Ethanol is a Net Energy Loser

In his State of the Union speech, President Bush called for increasing ethanol as a way of reducing petroleum consumption and dependence on foreign oil. It will do just the opposite.

Many studies over the years have concluded that it takes more energy for growing the corn (for farm machinery, pesticides, fertilizers) and distilling the alcohol than you can get from burning the ethanol that is produced. The best known of these is by Prof. David Pimentel of Cornell University, which is featured in the Encyclopedia of Physical Sciences and Technology. But his work has been criticized by the ethanol industry and others promoting ethanol, including the National Corn Growers Association, the Renewable Fuels Association, and the U.S. Dept. of Agriculture. They have come up with their own studies, the best known of which is by Hosein Shapouri, an economist with the U.S. Dept. of Agriculture.

Pimentel says “The reason [they] come up with positive returns and we do not is that they omit about half of the inputs.” One he has cited is the energy needed to make and maintain farm equipment. He asks, “Have you seen many farmers raising corn by hand?” He also says Shapouri “draws the bounds too close to the gates of the ethanol plant.” But the most important dispute involves the amount of energy credited to byproducts from ethanol production, whose principal use is cattle feed. Shapouri charges 34 percent of the energy to this purpose, leaving only 66 percent charged against ethanol. Pimentel, on the other hand, says the appropriate credit should be the amount of energy needed to grow and produce soybean meal, which can be used for the same purposes—and requires vastly less energy. The cost has to be competitive or no one would use the product. Why would anyone substitute a high cost product for a low cost one? Only by crediting an unrealistically high energy cost to the byproduct can the cost of ethanol be held artificially low enough to make it appear net-energy efficient and economic. (If it were energy efficient and economic, it would not need government subsidies.)

The ethanol advocates claim Pimentel used old data and that the industry has gotten more efficient since his study several years ago. They say it now results in a net gain in energy. However, just two moths ago Pimentel and his colleague Ted Patzek, of the Department of Civil and Environmental Engineering at University of California-Berkeley, provided an update. Writing in BioScience, they state:

"Our up-to-date analysis of the 14 energy inputs that typically go into corn production and the 9 invested in fermentation and distillation operations confirms that 29 percent more energy (derived from fossil fuels) is required to produce a gallon of corn ethanol than is contained in the ethanol. Ethanol from cellulosic biomass is worse: With current technology, 50 percent more energy is required to produce a gallon than the product can deliver."

They also state that “the environmental impacts of corn ethanol are enormous,” including severe soil erosion, heavy use of fertilizers and pesticides, and 1,700 gallons of water (mostly to grow the corn) for each gallon of ethanol, plus 6 to 12 gallons of noxious organic effluent.

Once again, government intervention in the market is worse than if it did nothing. It is substituting a more expensive product at a net loss of energy, with greater consumption--not conservation--of petroleum resources and with more severe impact on the environment than would occur if the outcome were simply left to the free market. It is another illustration of the wisdom of Nobel Prize-winning economist Friedrich Hayek when he said it is a “fatal conceit” that government can do better than the market in determining the economic actions that can best advance society.