Here's an ethical question: in a world where people starve, does it make sense to run cars on food? In 2005, ethanol plants consumed 14 percent of the nation's corn crop. Producing seven times as much fuel, under Bush's proposed mandate, would put the proportion close to 100 percent.
....it didn't take him long to decide that cellulosic ethanol was the Next Big Thing.
It was a simple question of math. In 2005, Congress passed the Energy Policy Act, which required 7.5 billion gallons of renewable fuels—mostly ethanol—to be blended into gasoline per year by 2012. Then, in his State of the Union Address this year, President Bush called for increasing that mandate to 35 billion gallons by 2017, both to help the environment and to reduce America's reliance on foreign imports of fossil fuels. The ethanol mandate advocated by the president represents one-fourth of the gasoline consumed last year in the United States.
...Few governments are willing to live and let live when it comes to biofuels. Ethanol currently benefits not just from the multibillion-gallon mandate, but also from a 51-cent-per-gallon-of-ethanol tax credit to blenders that mix the stuff with gasoline. At the same time, a tariff on imported ethanol reduces foreign competition.
Celunol isn't the only business chasing the cellulosic dream. John Howe, the company's vice president for public affairs, jokes that when he looks out his window in Cambridge, he can see six other firms working on the same problem. Most are fueled by a gusher of venture capital flowing as mightily as Heywood hoped his well would. In 2005, according to the National Venture Capital Association, venture capitalists (VCs) poured $195 million into alternative energy companies. In 2006, that figure reached $727 million. Cleantech Venture Network, an arm of the Cleantech Group (a consortium of companies that invest in green technologies) calculates that biofuel investments rose sevenfold from 2005 to 2006 (see chart on page 93).
Alexander Farrell, an energy expert who also teaches at Berkeley, tried to calm the debate with a January 2006 article in Science magazine that aggregated six different studies, including Pimentel's and Patzek's. Farrell's team found that, on the whole, corn ethanol had a positive energy balance, though "the average hides a lot," he said in an interview. "Some ethanol has a bigger benefit, and some a negative benefit—worse than gasoline." As for greenhouse gases, "the average is not terribly positive. There are technologies and plants today that perform well, but no one has an incentive for good performance."
At the pump, ethanol faces another big problem: it is less powerful than gasoline in today's engines. New flex-fuel vehicles that can run on 85 percent ethanol blends (E85) show decent fuel efficiency, and if an engine is built to take complete advantage of ethanol, the biofuel's high octane levels could give it some advantages over gasoline. But ethanol-optimized vehicles are as rare as ethanol service stations. That means that in the near future, ethanol, since it gets fewer miles per gallon in conventional cars, needs to be cheaper per gallon than gasoline to compete. Achieving that low price is tough because of America's limited corn supply. In 2005, ethanol plants consumed 14 percent of the nation's corn crop. Without efficiency gains or massive imports, producing seven times as much fuel, under Bush's proposed mandate, would put the proportion of the crop close to 100 percent.
But ethanol policy isn't necessarily about practicality. It's about politics, personified in another presence on the RFA's board: Martin Lyons, senior vice president for ethanol sales and marketing at Archer Daniels Midland Company.
What is clear is that, despite its environmental and efficiency woes, corn ethanol has been the lucky beneficiary of an American political quirk, first pointed out by economist Bruce Yandle in a famous 1983 article in the journal Regulation. In the article, Yandle, now dean emeritus of the Clemson College of Business and Behavioral Sciences, recounted that, while he worked at the Federal Trade Commission, he noticed a funny thing about regulations that captured the public's imagination and managed to endure. These regulations evolved not because of rational cost-benefit analysis, Yandle wrote, but because of odd alliances between what he called "Bootleggers and Baptists."
Yandle suggested that most regulations could be viewed in this light. Groups with moral motives provide cover for those who benefit economically (groups that, unlike bootleggers, typically operate within the law), even if the two sides don't have much else in common. So far, this dynamic has propelled ethanol from obscurity to the center of American energy policy.
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