BioFuels: It's Time to Set the Record Straight

Bliss Baker, Vice President GreenField Ethanol

As oil prices climb well above the $100 mark and concerns about global warming prevail, countries around the world are confronted with an opportunity to break their dependency on fossil fuels by replacing part of the gasoline pool with renewable biofuels like ethanol.

Ethanol is made from feedstocks such as corn, wheat, sugarcane and cellulosic materials including agricultural, forestry and urban waste residues. It is a cleaner, greener, more affordable source of energy. This homegrown fuel allows us to strengthen economic and environmental prospects at home and in the developing world.

But like any solution that disrupts the status quo (in this case, big oil), biofuels has its detractors – people with strong agendas opposed to change. Given recent media reports falsely blaming biofuels for food shortages in the developing world and more expensive groceries at home, it is time to set the record straight.

What causes food shortages and high prices?
The answer is clear: $100 oil and increased Asian demand.

In the past year alone, the price of oil has increased by approximately 100 per cent. Food marketing costs in the United States (including fuel costs that have doubled) account for roughly 80 per cent of the price we pay at the checkout counter. Farmers need fuel to harvest their crops and to ship their goods to market. With oil prices well above $100 a barrel, this has become an expensive process, especially in the developing world.

The growing middle class in India and China is also having a huge impact on food costs. This growing group of consumers is hungry for food and goods that consume oil. Furthermore, OPEC (the Organization of Petroleum Exporting Countries) continues to withhold production while the world’s existing refining infrastructure is operating near peak capacity. Biofuels production may also be having an impact, but it pales in comparison to the impact of $100 oil and Asian demand.

The numbers don’t lie. After removing the volume of corn used in the United States for the production of ethanol (roughly 20 per cent of total corn production), farmers still produced a net 9.7 billion bushels in 2002, 10.4 billion bushels in 2006 and 12.2 billion bushels in 2007. As demand for corn grew, so did supply. Prices for fish and rice – which play no role in biofuel production but need to be transported – have also increased significantly because of $100 oil and Asian demand. The inescapable conclusion is that higher oil prices and Asian demand are causing rising food prices – not biofuels.

What is the remedy?
The good news is that biofuels like ethanol can help the world meet its growing transportation fuel demands. In fact, biofuels are a triple winner: for the economy, for farmers and for the environment.

In economic terms, biofuels compete with gasoline and therefore will serve to moderate price increases and supplement supply. Even more significant are the opportunities for growth. Our agriculture sector, that supplies the corn and wheat used to make ethanol, is on the road toward new prosperity and selfsufficiency. The promise of biofuels could also open up these opportunities in the developing world.

Finally, the environmental benefits of biofuels are both significant and growing. According to Natural Resources Canada’s GH Genius model, ethanol made from corn and wheat brings greenhouse gas reductions of 40 to 60 per cent compared to gasoline. And cellulosic ethanol has the potential to reduce greenhouse gasses by up to 90 percent, according to the US Department of Energy’s GREET model.

Whether your concern is the price of food, the price of fuel or fighting climate change, the conclusion is the same. Biofuels like ethanol represent a source of optimism for the future. A new bio-economy is upon us, where value is drawn from renewable resources we grow and harvest, rather than non-renewable resources we extract and mine. Ontario’s corn farmers have a key role to play in this homegrown solution to $100 oil and global warming.