06.10

Biofuel Review Part 4: Food vs. Fuel and Profit vs. Hunger

By Patrick E. Meyer, Ph.D.

Introduction

Most experts agree that, if managed properly, biomass fuel stocks are a reliable and sustainable energy resource that can replace significant amounts of fossil fuels and assist in reducing emissions of greenhouse gasses (Smith, 2004). Biofuels, in particular, have the potential to become major contributors to the global primary energy supply over the next century (Berndes, Hoogwijk, & Broek, 2003). Ethanol has been dubbed the most bipartisan energy source in America; President Bush raised targets for its use and President Obama has increased them even further (Bittle & Johnson, 2009). However, a full understanding of the global impacts of expanded biomass production has yet to be realized. Increases in biomass production have already had an impact on energy, environment, economy and society — yet the extent of future impacts remains uncertain.

In this ongoing series on biofuel and biomass energy, I discuss the most prominent and critical issues surrounding the biofuel industry. In the first article, I discussed biofuel basics, outlining the general premise of the biofuel industry (Meyer, 2009a); in the second article I discussed emissions impacts and infrastructure development, providing information on biofuels’ greenhouse gas (GHG) emissions, and availability of infrastructure (Meyer, 2009b); and in the third article I discussed the critical issues of land availability, conversion and deforestation (Meyer, 2010). This article, the fourth in the series, provides a discourse on the food versus fuel and profit versus hunger debates. That is, firstly, how does biomass production impact food prices, and secondly, how does the value of bioproducts impact the decision making of organizations as they weigh options of commercial profit or societal well-being.

Food vs. Fuel

In 2007-2008, more than 25 percent of the corn grown in the United States was used for fuel (CRS, 2008). Further, it is projected that biofuels will meet most of the growth in liquid fuel supply from 2010 to 2035 (EIA, 2009). The other 75 percent of the corn is used mostly for food, so we need to think carefully about what will happen to corn-based food if we increase the portion of corn devoted to fuel. As asserted by Bittle and Johnson (2009): “If the United States currently devotes 25 percent of its corn crop to ethanol, and ethanol is 5 percent of American gasoline use, how much of the corn crop would be needed to produce 20 percent of gasoline use? That’s right: all of it. Which would significantly impact American production of corn dogs, not to mention everything else we use corn for” (p. 225).

The United States accounts for about 40 percent of the world’s total corn production, and more than half of all corn exports (Runge & Senauer, 2007). Increased ethanol production is having and will continue to have a substantial impact on food prices worldwide. Lester Brown, president of the Earth Policy Institute argues that “since nearly everything we eat can be converted into automotive fuel, the high price of oil is becoming the support price for farm products … On any given day, there are now two groups of buyers in world commodity markets: one representing food processors and another representing biofuel producers” (Brown, 2006). As a result, in March 2007, corn futures rose to over $4.28 a bushel, the highest level in ten years (Runge & Senauer, 2007).

Food prices spiked even higher in 2008, and the prices had a devastating effect in nations worldwide (Bittle & Johnson, 2009). There were food riots in thirty nations, including Haiti, where thousands of people marched in the streets shouting, “We’re hungry!” (Bittle & Johnson, 2009; nytimes.com, 2008). Although other issues, such as rising prices of fertilizer and energy of all kinds, had impact on the high food prices, it is generally agreed upon that the fact that major agricultural nations, including the United States, countries of the European Union (EU) and Brazil, are shifting cropland to biofuel production is a major part of the problem (Bittle & Johnson, 2009).

The new competition between biofuel and food production has created a situation which, according to the World Bank, could push 100 million people into deep poverty (Kanellos, 2008). Consider the following quotes:

Global energy consumption will rise by 71 percent between 2003 and 2030, with demand from developing countries, notably China and India, surpassing that from members of the Organization for Economic Cooperation and Development by 2015. The result will be sustained upward pressure on oil prices, which will allow ethanol and biodiesel producers to pay much higher premiums for corn and oilseeds than was conceivable just a few years ago. The higher oil prices go, the higher ethanol prices can go while remaining competitive — and the more ethanol producers can pay for corn.

The International Food Policy Research Institute projects that given continued high oil prices, the rapid increase in global biofuel production will push global corn prices up by 41 percent by 2020. The prices of oilseeds, including soybeans, rapeseeds, and sunflower seeds, are projected to rise by 76 percent by 2020, and wheat prices by 30 percent by 2020. In the poorest parts of sub-Saharan Africa, Asia, and Latin America, where cassava is a staple, its price is expected to increase by 135 percent by 2020 (Runge & Senauer, 2007).

Despite these alarming statistics, there appears to be no lightening of demand or production of biofuels or biomass in general. Growth in biomass markets will occur not only for liquid transportation fuels, but for electricity generation as well. The U.S. Department of Energy's Energy Information Administration (EIA) projected in 2009 that by 2013, the majority of new nonhydropower renewable electricity generation will be from biomass sources (Figure 1).

Figure 1. Nonhydropower renewable electricity generation growth 1990-2035

Graphic source: EIA (2009)

Many experts argue that the rapid growth in biofuels production may have unexpected economic benefits for the world’s poor (worldwatch.org, 2007). The Organization for Economic Cooperation and Development (OECD) has warned that world food prices may rise another 20 percent to 50 percent by 2016, and that biofuel development will partially drive that increase (Bittle & Johnson, 2009; OECD, 2007).

It must be remembered that biofuels are one contributing factor to the increase in global food prices, but they are not the only factor. Steady pressure on food prices has been building for several years because of increased food consumption in emerging nations (Kanellos, 2008). Moreover, consider that the use of pesticides and fertilizers, and the transportation and distribution of food all rely on fossil fuel products. As oil prices increase, so do food prices, regardless of whether or not biofuel demand has also increased.

Profit vs. Hunger

Despite the many social and economic benefits of globalization, unequal access to food is common, and undernourished communities abound in today’s world (Smil, 2003). The Food and Agriculture Organization (FAO) reports that in the late-1990s, there were more than 820 million undernourished people in the world, or about 14 percent of the world’s population at that time (FAO, 2000). More than a decade later, these statistics have become even worse, with more than one billion people starving worldwide by 2008 (Borger & Jowitt, 2008).

While people starve throughout the world, some countries must seriously question the logic behind growing crops for commercial profit, especially when such crops are sold to foreign markets rather than assisting the needs of citizens. Consider that filling the 25-gallon tank of an sport utility vehicle (SUV) with pure ethanol requires more than 450 pounds of corn—which contains enough calories to feed one person for a entire year (Runge & Senauer, 2007). Even countries that have a high number of starving citizens seek to export crops for profit rather than selling it locally to needy citizens for a lower price. Recently, food producers can expect a better price for their crop when selling to a fuel processor rather than a food processor. On a grand scale, the desire for profit, and the neglect of the world’s most food-deprived people may aggravate hunger issues several fold.

For example, consider Ghana’s decision to build their first industrial-scale biofuels project, not to produce fuel for use domestically, but for export of ethanol to Sweden. The ethanol plant will be built by a Brazilian company but run locally. A Swedish green fuels company has committed to buying the first 10 years of the plant’s production, which is enough to cut Sweden’s ethanol deficit by almost one third. After the first year of production, ethanol will rank fourth amongst Ghana’s exports, behind coffee, gold and timber (forbes.com, 2008). By late 2009, several thousands of hectares of land had been acquired by multinationals across Ghana for the production of food crops and non-food crops for the production of biofuels (Dogbevi, 2009).

In another example, a small Argentinean biotechnology firm has signed a five-year contract to export one million liters of soybean-derived biodiesel to a German fuel distribution company. The contract represents the debut of Argentina in the world biofuel market (CropBiotech.net, 2006).

And in yet another example, Dallas-based Maple Energy will clear-cut 20,000 acres in Peru for sugar cane-based ethanol production for export to the United States and Europe. The plant is expected to produce about 30 million gallons of ethanol a year (Bridges, 2007).

These are just three examples among countless others where developing nations are signing contracts to grow and export biofuels to meet industrialized nations’ demand. Peru and Argentina rank as “high human development” on the United Nations’ Human Development Index (HDI) (UNDP, 2010). So perhaps Peru and Argentina can afford to export ethanol instead of grow food crop for local use — but Ghana perhaps cannot. Ghana, which ranks at 152 out of 182 on the HDI, barely passes as “medium human development” and likely could find more pertinent use for food used locally instead of sold abroad for fuel.

As long as farmers in developing nations can fetch a higher price for their product sold to fuel producers rather than food producers, the farmers will likely sell at the higher price. Government subsidies can prevent this by providing farmers a higher price to sell locally, but the farming is often taking place in regions of the world where subsidies are impossible, impractical or non-functional.

An answer of many of the above-discussed problems may be in advanced technologies such as cellulosic ethanol. Cellulosic ethanol is made from waste products such as wood chips, fast-growing trees and plants, such as switchgrass—that is, plants people do not eat (Bittle & Johnson, 2009). Furthermore, cellulosic ethanol, produced by advanced techniques, would create ethanol with a much higher power density than corn-based ethanol currently used (Smil, 2003). Studies show that cellulosic fuels (such as wood-derived methanol and grain-derived ethanol) could be cost competitive with liquid fuels refined from crude oil if there were sustained petroleum priced in excess of $40-50 per barrel (Kheshgi, Prince, & Marland, 2000; Larson, 1993; Smil, 2003). With the exception of a couple month period from late-2008 to early-2009, crude oil prices have been above $50 per barrel since early-2005 and are predicted to rise in the coming years (tradingcharts.com, 2010). So the question is: what are we waiting for? Logic should tell us that now is the time to seriously pursue cellulosic alternatives.

Still, recent estimates show that cellulosic ethanol technologies are years away. “In the meantime, we may need to ask ourselves whether we are actually getting all that much energy from the investment. Devoting the entire nation’s corn production plus all the soybean production to biofuels would only meet 12 percent of gasoline demand and 6 percent of diesel demand. And then we’d still be hungry for more food and more energy.” (Bittle & Johnson, 2009, p. 234) Bittle and Johnson raise a valid point and that’s exactly why most transportation energy analysts say that biofuels should constitute only part of a wide portfolio of alternative fuel options. In the next installment of this series, I will discuss two additional critical issues of biofuel and biomass energy development: the impact of these industries on water usage and biodiversity.

References

Berndes, G., Hoogwijk, M., & Broek, R. v. d. (2003). The contribution of biomass in the future global energy supply: a review of 17 studies. Biomass and Bioenergy, 25(1), 1-28.

Bittle, S., & Johnson, J. (2009). Who Turned Out the Lights?: Your Guided Tour to the Energy Crisis. New York: Harper.

Borger, J., & Jowitt, J. (2008). Nearly a billion people worldwide are starving, UN agency warns. London, UK: guardian.co.uk. Retrieved 18 February 2010, from http://www.guardian.co.uk/world/2008/dec/10/hunger-population-un-food-environment

Bridges, T. (2007). Texas Company to Clear 20,000 Acres in Peru for Ethanol Production. Houston, TX: Houston Chronicle. Retrieved 18 February 2010, from http://www.chron.com/disp/story.mpl/business/energy/5065093.html

Brown, L. (2006). How Food and Fuel Compete for Land. Washington, DC: The Globalist. Retrieved 18 February 2010, from http://www.theglobalist.com/StoryId.aspx?StoryId=5077

CropBiotech.net. (2006). Argentina to export biodiesel to Germany: CropBiotech Net. Retrieved 18 February 2010, from http://bioenergy.checkbiotech.org/news/argentina_export_biodiesel_germany

CRS. (2008). Fuel Ethanol: Background and Public Policy Issues. Washington, DC: Congressional Research Service.

Dogbevi, E. K. (2009). Land in northern Ghana to produce ethanol for export to Sweden. Legon-Accra, Ghana: Ghana Business News. Retrieved 18 February 2010, from http://www.ghanabusinessnews.com/2009/12/21/land-in-northern-ghana-to-produce-ethanol-for-export-to-sweden/

EIA. (2009). Annual Energy Outlook 2010 Reference Case. Washington, DC: Energy Information Administration.

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forbes.com. (2008). Ghana's first industrial-scale biofuels project to export to Sweden: Forbes.com and Thomson Financial News. Retrieved 18 February 2010, from http://www.forbes.com/feeds/afx/2008/05/04/afx4967145.html

Kanellos, M. (2008). The biofuel factor in rising food prices: CNET News. Retrieved 18 February 2010, from http://news.cnet.com/8301-11128_3-9918741-54.html

Kheshgi, H. S., Prince, R. C., & Marland, G. (2000). The potential of biomass fuels in the context of global climate change: Focus on transportation fuels. Annual Review of Energy and the Environment, 25(199-244).

Larson, E. D. (1993). Technology for electricity and fuels from biomass. Annual Review of Energy and the Environment, 18, 567-630.

Meyer, P. E. (2009a, 08). Biofuel Review Part 1: Biofuel Basics. Washington, DC: IEEE-USA Today's Engineer Online. Retrieved 27 October 2009, from http://www.todaysengineer.org/2009/Aug/biofuels-pt1.asp

Meyer, P. E. (2009b, 11). Biofuel Review Part 2: Emissions Impacts and Infrastructure Development. Washington, DC: IEEE-USA Today's Engineer. Retrieved 16 November 2009, from http://www.todaysengineer.org/2009/Nov/Biofuels-pt2.asp

Meyer, P. E. (2010). Biofuel Review Part 3: Land Availability, Conversion, and Deforestation. Washington, DC: IEEE-USA Today's Engineer. Retrieved 18 February 2010, from http://www.todaysengineer.org/2010/Jan/Biofuels-pt3.asp

nytimes.com. (2008). Haiti: Thousands Protest Food Prices New York, NY: The New York Times. Retrieved 18 February 2010, from http://www.nytimes.com/2008/04/08/world/americas/08briefs-THOUSANDSPRO_BRF.html?fta=y

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Smil, V. (2003). Energy at the Crossroads: Global Perspectives and Uncertainties. Cambridge, Massachusetts: The MIT Press.

Smith, Z. A. (2004). The Environmental Policy Paradox (4th ed.). Upper Saddle River, New Jersey: Pearson Education, Inc.

tradingcharts.com. (2010). Light Crude Oil (CL, NYMEX): tradingcharts.com. Retrieved 18 February 2010, from http://futures.tradingcharts.com/chart/CO/M

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worldwatch.org. (2007). Food and Fuel: Biofuels Could Benefit World’s Undernourished. Washington, DC: World Watch Institute. Retrieved 18 February 2010, from http://www.worldwatch.org/node/5300

Dr. Patrick E. Meyer is Principal at Meyer Energy Research Consulting, Newark, Delaware and Research Associate at Energy and Environmental Research Associates, LLC., Pittsford, New York. Holding a Ph.D. in Energy and Environmental Policy from the University of Delaware, Meyer specializes in alternative energy, electricity, and fuel technology policy analysis; global sustainable energy systems; and energy and environmental systems modeling and analysis. Meyer is a member of IEEE and the IEEE-USA Communications Committee and is IEEE-USA Today’s Engineer Energy, Environment & Sustainability Editor.

Comments may be submitted to todaysengineer@ieee.org.