The Economic Case for Ethanol and Other Biofuels

Published July 1, 2006

Let me begin my defense of biofuels grown on the farm by noting that I have spent half a century promoting nuclear energy, while simultaneously explaining our nation will not run out of petroleum-based energy to run our automobiles for at least two centuries.

Concurrently, I have attempted to show misguided folks that solar and wind energy can never fill more than a tiny niche of our energy requirements. Solar and wind power require us to sacrifice hundreds of square miles of land to equal each conventional power plant. The land and hardware are extraordinarily expensive and an eyesore, to say the least.

Biofuels, including ethanol and biodiesel, are the new darlings of the renewable energy movement. This is a movement one should always be skeptical of, because many of its supporters and promoters are insincere in their views regarding renewable energy but are very dedicated to slowing progress, defeating markets, reducing individual freedom, and subtly foisting an expanding program of collectivism (read: socialism) on our society.

In sum, my record is that of a scientist who is not likely to support any new renewable energy scheme. In fact, it would not be difficult, in debating this issue, to take Dennis Avery’s side, as expressed in the adjacent article.

However, I believe Dennis, in his propensity for pessimism, has failed to recognize one additional resource that will play a major role in the development of biofuel. That resource is the human brain, which in all of its resourcefulness has changed the entire agricultural landscape through the advent of biotechnology. Even Dennis could not have predicted this in the early days of his career in agriculture.

Abundant Energy Sources

Let us first put the energy issue into proper perspective. The United States could easily become energy independent if we chose to exploit the Arctic, the Gulf of Mexico, offshore coastlines, and our vast oil shale reserves, which at $70 a barrel will one day (perhaps in our lifetime) dwarf the supplies of Saudi Arabia and all of OPEC. But at the moment the anti-capitalist environmental zealots are winning, and none of these sensible approaches is going to happen any time soon.

In the meantime two positive things are happening. First, nuclear energy is once again beginning to gain favor, with our first new nuclear power plant in 30 years likely being built within the next decade. Second, the country is casting a new and positive eye on the much-beleaguered American farmer as a potential source of its fuel.

Fairness for Farmers

The quiet and unobtrusive farmer, once heralded as the epitome of all things good in the United States, has been vilified for the past 30 years by environmental zealots for the use of agricultural chemicals to enrich soil, destroy pests, and kill weeds. Fertilizers, the natural products of the planet–nitrogen from the air, phosphate and potassium from the sea–are characterized as toxic industrial waste products cunningly used by farmers to increase their yields at the expense of the public’s health.

While the latter is patently false, few people realize America’s farmers are the very best of environmental stewards and land conservationists. They have a tremendous economic incentive to retain every ounce of their inputs in the soil on their farm rather than let them escape to contaminate surface or ground water. Their ever-increasing yields have made possible the development of vast land areas for recreational and conservation uses rather than farming. And yet in the eyes of many today the farmer wears the proverbial black hat, riding the black horse.

However much we try to set the record straight on American agriculture, it remains an uphill battle. Now, however, as the nation views the farmer as an important piece of the energy equation, the opportunity exists to set the record straight.

Bright Outlook for Biofuels

Ethanol and biodiesel fuels have been around for a very long time. Henry Ford ran his first car on ethanol, and Rudolph Diesel ran his first car on peanut oil. But at the ensuing cheap price of petroleum, both fuels fell out of favor, for good reason.

Today, however, in an environment of fear-driven, escalating oil prices and with dramatic improvements in chemical engineering, both fuels have a fighting chance of becoming economic success stories if put on a level playing field of competition. It makes sense to refine our chemical engineering further to make use of less-valuable crops such as sorghum and switchgrass.

Eventually biotechnological research will enable us to create a plant that will rival sugar cane in conversion efficiency. We will not run out of land on which to grow crops for fuel, because we will engineer our plants to grow on less arable, desert-dry soil and even soil previously destroyed by salts evaporated from over-irrigation.

Harmful Tariffs

The same kinds of advances will be achieved with biodiesel fuels, which can essentially be made from any organic product. Today it is definitely true that subsidies are required to set up a potentially viable industry for both ethanol and biodiesel, but there is a reasonable possibility that one day no favoritism need be shown by the government. This exact scenario has played out in Brazil, which now has a self-sufficient ethanol industry.

Until this can be established in the United States, Congress should eliminate the 54 cent tariff on imported ethanol, as we cannot currently meet the escalating domestic demand that has resulted because ethanol is rapidly replacing methyl tertiary butyl ether (MTBE) as a clean-burning fuel oxygenate.

Ethanol’s Many Benefits

Many observers believe that by the year 2025, the United States could get 25 percent of its automobile fuel from biofuel. I am not one of them. I believe the percentage will be lower, but that ethanol will still be an important piece of the energy puzzle.

The ancillary benefits of the development of biofuels are numerous and obvious. It will contribute to long-term energy security and independence. It will increase farm income, eventually lowering the need for farm supports. It will likely reduce energy costs. It will promote further rural development while pleasing the environmental community.

Meanwhile, biofuel development will not put pressure on food crops through increased prices or land shortages. Neither will happen because we are far too resourceful to fail to remove these stumbling blocks touted by the anti-biofuel spokespersons.

A positive outlook in this arena will be a self-fulfilling prophecy.

Jay Lehr ([email protected]) is science director for The Heartland Institute.