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Ethanol's Promise Isn't False

By John Alejandro
Saturday, July 22, 2006; A17

The July 2 op-ed by James Jordan and James Powell, "The False Hope of Biofuels," painted a bleak portrait of the potential for corn-based ethanol as a long-term solution for meeting our future transportation fuel needs. But although their piece contained various statistics and metrics that appeared to be credible, the article overlooked other important factors that contribute to ethanol's chances of becoming a viable, long-term alternative fuel solution.

First and foremost, while domestic production may never meet total U.S. demand for ethanol, importing ethanol from other countries such as Brazil would bridge U.S. production shortfalls. Brazil's exports of ethanol in 2005 were valued at $600 million and are expected to rise to $1.3 billion by 2010. The United States imported 86 million gallons from Brazil in 2004, about 5 percent of domestic production and 54 percent of all our imported ethanol.

But there is a major barrier to importing large quantities of cheap ethanol: the tariff of 54 cents per gallon that the United States levies, presumably to protect a growing domestic ethanol industry. Compare that with the tariff of 5.25 cents per barrel of imported oil and the question becomes: Why are we heavily taxing a cheap and clean fuel while importing foreign oil with practically no tax?

Second, although production costs are commonly used to determine ethanol's benefits, those figures can be misleading in long-term forecasts because technological advances will continue to increase the efficiency of converting feedstock materials into ethanol, contributing to lower production costs. Further, while corn and corn stover are two of many different types of feedstocks used to produce ethanol, converting them into fuel is comparatively inefficient and costly. Cellulosic ethanol, however, can be made from a greater variety of feedstocks -- virtually any plant matter or municipal waste -- and its production is highly efficient and cost-effective. Studies have shown that costs associated with the entire production chain and use of cellulosic ethanol can be equal to, or even less than, that of gasoline.

The International Energy Agency speculates that "if the cost targets for cellulosic ethanol production techniques over the next decade are met, a new supply of relatively low-cost, high net-benefit biofuels will open, with large resource availability around the world."

Third, market forces, particularly in the private sector, will drive production and widespread adoption of ethanol. Record high oil prices are causing petroleum companies to seek new revenue streams by providing consumers a choice at the fuel pump, and they are not the only ones seeking to cash in.

Take Archer Daniels Midland Co., for which ethanol is the most profitable business segment. The company began producing corn-based ethanol in 1978 and today produces more than 1 billion gallons a year. Although the fuel accounts for only 5 percent of its annual sales of $36 billion, analysts believe it generates 23 percent of its operating profit.

The company announced last fall that it would increase production by 500 million gallons in 2006, and other firms are following suit. Pacific Ethanol Inc. of Fresno, Calif., has raised $111 million to build five production plants in that state. Cargill is also starting ethanol production in many states, including Iowa, Minnesota and Nebraska. In total, new ethanol production is expected to climb by 40 percent as a result of $2.6 billion in new project investments.

Finally, the notion of biofuel crop farms encroaching on farmlands used to grow food is an aging argument that has become less of a concern. Ethanol feedstocks such as switchgrass can be planted and harvested very quickly, yielding numerous crop cycles each year and thus greatly reducing the amount of land needed for growth. Many biofuel advocates and agriculture analysts believe the farming of biofuel crops will invigorate and benefit farmers in Midwestern states, as well as contribute to the sustainable development of some of the poorest countries in the world if they choose to farm ethanol feedstocks.

Ethanol is in a prime position to become the alternative fuel of choice for transportation.

The writer is a graduate student in renewable energy technologies at the University of Maryland University College.

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