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Oil Refiners And Farmers Battle Over Biofuels

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Rethink Biofuel Sources, Not Biofuels Subsidies

Rethink Biofuel Sources, Not Biofuels Subsidies

The world’s foremost economic authorities are divided as to whether the planting of conventional crops to produce biofuels makes sense. Some say that the amount of money and resources poured into growing corn, rapeseed, jatropha, sugarcane and other plants for biofuels is wasted -- that it takes away land needed for food production, creates more emissions than it saves, and has caused food prices to go up worldwide.

Others say that if the price of food crops includes the cost of linked oil production, then biofuels are still cheaper, that certain biofuel crops have not been fully tested and that their harvesting only emits carbon dioxide.

It can be difficult to know which side is right. Two major reports issued in 2008 came to quite different conclusions. The World Bank said that from 2005 to 2008, food prices increased sharply after dropping by 75 percent between 1974 and 2005. This 30-year drop had been undone in three years as corn prices went up by nearly 300 percent, rice shot up by 170 percent and wheat by 127 percent. Biofuels took a large share of the blame in the study.

However, a research paper by the Organization for Economic Co-operation and Development warned that while biofuels had indeed led to a price hike for foodstuffs, they were not the primary driver. It estimated that incentives for biofuels would cause wheat to rise by only 5 percent and corn by only 7 percent between 2008 and 2018.

But both bodies agreed on one thing: the subsidies for biofuels have either been entirely useless or wasted on the wrong kind of crop.

The main recipient of biofuel subsidies in the U.S. has been corn; in 2013, 40 percent of the country’s corn harvest -- or 4.7 billion bushels – produced 13 billion gallons of ethanol fuel. That’s a dramatic change from 2000, when 90 percent of the corn crop went to feed livestock and less than 5 percent was used for ethanol.

But the choice of corn as the biofuel crop of choice seems to have been woefully misguided, made during a period in which any and all policies to mitigate the threat of climate change were being considered.

Last March, the United Nations Intergovernmental Panel on Climate Change lambasted the illusion that biofuels, when not grown with care, saved on greenhouse gas emissions. It stated that although the direct emissions for biofuels were 30 to 90 percent lower than for gasoline or diesel fuels, their indirect emissions, including from land use change, could actually outstrip conventional fuels in terms of total emissions.

Corn is not the only biofuel source to be so criticized. In 2012, GEM BioFuels wound down a program which had seen it lease 1.1 million acres in Madagascar to grow jatropha. The yields had not matched its expectations and several other jatropha programs around the world suffered similar fates.

Even so, the repeated failures of these two crops to muster economically and environmentally viable biofuels doesn’t justify dismissing their potential.

It is true that a desire to take rapid action against greenhouse gases led to certain policies being passed hurriedly. The U.S. Congress is already considering a measure that would kill the corn ethanol mandate within the country’s Federal Renewable Fuel Standard. While that may make sense, such policies should not be scrapped as of yet. The European Union has a law in place that mandates that 10 percent of energy used to power transport must be drawn from renewable sources by 2020. Why not use such existing legislation to give all potential biofuels a fair shake?

For biodiesel, corn provides the lowest vegetable oil yields of all biodiesel crops, producing just 145 kilos of oil per hectare per year (kg oil/ha/yr). This is pitiful compared to the 5,000kg oil/ha/yr created by palm oil, or the staggering 80,000kg oil/ha/yr created by the right algae in an open pond. Still, there are major problems with both sources: large-scale harvesting of palm oil has caused major deforestation and there’s no stable agricultural model yet for the large-scale cultivation of algae.

Just this week, Japanese company IHI announced that it had combined two utilities in one algae system: the creation of biofuels and the treatment of wastewater. This makes it the first carbon-negative biofuel process, killing any doubts about the polluting contributions of biofuels. This is only happening on a 40,000 gallon per day system for the moment, but it is showing major promise.

Another exciting development was published in Nature in January 2014: a research team took into consideration the biofuel potential of non-food crops that grow naturally in American fields left fallow. It estimated that if species like goldenrod, frost aster and couch grass were fertilized, they could match the amount of biofuel energy produced by conventional crops while reducing CO2 emissions by twice as much.

Discussions about a topic as controversial as climate change can cause variations to get drowned out in favour of pre-conceived ideas. Thus, the debate for biofuels has tended to revolve mostly around wasted subsidies and the threat to food prices. While such assessments are correct, the entire potential of biofuels should not be dismissed all at once. The recent advances concerning algae and non-food crops have gone largely unreported, but they could help bring about the environmentally friendly society sought by so many.

By Chris Dalby of Oilprice.com

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  • Jessica Robinson on August 28 2014 said:
    It’s easy to dismiss the author’s entire arguments as being uninformed when he conveniently uses the umbrella term “biofuel” as an excuse to ignore the very real benefits of advanced renewable products, like biodiesel. Biodiesel is made from a wide range of sources. The author’s reference to corn oil is almost comical as the only oil from corn that gets to the biodiesel industry is either recycled cooking oil or what used to be useless leftovers from ethanol plants. Furthermore, it makes no sense when he talks about palm oil and the Renewable Fuel Standard when that particular feedstock isn’t even eligible under the strict US program.

    But instead of simply rejecting the essay entirely, let’s discuss the role of biodiesel and food prices.

    While there are many factors that affect food prices, experts agree energy costs from the petroleum market play the biggest role. That’s why it’s so critical that we diversify the world’s transportation fuels supply with alternatives. And in the U.S., the country’s first commercially available advanced biofuel, biodiesel, is already playing a critical role in protecting American consumers.

    Livestock producers such as the National Pork Producers Council have long been on record supporting biodiesel production because it reduces livestock costs – yes, you read that right – reduces livestock costs, which ultimately benefits consumers. Here’s why. First biodiesel is made from all sorts of fats and oils, among them soybean oil. Soybean oil is not a crop. The bean is the crop. And most of the bean feeds the animals we eat. Biodiesel can use the oil left over. As a result, the meal from soy – the animals’ food - is less expensive today because of the demand for the natural oil in soybean-based biodiesel. The savings as a result of biodiesel production can be as much as $25 per ton for animal producers that feed soy protein meal.

    And those aren’t the only savings that can be passed onto consumers. Our industry has also created a strong new market for animal fats that can be used in biodiesel production. That increases the per-head value of livestock and reduces price pressures on meat and dairy products. Think of it like this: when a farmer gets paid more for inedible animal fat the meat doesn’t have to cost as much to make the same profit. Studies show this new revenue stream equates to $10 to $12 per animal for beef cattle or as much as $350 million dollars annually across the beef, swine and poultry industries. That benefit can be passed to the consumer.

    Perhaps most importantly for consumers, biodiesel is creating competition to petroleum by providing diversity in the transportation fuels sector. The fact is that we’re never going to be able to drill our way out of our energy problems. Producing more oil at home isn’t going to improve the air we breathe and it’s not going to make us independent of the global events that ultimately determine the cost of a barrel of oil. We recognize that petroleum is priced by an international market. And that’s not going to change whether the oil is pulled out of North Dakota or shipped from Saudi Arabia.

    Jessica Robinson
    National Biodiesel Board
  • Fred Brown on March 15 2015 said:
    The article is a bit too inclusive. The spokesperson for biodiesel makes good points for her industry, and I'm sorry my new cars say don't use it, when my previous Mercedes liked it just fine. But the impression one can be left with most strongly after reading here, is that the US needs a sane energy policy. Our corn/ethanol set up is a disaster from every angle except for the farmer, and that has become the only force which is important to congress, so it will continue. Alternative energy, both by source and by usage, has come to be seen as a threat by too many components of US business, and sometimes the results are bizarre - note that states this year have dropped their subsidies for alternative fuel vehicles, or even placed special taxes on their purchase and use, have heavily taxed or even outlawed residential use of solar power, even placed restrictions on state purchases and/or use of equipment, vehicles, or changes in policies, which might possibly negatively affect oil companies.

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