Sugar Subsidies
MB recently kicked off a discussion of energy policy. I would like to toss our policy of subsidizing sugar prices into the mix of the discussion. Sugar is important to energy policy because ethonol made from sugar, unlike ethanol derived from corn, is actually a net energy saver. A primer on the subsidies is here (pdf).
The energy argument against sugar subsidies is well summarized by James Surowiecki in the New Yorker:
Our current policy is absurd even by Washington standards: Congress is paying billions in subsidies to get us to use more ethanol, while keeping in place tariffs and quotas that guarantee that we'll use less. And while most of the time tariffs just mean higher prices and reduced competition, in the case of ethanol the negative effects are considerably greater, leaving us saddled with an inferior and less energy-efficient technology and as dependent as ever on oil-producing countries. Because of the ethanol tariffs, we're imposing taxes on fuel from countries that are friendly to the U.S., but no tax at all on fuel from countries that are among our most vehement opponents. Congressmen justify the barriers to foreign ethanol with talk of "energy security." But how is the U.S. more secure when it has to import oil from Venezuela rather than ethanol from Brazil? These tariffs are bad economic policy, bad energy policy, and bad foreign policy. Talk about your Domino effect.
Folks like Barack Obama support sugar subsidies. There is a lot of corn grown in Illinois. It is a short sighted position and takes us one step further away from a rational energy policy.
Comments
Corn, sugar and other subsidies bother me because they are stupid in a hundred ways. Don't get me started. However, the sugar subsidy is not an energy issue.
Sugar-based ethanol, even from beets or cane in low-production-cost areas, is not a big energy gain. I think current estimates put it around 30%. I'd rather see the tractor fuel and distillation heat generating electricity, and see Toyota selling light, efficient, electric-only vehicles to citydwellers and commuters. The gain there is a lot more than 30%.
Cellulosic ethanol for cars and soy biodiesel for trucks would be substantially more efficient. The former needs more work, I think. The latter is your best bet right now. Soy production iirc is subsidized directly, which lowers prices. I seem to remember soy is easier on the land than corn, so if you must pump out subsidies, at least these point the right directions.
Posted by: wcw | November 26, 2006 01:01 PM
30% energy gain seems rather substantial to me. Multiplied across broad use such as in Brazil and it adds up. From the New Yorker article linked above:
We need not pick between soy biodiesel, cellulosic ethanol, and sugar based ethanol. We can pursue tham all at once. Indeed, that would seem to part of a rational policy.
Posted by: dwight | November 26, 2006 02:06 PM
I think Dwight's path would make a lot of sense. And count me as thinking that sugar subsidies are about the stupidest and most abusive of the entire Ag-Farma system. Cheers, 'VJ'
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Posted by: VJ | November 27, 2006 01:07 AM
My real problem with corn based ethanol, besides the huge amounts of fertilizer required to grow corn and the vast amounts of water required to convert corn into fuel, is that it doesn't stand a chance of competing with cellulosic ethanol, once the cellulosic technology comes around.
What of our farmers then?
Recently in Minnesota, the DFL candidate for Governor's running mate dropped a slight bomb when asked about E-85 replied with an effective "wha?" She stated she didn't know what E-85 was, or anything about it.
The giddiness of the media and GOP partisans over this gaffe was lost on me, as I could hardly imagine a politician who did know anything about ethanol, and didn't have a concrete policy of blowing smoke up the farmers asses.
The only reason that corn-based ethanol isn't a total boondoggle is that it is, at least, preparing the consumer for some sort of change, at some point in the future.
I'd also like to add that recently, sugar-beet farmers for American Crystal in North Dakota and Minnesota recently plowed under 8% of their crop. I wondered if this wasn't a waste of resources. A few weeks later, I came across an article with these numbers.
The problem of using sucrose to make ethanol in the United States is the feedstock cost, Malmskog said. Corn costs about $3 per bushel, which makes three gallons of ethanol. Raw sugar costs $21 per hundredweight, which makes about 6.77 gallons. At that price, ethanol from corn costs $1 per gallon compared to $3.10 per gallon for ethanol from raw sugar.
“This pretty much sums up what I have to say about sucrose ethanol,” Malmskog said of the cost difference. “Ethanol made from U.S. sugar: Not economically viable.”
Even with an integrated sucrose/ethanol facility, the cost analysis only works if the mill currently is underutilized, he said. In the United States, most factories run at almost 100 percent capacity.
Residue disposal costs from the beets could offset the operating cost savings from adding an ethanol facility to the sucrose factory, Malmskog said. Ethanol also uses a lot of water, which beets produce. The downside, though, is that water from the beets would need to be purified.
Malmskog said sucrose ethanol isn’t economically viable under current prices and credits. Hawaii is the exception because gas prices are about $1 higher there than on the mainland.
Funny thing, I lived in Hawaii when they implemented the 10% ethanol/gasoline blend. While I filled up my tank at a 76 station in Kaneohe, where sugar cane once dominated the road to the North Shore, the ethanol was imported from Brazil. Hawaii hopes to have six ethanol plants in operation next year.
Posted by: tom | November 27, 2006 03:54 PM
Way better than sugar or corn is switchgrass, a native tall grass of the High Plains and interior Southeast. Switchgrass is a perennial, can be harvest twice a year for ten years (with current haying machinery) and can also be used to feed cattle (it was native American Bison's favorite food.) With the dramatic weather shift (potentially permanent) that we're currently experiencing in the West, namely severe mid-late summer drought, the cost of even planting corn in the western "corn belt" might end up being moot anyway. (A huge portion of corn had to be plowed under last August, when it grew no higher than three feet due to extreme drought conditions.)
Switchgrass can also be burned with coal, reducing potentially by half the carbon emissions from any single coal-fired plant. And it's a money-maker without subsidies - farmers in Iowa growing test patches for the US government are getting enough switchgrass for 11,000 gallons of ethanol per acre.
We need to take corn and sugar back to food and feed crops, and look for better alternatives, especially those right under our noses.
Posted by: MBW | November 28, 2006 08:44 AM
In Minnesota, some are looking towards by-products from the timber/paper industries, i.e. wood chips. I believe Penn State was looking at poplar trees for the same purpose.
Fortunately, I think some of the farmers are starting to realize that corn based ethanol is too inefficient to succeed against coming technologies.
This is lifted from an email I just received, but demonstrates what a disastrous path we're on.
[A]ccording to a Nov. 19 Des Moines Register story, Iowa now has 25 operational ethanol plants, another 11 under construction, and "a couple of dozen on the drawing boards."
"If all are built," noted the Register's Phil Brasher citing estimates developed by Iowa State University ag economist Bob Wisner, "Iowa farmers would have to plant an additional 8 million acres of corn--nearly two-thirds more than they harvested this year--to make ethanol and still feed the millions of hogs, chickens and turkeys produced here."
It strikes me that bio-energy, in whatever form it takes, will operate on a local, perhaps regional, basis. Yet the industry that corporations and investors are trying create is a national one, that is very midwest-centric. This doesn't jibe with me too well, because as we speak, pipelines are being built to Minneapolis and Milwaukee-Chicago (and most likely to most west coast population centers) from the Athabasca oil sands in Saskatchewan, which promise to pump crude down our gullets for decades to come.
Posted by: tom | November 28, 2006 10:48 AM