Biofuels: Promise or Peril?

When Matt Hawkinson started growing corn in the rich farmland of western Illinois nearly a decade ago, he sold the grain for $2 a bushel, 50 cents less than the cost him to produce it. Recently, buyers have been paying him $4.35 a bushel. It’s a welcome profit – even if it raises the cost of the hogs he feeds – and eliminates his need for government subsides. 

Hawkinson owes this good fortune to factories like those in the nearby towns of Galva and Pekin that turn corn into ethanol for fuel. 

Yet the simple decision to make fuel from crops turns out to be anything but simple: it involves a tricky tangle of environmental, farm, trade, economic and foreign policy issues.

Biofuels – energy sources produced from dedicated crops and agricultural waste – have suddenly won wide support. The biofuel craze has been fueled by high oil prices, Mideast political turmoil, global warming fears, concern about low agricultural prices and high government subsidies, and the prospect of making money on the next big thing. Biofuels seem to promise a quick fix for worries about oil prices and supplies without the need for major technological changes. Is oil for the auto-industrial complex too expensive or fraught with problems? Just fill ​‘er up with biofuels.

But skeptics – on both the left and the right, including many environmentalists – argue that biofuels can’t solve the world’s energy problems. What’s more, they argue, the biofuel solution threatens both the environment and the world’s poor. In Mexico, the doubling of global ethanol production and quadrupling of biodiesel production in the past five years has led to protests over high prices for corn tortillas. And in Southeast Asia and Latin America it has raised concerns that rainforests are being cleared to cultivate crops for fuel.

Both sides in the debate marshal studies predicting promise or peril. Ultimately, the evidence suggests that biofuels could be one valuable source of renewable energy. But for biofuels to deliver on that promise, governments will need to both tightly regulate agricultural and land-use practices, and carefully tailor trade and economic policies. Most important, the world – especially the United States – will have to greatly increase how efficiently it uses energy.

The biofuel allure

Biofuels seem straightforwardly attractive. Farmers capture solar energy though their crops, which take up carbon dioxide as they grow. Theoretically this off-sets the carbon dioxide released when they are burned, thus reducing the world’s output of greenhouses gases (GHGs). Energy crops can be grown nearly everywhere, potentially providing income for peasants and farmers around the world. The main biofuels today are ethanol made from plant carbohydrates and sugars (like corn and sugar cane) and, to a lesser extent, biodiesel made from oilseeds (like soybeans, palm nuts, and rapeseed). Currently in development, and showing great promise, is ethanol made from woody, cellulosic plants (like switchgrass or miscanthus, as well as organic waste).

But cultivating the crops and processing them into fuel requires energy (or fossil fuel derivatives, like fertilizers), and much of that energy now comes from natural gas and coal. For years, scientists David Pimentel of Cornell and Tad Patzek of University of California at Berkeley have claimed that the energy output from ethanol made from bio mass is less than the fossil-fuel energy used to produce the ethanol. 

Other experts respond that their calculations of this energy balance fail to reflect the efficiencies of new facilities, overcount energy inputs and ignore the energy value of byproducts, such as the distillers’ mash that animals can eat. In fact most studies show that ethanol from corn provides more energy than goes into its production, according to a 2006 review by Berkeley scientists Alexander Farrell, Daniel M. Kammen and others. 

Yet in terms of global warming, the carbon balance – or contribution to reducing GHGs – is more important than the energy balance. The Berkeley review concludes that, overall, ethanol from current sources only modestly reduces GHGs. 

Farming techniques and the choice of crops determine the extent to which biofuels reduce GHGs. For corn-based ethanol, the estimates range from a 36 percent reduction in GHGs to a 29 percent increase, depending on cultivation practices. The best reduction would come from using woody plants and grasses, like miscanthus and switchgrass, which could reduce GHGs by 90 percent compared to gasoline. In addition, some cellulosic feedstock plants can thrive in soils that are marginal or depleted, possibly enriching and saving the topsoil while sequestering carbon. 

That is not what is happening in most of the tropics. In the near future, tropical biofuels from sugar cane and oil palm have a price advantage, and big agribusiness operators are slashing rainforests for plantations that deplete soils, reduce biodiversity and eliminate wildlife habitat. In 2006, the Worldwatch Institute reported, ​“If biofuels are produced from low-yielding crops, are grown on previously wild grasslands or forests, and/​or are produced with heavy inputs of fossil energy, they have the potential to generate as much or more GHG emissions than petroleum fuels do.” In Indonesia and Malaysia, for example, the burning of forests and peat bogs to clear land for palm oil plantations has unleashed vast quantities of carbon dioxide, overwhelming any modest GHG gains from biodiesel. 

Promise or peril?

Energy farming also poses tough questions about how the world uses its land: Is there enough cultivable land to produce significant quantities of fuel? And won’t fuel crops compete with food crops, raise food prices and hurt the world’s poor?

Once again, the scientific estimates vary widely. According to Worldwatch, studies predict that bioenergy could sustainably provide more than twice the global energy demand and also project that ​“bioenergy could supply only a fraction of current energy use by 2050, perhaps even less than it does today.”

The competition over use of land for food or fuel will be much greater in developing countries than in the United States, unless farmers grow energy crops on marginal lands or rely heavily on agricultural wastes. According to a December 2006 study by the International Food Policy Research Institute (IFPRI), a global think tank, producing enough ethanol to replace world gasoline demand would require five times more corn than is planted today and 15 times as much sugar cane, assuming those are the two main sources. 

But the impact on food prices would depend on how the biofuel boom develops.

According to another IFPRI study, different mixtures of crops and technology improvements could raise corn prices by as much as 41 percent or as little as 23 percent by 2020. Higher grain prices will have a mixed effect: They would boost incomes of farmers throughout the world, and a large fraction of the world’s poorest people are peasants. With higher grain prices, U.S. and European farmers could sustain themselves without the current costly subsidies that lead to dumping underpriced grain on the world market, which drives down prices for peasants everywhere. 

Local economies would grow and urban workers would also benefit, but probably not enough – certainly in the short run – to compensate for higher food prices. Critics worry that biofuel production will increase world hunger. But low incomes – not lack of food – are the main reason for world hunger. And the answer to that problem is to raise urban and rural workers’ incomes, partly by assuring that all people have the right to organize industrially and politically.

But with big landowners and industrialists having the advantages of wealth and power, it is doubtful that farmers and peasants will reap the benefits of biofuels. David Morris, vice president of the St. Paul-based Institute for Local Self-Reliance, argues that ethanol programs in the United States must be designed to favor farmer-owned cooperatives, which have a significant but declining share of the American market. 

If global trade in biofuels develops more dramatically, big business will promote biofuel exports over domestic food production in developing countries, and as a result the natural environment will be destroyed and peasants and tribal people will be forced off their lands. Some biofuel strategists, such as John Mathews, the Australian author of ​“A Biofuels Manifesto,” argue that biofuels be certified in order to guarantee that they were produced in a socially and ecologically sustainable manner.

Fuel for politics

U.S. politicians of varied stripes have played up biofuels as a strategy for energy independence. But the biofuel market will continue to be influenced by petroleum prices. Ethanol is now profitable in the United States because oil prices are over the competitive threshold of $50 a barrel. But if corn prices go higher, or if oil prices drop, ethanol will be less competitive. Even now, domestic ethanol competes with Brazilian imports in large part because of a stiff tariff. And if tariffs are cut, as advocates of both free trade and cheap biofuels propose, the resulting increase in biofuel imports would undercut the goal of independence. 

Though full energy independence may be illusory, increasing domestic biofuels production could significantly reduce the trade deficit. And poor, developing countries that are strapped for foreign exchange could benefit greatly from substituting home-grown fuels for imported oil.

Whether the biofuel boom benefits or harms mankind will depend on how countries regulate the agricultural and industrial practices used to produce biofuels, including how much peasants, small farmers and workers benefit from the biofuel industry.

The editors of the IFPRI study, ​“Bioenergy and Agriculture,” conclude: ​“Because most of the environmental and social benefits and costs of bioenergy are not priced in the market, leaving bioenergy development entirely to the private sector and the market will lead to bioenergy production and processes that fail to achieve the best environmental and social outcomes.” Public policy choices are critical.

Brazil, virtually tied with the United States as the world’s largest ethanol producer, illustrates both the good and the bad. The country has introduced some policies that have helped increase the social and environmental payoffs. Initially, the government drove the development of an ethanol industry and both flex-fuel and ethanol cars. Now it promotes production of biodiesel from crops grown on degraded, arid land in the historically poor Northeast, and it provides a seal of social responsibility for producers if the crops come from small family-owned farms. The government’s ethanol policies have created 100,000 new jobs in the needy region and roughly 1 million new jobs in the whole country, while keeping 30 percent of sugar cane production in the hands of small farmers. Although sugar cane fields contribute to deforestation, cane is also planted on depleted rangeland, and the government requires than one-fourth of all plantation area is left in natural vegetation to preserve biodiversity and natural predators of crop pests. 

But huge monoculture plantations contribute to deforestation. And most of the new jobs are very poorly paid and temporary. Big corporations and large landowners are consolidating control, often pushing peasants off their land and triggering a growing rural conflict. (See ​“The Multinational Beanfield War”) 

The biofuel potential will only be realized if governments everywhere push for energy efficiency and thereby reduce the need for massive farming for fuel. Daniel Kammen, a professor in the Energy and Resources Group at University of California, Berkeley, writes, ​“If the entire U.S. vehicle fleet were replaced overnight with [plug-in hybrid electric vehicles that combine internal combustion engines with electric motors and large batteries for recharging from an outlet], the nation’s oil consumption would decrease by 70 percent or more, completely eliminating the need for petroleum imports.” 

If the world – but especially the United States – takes advantage of existing possibilities for energy efficiency and designed biofuel policies to protect the environment as well as farmers and workers in the industry, then the potential for biofuels is rosy. If, however, we continue to leave the development of biofuels to big corporations and the free market, the biofuel dream could warp into a social and environmental nightmare.