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Corn-Based Ethanol and its Politics
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Corn-Based Ethanol and its Politics

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  • Ethanol has many issues, agreed, but it has helped reduce export dumping (US losing money on farm commodity exports). That means farmers subsidize consumers less, vs 1981-2006, for a sum of 8 crops, several hundred billion below full costs (USDA-ERS). Poor countries, LeastDCs, are 70% rural & need fair trade farm prices, but have had cheaper & cheaper since 1953, for extreme poverty. What you can afford on $1.25 per day is not a fair trade price, so it's a dilemma caused by decades of cheaper & cheaper prices. US farmers are huge losers with these decades of cheap prices, and have had only a few years of prices above full costs. Mega ethanol want's cheap farmer prices. Farmers investing in ethanol try to win one way (ie. higher corn prices & lose on ethanol) or another (ie. ethanol profits & lose on corn growing). Food should be priced fairly, and ethanol could (but hasn't yet) pushed corn prices much above full costs (fair trade). Cheap prices (caused by zero Price Floors, not by subsidies,) hurt conservation, as livestock is lost (ie. & the economic basis for clover/alfalfa in crop rotations). We'd have massive dumping on the poor farming countries (80% of 'undernourished' are rural) without ethanol, (unless we managed supply etc. again). Cheap prices, dumping, is the cause, not the solution, to (80% of) 'undernourished.'
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  • 1. Of Bushels, Booze, and Bullocks: Currrent Event Briefing June 18,2008 Introduction to Environmental Policy Marci E. Fiedler, Colin FitzGerald, Jessica McHugh, Alejandro Gomez Palma, Carlos Rymer Corn to Ethanol Subsidies in the United States
  • 2. Current Event Briefing
    • Corn to Ethanol Subsidies in the United States
    • Introduction
    • Of Bushels: Corn Production, Ethanol and Price Impacts
    • Of Booze: Energy Balance of Ethanol
    • Conclusions
    • Of Bullocks: The Politics of Current Subsidies
  • 3.
    • The Energy Independence and Security Act mandates the use of 36 billion gallons of biofuels, largely ethanol, by the year 2022.
    • Federal and state tax credits subsidize ethanol production to the tune of $0.57 per gallon
    Introduction “ [T]he demands of America's ethanol programme alone account for over half the world's unmet need for cereals. Without that programme, food prices would not be rising anything like as quickly as they have been. ” The Economist Dec 6th 2007
  • 4.
    • 56 pounds of shelled corn
    • (after the husks and cobs are removed).
    Of Bushels: Corn Production , Ethanol and Price Impacts Corn Production 2007 (USDA): 13.1 Billion Bushels Up 24% from 2007. 93.6 million acres Highest level since 1944. $ 52,090,108,000 USD $ 4.00 usd/bushel 3.3 Billion Bushels ( 25 %)
  • 5. Of Bushels: Corn Production, Ethanol and Price Impacts Gallons of ethanol 2006: 5 Billion Gallons 2006 Gasoline Consumption USA: 138 Billion Gallons Ethanol – Gasoline Equivalence: 4% of gasoline supply Wheat stocks are at their lowest level since 1980.
  • 6. Of Bushels: Corn Production, Ethanol and Price Impacts “ The impact is around 3%...I invite you to do the homework… ” ''While we do have some role in higher corn prices, we're closer to a Little Bo Peep than an ax murderer…'' Vice President of USA Automotive Company President of the National Corn Growers Association “ The growing interest in ethanol fuel has other notable motives[…]: the need to diversify energy sources, the desire of many countries to meet their greenhouse gas abatement targets under the Kyoto Protocol, and the need to stabilize commodity prices and cut down on agricultural subsidies in line with WTO provisions.” Food Outlook , FAO (2006)
  • 7.
    • A Controversial Question: Does It Reduce Fossil Fuel Use?
    • According to the US Department of Agriculture, corn-derived ethanol yields 67% more energy than is consumed during its production
    • According to researchers at Cornell University and the University of California-Berkeley, corn-derived ethanol requires 29% more fossil energy than is produced
    • Many other studies fall on either side of the debate
  • 8. Studies on Ethanol Energy Balance Credit : USDA
  • 9. Production System Studied by Bruce Dale et al., 2002
  • 10. Inputs According to Pimentel and Patzek, 2005 Energy Output Energy Input
  • 11.
    • The energy balance of corn-derived ethanol is still a very controversial topic
    • With the high levels of inputs corn ethanol requires and current subsidies, the actual cost of ethanol is very high
    • Ethanol derived from corn, like other biofuels derived from food crops, is a poor economic and environmental choice in general
    Bottom Line on Ethanol Energy Balance and Cost
  • 12. Bullocks: The Politics of Current Subsidies
    • $0.51-0.57 per gallon subsidy for ethanol blenders
    • These subsidies were meant to stimulate the corn ethanol industry
    • 7 Billion gallons in 2007 and quickly growing
  • 13. Bullocks: The Politics of Current Subsidies
    • The subsidies are now helping drive up the cost of food as food and fuel compete for farmland
    • 2007 Energy Bill called for a five-fold increase in ethanol production
    • Less than half would come from corn
    • Nevertheless, along with the subsidies, this pleases farmers and Midwestern politicians
  • 14. Bullocks: The Politics of Current Subsidies
    • Organization for Economic Cooperation and Development: These subsidies should be eliminated because they are driving up the cost of food worldwide
    • In addition, natural landscapes are being lost to farmland
  • 15.
    • An increasing amount of domestic corn is being diverted to ethanol production as the industry grows quickly
    • Even with the fast pace of growth, ethanol from corn will not be able to satisfy domestic transport fuel demands
    • Ethanol production in the U.S. is having significant global impacts in food prices and greenhouse gas emissions
    • The energy balance of ethanol derived from corn continues to be a controversial issue
    • Politically, ethanol production is favored even if it costs the economy due to pressure from strong farm states
    Conclusions
  • 16. References Martinelli, Jose Maria. 2002. Políticas públicas en el nuevo sexenio . Plaza y Valdés editores, México. Dale, E. Bruce and Kim, Seungdo. 2002. Allocation Procedure in Ethanol Production System from Corn Grain. International Journal of Life-Cycle Analysis. De Gorter, Harry and Just, David. 2008. Why new U.S. biofuel legislation is on track to waste billions of tax dollars, while subsidizing oil consumption . Cornell Chronicle: http://www.news.cornell.edu/stories/May08/Perspective.deGorter.html Iowa Corn Association. “Frequently Asked Questions about Corn in Iowa “. Accessed June 17, 2008. http://www.iowacorn.org/cornuse/cornuse_20.html#harvest Pimentel, David and Patzek, Tad W. 2005. Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower. Natural Resources Research, Vol. 14, No. 1: 65-76. Shapouri, Hosein et. al. 2002. The Energy Balance of Corn Ethanol: An Update . USDA. U.S. Department of Agriculture. National Agricultural Statistics Service (NASS). WASHINGTON, Jan. 11, 2008 http://www.nass.usda.gov/Newsroom/2008/01_11_2008.asp 1. Cover Slide: Generic photo of corn to be used for ethanol production 2. Cover Slide: 200-proof ethanol produced in a plant in Illinois, USA. https://www.eere-pmc.energy.gov/PMC_News/EERE_Program_News_3-08.aspx
  • 17. Thank you.
    • For more information, contact:
    • Marci E. Fiedler
    • Colin FitzGerald
    • Jessica McHugh
    • Alejandro Gomez Palma
    • Carlos Rymer