’s surprising to see these mainstream economists deliver such a dismal forecast for cellulosic ethanol.
To come up with their forecasts, the authors do their economists’ trick of creating a model and plugging in various assumptions.
They start by calculating that without the latest round of goodies — i.e., the fat “Renewable Fuel Standard” of the 2007 Energy Act — cellulosic ethanol (and biodiesel, too) would have withered away. In that scenario, corn ethanol would keep ramping up from the current level of about 7 billion gallons, pushed by high oil prices and the $0.51/gallon tax credit that’s existed for years.
Here’s what they say would have happened by 2022, if the 2007 Act had never happened (economists lay out their conditional, speculative scenarios in the simple present tense):
The corn ethanol sector expands until total production exceeds 18 billion gallons per year. Biodiesel and cellulosic ethanol from switchgrass are not viable in this scenario. Cellulosic ethanol never expands, and the biodiesel sector contracts so that there are no biodiesel plants operating in the long run.
They add a bit that I found particularly devastating: “These results suggest that [without the 2007 Energy Act], once the opportunity cost of land is taken into account, rational farmers will not grow switchgrass or soybeans for biofuel production, and rational investors will not build these plants.”
Believe me, that thing about “rational” farmers and investors is strong stuff, coming from conventional economists.
Now, what happens when we account for the 2007 Act’s hefty mandate? Current production, almost all from corn, stands at about 7 billion gallons. The act demands 36 billion gallons of biofuel by 2022, of which 15 billion comes from corn, and the other 21 billion gallons comes from cellulosic (and to a much less extent biodiesel).
The authors seriously doubt the cellulosic target can even come close to being met. They reckon that the mandate can inspire “rational” farmers and investors to churn out 4.5 billion gallons of cellulosic ethanol by 2022 — but there’s a catch. In order to reach even that level, the government will have to significantly jack up the tax credit awarded to mixers — from the current 51 cents to $1.55.
The message is this: Even with the fat 2007 Act mandate, cellulosic ethanol can only offset a tiny amount of petroleum use — and then only if it’s borne aloft by titanic amounts of public cash.