Faculty reconsider US energy policy
Report says ethanol subsidies do more harm than good
Published: Thursday, April 26, 2012
Updated: Wednesday, July 25, 2012 20:07
Researchers at Texas A&M concluded that U.S. energy policy mandating an increase in ethanol production is failing to reap the benefits lawmakers initially expected, with consequences for global food prices.
The legislation in question is the Energy Independence and Security Act of 2007, originally the Clean Energy Act. James M. Griffin, director of the Mosbacher Institute for Trade, Economics and Public Policy, led the study at A&M with the help of Mauricio Cifuentes Soto, graduate student in public service and administration.
According to the report, lawmakers anticipated that by increasing the use of ethanol, Americans would see lower gas prices, U.S. energy security would improve and greenhouse gas emissions would decrease.
Griffin and his team found that, while all three of these benefits did occur, the impact of the policy thus far has been small.
“We have gotten some positive effects, but the positives aren’t near as big as we thought they were going to be,” Griffin said.
Currently the blend of gasoline is E-10 — 10 percent ethanol. Automobiles are able to travel farther per gallon of ethanol-free gasoline than per gallon of ethanol-enriched gasoline. However, the refining costs of making the E-10 blend are lower, saving the consumer about six-and-a-half cents per gallon.
After correcting for federal subsidies to ethanol blenders, the net savings for the tax-payer is two cents per gallon.
According to Griffin’s report, the percentage of ethanol that substitutes imported petroleum is a misleading calculation of energy security. And, even if the U.S. imports no oil from a certain region, domestic oil prices are still subject to price changes in the world oil market.
As for the promise of being eco-friendly, Griffin said ethanol has had a miniscule impact. The amount of conserved carbon dioxide emissions totaled 25.2 million metric tons per year, accounting for less than one-half of one percent of U.S. emissions and under one-tenth of 1 percent of world emissions.
“The benefits to the environment are really small compared to world emissions of CO2,” Griffin said. “The big issue is this really triggered a major increase in food prices.”
As more land and corn crops are allocated toward ethanol production, the price of corn has increased.
The U.S. is the largest producer and exporter of corn in the world, impacting other countries.
“They didn’t realize how interconnected these markets are,” Griffin said. “If you start diverting land to produce corn, you have less land to raise wheat and other grains, so we not only have received big price increases for corn, but wheat and oats and barley ... It’s triggered a lot of price increases.”
Soto said he is concerned about the impact of rising global food prices on developing countries.
“This policy is very damaging … we have to consider the implications beyond the American borders. The consequences can be very damaging to other countries, especially developing countries,” Soto said.
Soto is from Columbia, one of the many developing countries he said is impacted by U.S. energy policies.
Travis Miller, professor and extension specialist in the Department of Soil and Crop sciences, took a different approach to the energy issue, calling its effect positive.
“They’ve been very successful. We still export huge amounts of corn. We’ve satisfied the demand for an alternative motor fuel or part of that demand,” Miller said.
Miller said the complex issue of rising global food prices cannot be solely attributed to increased ethanol production.
“There have been a lot of studies done on it. There are conflicting numbers,” Miller said.
“At the same time we put ethanol into use, we saw an industrialization of India and China and other Asian countries. People that had a diet of rice and beans suddenly wanted chicken or pork. They are demanding a higher-quality diet.”
The Energy Independence and Security Act mandated a 730 percent increase in ethanol production from 2006 to 2022, jumping to 36 billion gallons from 4.9 billion gallons in the 18-year timespan.
“We are on a track to increase ethanol production, and we are not even halfway to our target that is supposed to hit in 2022. We’ve already unleashed all these affects. Do we really want to stay on this path?” Griffin said.
A&M researchers are in the beginning stages of research on cellulosic fuel sources. At least 15 billion of the 36 billion gallons of ethanol produced in 2022 will be from cellulosic ethanol, which is made from plant material.
“Here at Texas A&M we are doing a lot of research in the College of Agriculture on other sources … If we go to cellulosic, we’ve got a bioenergy sorghum, and we think that is going to be very important. That’s where our research is going,” Miller said.
Griffin said he thinks the policy should be reassessed, supporting an increased use of cellulosic ethanol and trusting supply and demand in open markets to decide the proper blends of ethanol and gasoline.
“That’s the thing that really needs to be changed. They would be wise to let the markets sort out how much ethanol will be used in gasoline,” Griffin said. “[Ethanol blends] will be used but the question is how much.”