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It’s Final—Forbes is Terribly Misinformed on Ethanol

April 21, 2014

           

Nuclear energy fan James Conca posted this hit piece on corn ethanol on Forbes' web site on April 20. We responded with the following rebuttal. Dear Mr. Conca, It appears you have unfortunately fallen victim to the bombastic spin and salacious rhetoric of the Environmental Working Group and other extremist organizations. Your recent column on ethanol in Forbes is replete with gross inaccuracies and your characterizations of the recent IPCC reports are utterly erroneous. If you had actually scrutinized the thousands of pages of analysis produced by IPCC Working Groups I and III, you would have surely noted that discussion of biofuels is extremely sparse and largely uncontroversial (in fact, the word "biofuels" doesn't even appear a single time in the WGI Summary for Policymakers). When biofuels are mentioned in the reports, the discussion typically achieves reasonable balance and context. For example, the WGIII report states, "[ b ]ioenergy projects can be economically beneficial, by raising and diversifying farm incomes and increasing rural employment through the production of biofuels for domestic or export markets." In an associated report, WGIII lists biofuels substitution as a climate change "mitigation strategy," noting that "[c]ommercially available liquid and gaseous biofuels already provide co-benefits together with mitigation options that can be increased by technology advances." This is a far cry from what you describe as a "complete about-face" by the IPCC with regard to biofuels. The IPCC reports essentially say that biofuels "done wrong" pose potential environmental risks, but that biofuels "done right" offer significant opportunity for mitigation of climate change, other environmental services, economic development, and enhanced energy security. This is nothing new and the biofuels industry has long subscribed to the notion that growth in production must occur in a manner that is environmentally, economically, and socially sustainable. More troubling than your misrepresentation of the IPCC reports is the litany of baseless assertions about the economic and environmental effects of modern corn ethanol. The most egregious statements from your article are addressed in detail below. Conca: In 2000, over 90% of the U.S. corn crop went to feed people and livestock, many in undeveloped countries, with less than 5% used to produce ethanol. In 2013, however, 40% went to produce ethanol, 45% was used to feed livestock, and only 15% was used for food and beverage. Response: There are a number of problems with this passage. First, you fail to recognize that corn ethanol plants produce both renewable fuel and animal feed. Every 56-pound bushel of corn processed by an ethanol plant produces 2.8 gallons of ethanol and 17-18 pounds of high-protein, high-energy livestock feed. Thus, roughly one-third of the volume of grain going into the ethanol plant comes back out in the form of feed. This feed—called distillers grains—replaces both corn and soybean meal in animal diets. Because of its superior nutritional profile, it is currently more valuable to feeders than the corn it is replacing. Thus, any discussion of the impact of ethanol production on corn supplies MUST include the feedback effects of these valuable animal feed co-products. So, on a gross basis, ethanol is expected to use 5 billion bushels (bbu.) of the 14.78 bbu. corn supply in 2013/14; this is equivalent to 34% of the corn supply on a gross basis. Meanwhile, livestock feed is expected to account for 36% of the corn supply (5.3 bbu. out of 14.78 bbu.) However, as demonstrated above, roughly one-third of the corn used for ethanol (1.5 bbu. in 2013/14) is actually being consumed as animal feed. This means ethanol consumes just 24% of the 2013/14 corn supply and livestock feed accounts for 46% on a net basis. Your statement that the U.S. corn crop previously fed people and livestock in "undeveloped countries" is simply wrong. U.S. corn exports have always primarily served developed countries like Canada, Japan, Mexico, Egypt, and South Korea. Typically less than 2 percent of total U.S. corn exports go to UN-designated "Category 4" or "Category 5" countries (where undernourishment affects at least 25 percent of the population). Exports to sub-Saharan Africa represented just 0.2% of total corn exports in 2000/01. In any case, discussing corn usage by the ethanol, livestock, and human food segments in terms of percentages is highly misleading. Yes, ethanol accounts for a larger slice of the corn supply pie than in the past, but the pie is much bigger. You ignore the fact that the available supply of corn has grown dramatically since 2000 as demand has increased. For example, the 2000/01 corn supply was just 11.64 bbu., 21% smaller than the current corn supply of 14.78 bbu. In absolute terms, more corn and distillers grains are fed to U.S. livestock today than in 2000/01 (6.83 bbu. in 2013/14 vs. 6.06 bbu. in 2000/01).  Similarly, more corn is used today for food/beverage, seed, and industrial use than in 2000/01 (1.4 bbu. today vs. 1.29 bbu.). On a global basis today, there is more grain available for food and feed uses (i.e., more "left over" after biofuels demand is satisfied) than at any time in history. Conca: If all of the present production of corn in the U.S. were converted into ethanol, it would only displace 25% of that 130 billion. Response: "Only 25%"??!! You act as if displacing one-quarter of the gasoline supply (half of which is derived from foreign crude oil) would be no big deal. In truth, using the entire 2013 corn crop for ethanol would have generated 39 billion gallons of ethanol, which would be 30% of 130 billion gallons of gasoline. But the more important point is that no one has ever suggested or advocated using the entire corn crop for ethanol! The industry understands there are limitations on how much ethanol can come from corn and that an appropriate balance must be maintained amongst various corn uses. In any case, the federal Renewable Fuel Standard (RFS) caps the amount of corn-based ethanol that may qualify for the program at 15 billion gallons—a level just slightly above current production rates. This is where the next generation of ethanol feedstocks—such as agricultural residues, municipal waste, and crops like miscanthus and switchgrass—comes into play. Today, three commercial scale cellulosic facilities are on the verge of beginning production and a fourth commercial facility, albeit somewhat smaller, has already begun production. Conca: In 2014, the U.S. will use almost 5 billion bushels of corn to produce over 13 billion gallons of ethanol fuel. The grain required to fill a 25-gallon gas tank with ethanol can feed one person for a year, so the amount of corn used to make that 13 billion gallons of ethanol will not feed the almost 500 million people it was feeding in 2000. Response: This ridiculous talking point from Lester Brown, the modern-day Thomas Malthus, has been disproven time and time again. Yet, it continues to live on because writers like you can't resist breathing new life into such an emotionally-charged one-liner. You are essentially suggesting that one person can live for a full year on nine bushels of yellow field corn, which is in fact inedible to humans. I would be happy to deliver nine bushels of field corn to you and observe exactly how you would go about using that corn to sustain yourself for a year. I hope you have a good dental plan. Ethanol is not made from food grains—like wheat and rice, or sweet corn—that are consumed directly by humans. In any case, this talking point amounts to pure reductionist thinking; it assumes there is a choice between using nine bushels of corn for fuel or using it for animal feed or food processing. In fact, there is no such choice. Grain supplies have grown large enough to satisfy both rising demand for food and feed as well as additive demand from the biofuels sector. Conca: In 2007, the global price of corn doubled as a result of an explosion in ethanol production in the U.S. Because corn is the most common animal feed and has many other uses in the food industry, the price of milk, cheese, eggs, meat, corn-based sweeteners and cereals increased as well. World grain reserves dwindled to less than two months, the lowest level in over 30 years. Response: What is the basis for your claim that the increase in corn prices was due exclusively to U.S. corn ethanol expansion? Please cite your sources. A number of retrospective analyses have been conducted examining the 2007/08 commodity price bubble. The universal conclusion has been that a number of intertwined factors were responsible for the increase in the price of all commodities during that period. As for the impact on consumer food prices, an analysis commissioned by the International Center for Trade and Sustainable Development (a frequent collaborator with the IISD, whom you cited) examined the impacts of ethanol policies, including the RFS and now-defunct blender's tax credit, on world crop and food prices in the 2005-2010 timeframe. Using a partial equilibrium economic model, the study found corn prices in 2009/10 wouldn't have been any different at all with or without the RFS in place. Corn prices would have been just 3.3% lower, on average, in the entire five-year study period without the RFS and ethanol blender's tax credit, the study found. The effect of the RFS and other ethanol-related policies on other (non-corn) crops is even less. If the RFS had not existed from 2005-2010, wheat prices would have been an average of just 1.6% lower, soybean prices would have been an average of 1.7% lower, and rice prices wouldn't have been any different at all. The ICTSD study found retail prices for broiler meat wouldn't have been any different at all without the RFS. Similarly, retail beef and pork prices wouldn't have been any lower without the RFS, with the exception of one year when prices for each would have been lower by just $0.01 per pound. As explained by the author, "[t]he reason for such a small price impact is that feed prices make up a small share of retail prices and because the feed cost impacts from ethanol [policy] over this period are small." Conca: Additional unintended effects from the increase in ethanol production include the dramatic rise in land rents, the increase in natural gas and chemicals used for fertilizers, over-pumping of aquifers like the Ogallala that serve many mid-western states, clear-cutting forests to plant fuel crops, and the revival of destructive practices such as edge tillage. Edge tillage is planting right up to the edge of the field thereby removing protective bordering lands and increasing soil erosion, chemical runoff and other problems. It took us 40 years to end edge tillage in this country, and overnight ethanol brought it back with a vengeance. Response: Again, please cite the sources you rely on to support these claims. USDA data show that total fertilizer application on corn acres is flat or trending slightly downward since 1980, and fertilizer use per unit of output (bushel) has dropped dramatically as yields have improved. Please provide evidence to support your assertion that forests are being clear cut to "plant fuel crops." Cropland in the U.S. continues to shrink, while afforestation is increasing, according to UN data. Further, information from the Natural Resources Conservation Service shows soil erosion and loss has declined substantially over the past 30 years. Conca: We should remember that humans originally switched from biomass to fossil fuels because biomass was so inefficient, and took so much energy and space to produce. So far technology has not reversed these problems sufficiently to make widespread use beneficial. Response: This statement is contrary to your own assertion that "ethanol is holding its own economically." Indeed, the energy and economic efficiency of ethanol production has significantly improved over the past several decades and today U.S. ethanol is the lowest-cost octane source and motor fuel on the planet. Over the past four years, ethanol has consistently been priced 50-80 cents per gallon less than gasoline. Further, ethanol is extremely efficient at displacing liquid petroleum; according to U.C. Berkeley the ethanol-to-petroleum input/output ratio is 1:17, meaning roughly 7,500 BTUs of petroleum are required to produce 125,000 BTU of ethanol. Most of the fossil energy required to produce ethanol comes from natural gas, an abundant domestic resource. When all of the energy inputs required to produce ethanol are summed, ethanol results in a clear net energy gain. Every BTU invested in producing ethanol results in 2.3 BTUs of useable energy.

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There are a number of other assertions and false claims in your article that warrant response. We would greatly appreciate the opportunity to sit down with you and answer your questions about ethanol. Hopefully, we've given you some food for thought and you will exercise more diligence and balance in researching your next article on ethanol. Geoff Cooper Renewable Fuels Association (RFA)