Update: The tariff and subsidy for corn ethanol were allowed to expire on 31 December 2011, a couple of months ago. Apparently, the supporters of the benefits (namely, the Renewable Fuels Association) did not resist the move. They have stated that they believe the market for corn ethanol is mature enough for the industry to stand unaided. This concludes a 30 year period of support totaling around $20 billion, with $6 billion spent last year alone . Automakers, though publicly stating their intent to continue pursuing ethanol-capable vehicles, have planned to scale back their flex-fuel lineup (those vehicles capable of running on E85). President Obama and his administration are much more supportive of electric vehicles compared to biofuels, which were President Bush’s focus . Ethanol producers plan to continue production unabated, so it remains to be seen if Brazilian ethanol can or will make an entry into the U.S. market.
Credit and thanks to David Jara.
The United States is currently in stage one of grieving over the continued failure of corn ethanol as an economically viable and environmentally sustainable fuel. For those unfamiliar with the grieving process, stage one is denial. For starters, corn is a bad source for fuel. Recent estimates of the energy ratio (units of energy produced divided by units of energy consumed in production) of corn ethanol put it at around 1.24, and that’s good news considering it was negative for many years . Compare this with Brazil’s sugar cane ethanol: conservative calculations put its energy ratio at 8.3 . At the same time, corn ethanol is also incredibly expensive to produce. Production of one unit of corn ethanol in the U.S. currently costs about twice as much as the sugar cane equivalent in Brazil . In order to make corn viable at all, domestic sources enjoy a subsidy of $0.45 per gallon (roughly $6 billion per year). At the same time, its only cousin and competitor suffers a tariff of $0.54 per gallon, which means that there is essentially no competition . Additionally, mandates from the various energy acts and provisions passed in the past seven years force ethanol into consumers’ gas tanks. This is an industry in which the government pays the producers directly, then eliminates their competition, and finally forces everyone to buy their product. Even with all that help, several of the largest ethanol producers have gone bankrupt in the past few years. While the media focuses on Solyndra, ethanol giants Renew Energy, VeraSun, and Pacific Ethanol all declared bankruptcy around 2009-2010 . Additionally, since, domestically, about 40% of corn is used for animal feed, its use for ethanol production has been linked to increased food prices . This has various socioeconomic implications, but needless to say that sugar cane ethanol does not suffer from that problem, since it is not a food crop. That’s still not all. The greenhouse gas emissions for sugar cane ethanol production and use are about one-third of that for corn ethanol . What’s the problem, then? Well, corn grows much better than sugar cane in the U.S., and corn-producing states are politically important (recall that Iowa is the first presidential state caucus). Additionally, domestic production of energy is a popular solution to energy security issues. Given all of the previously listed issues (and those not listed) with corn-based ethanol, though, serious thought should be given to opening the gate to Brazilian sugar cane ethanol. First, Brazil is and has been our ally, economically and otherwise, and so security issues are nonexistent. The State Department considers the U.S. and Brazil to have had an “excellent bilateral relationship” since Brazil’s independence in 1822 . Second, just because the U.S. drew the short straw geographically doesn’t mean that it has to import the end product. If proper incentives were applied, a sugar cane refining industry could be cultivated (pun intended) to replace the lost corn ethanol sector. Third, even if the U.S. chooses to bring in ready-to-use sugar cane ethanol, the increased trade with Brazil (one of the fastest growing and largest economies in the world) can only help to foster economic benefits in both countries. Also, the labor and resources freed upon the abandonment of the lost cause of corn ethanol can be redirected to sectors of the economy with actual promise. There’s no point pouring money, natural resources, and workers into a doomed industry. It hurts the entire nation (and other parts of the world). The U.S. can enjoy all the benefits of biofuel use with almost none of the disadvantages. Unfortunately, this is unlikely to be politically viable at any time in the future.