[getsmart-l] The support for ethanol from corn is drying up; what we save in subsidies we may pay to Brazil

[John O'Gorman]

http://www.theglobeandmail.com/servlet/story/RTGAM.20080512.wethanol12/BNStory/National/home
Backing for ethanol boost evaporates
Rapidly rising food prices have opposition parties rethinking their support for the farm-derived fuel 
BILL CURRY From Monday's Globe and Mail May 12, 2008 at 3:53 AM EDT

OTTAWA — Corn farmers counting on a big federal push for biofuels could soon be disappointed as, one by one, opposition parties are pulling their support for government legislation boosting ethanol content in Canadian gasoline.

Citing concern over soaring food prices, the Bloc Québécois is confirming it will vote against the bill when it comes to a final House of Commons vote at third reading. The sudden reversal is particularly unusual, given that the party voted for the bill as recently as May 1.

The Bloc's move comes after the NDP also pulled its support for the bill at the very late stages of the parliamentary process.

Those twin decisions leave the fate of the legislation and possibly the future of Canada's corn-based biofuels industry in the hands of the Liberals - and they, too, are having doubts.

The party's senior critics in areas such as environment, finance and agriculture held a flurry of meetings and discussions last week to discuss whether they should change their position in light of international warnings that ethanol is partly to blame for food inflation.

"There is a chance that the bill will not pass, depending on what we do. We're still negotiating that internally," said Liberal MP Keith Martin, the party's international development critic. "We now know that biofuels aren't what they were all made out to be and the new science must force all of us to rethink our position on biofuels."

Liberal environment critic David McGuinty insists the party's internal debate is over and that Liberals will vote in favour of the bill at third reading. 

However, with Liberals holding a majority in the Senate, Mr. McGuinty said, there is a good chance Liberals will make changes to the bill at that point.

"Anything's possible," Mr. McGuinty said.

Manitoba corn farmer Murray Pritchard said he and others had high hopes the federal plan would give them an economic boost.

"I really can't believe that they're going to back away from [ethanol]," he said of the political developments in Ottawa. "I think they're doing a little bit of posturing because of politics."

Mr. Pritchard, who is president of the board of directors for the Manitoba Corn Growers Association, said the federal ethanol target will end up being met by U.S. corn farmers if the opposition puts limits on Canadian corn ethanol.

He also said he does not see a link between corn and high food prices.

"I don't think corn is priced too high yet. It's just been abnormally low for a lot of years and people have gotten used to it," he said. "So an easy place to put the blame is on the price of corn, in my opinion."

The Bloc's change in position occurred last week after Bloc MP Bernard Bigras moved a motion at the Commons environment committee calling for assurances the new law will not lead to an increase in Canadian production of ethanol from corn.

The motion was supported by the NDP, but it was defeated by the Conservatives because the Liberals on the committee abstained. 

Critics of ethanol have argued that as the world increases its use of food crops such as corn to produce gasoline, the new demand increases the price - which is good for farmers and bad for food prices. Corn-based ethanol has also been criticized from an environmental point of view as an inefficient way of producing gasoline when compared with other sources such as sugar cane.

All parties support emerging forms of ethanol that can be made from hay and other biological sources that are not food. 

However, those sources, often called cellulosic ethanol, are not yet ready to meet the demand that would be triggered by a 5-per-cent ethanol content requirement in Canadian fuel.

In addition to the 5-per-cent target, the Conservative government has announced $2.2-billion in federal support for ethanol. 

Of that, $500-million is targeted toward the promotion of cellulosic ethanol.

Environment Minister John Baird has said his government wants to move as quickly as possible away from corn ethanol and into this "next generation" of biofuels.

http://www.theglobeandmail.com/servlet/story/RTGAM.20080512.wrreguly12/BNStory/robColumnsBlogs/

It's time to kill corn subsidies and go Brazilian
ERIC REGULY From Monday's Globe and Mail May 12, 2008 at 6:28 AM EDT

  a.. E-mail Eric Reguly  | Read Bio  | Latest Columns 
New in the ROB, feature columnist Eric Reguly will write in this space every Monday.

Your doctor will tell you not all cholesterol is created equal. The dangerous version can kill you, the good can make you healthier. Brazil uses the same line with ethanol. The corn-based stuff pumped out by the Americans and Canadians is bad, bad, bad. But our sugarcane ethanol is cheap and plentiful and environmentally friendly.

There is no doubt sugarcane ethanol is the more attractive fuel by almost every measure; just how much is still matter of political and scientific debate. Which raises the question: If there is good ethanol and bad ethanol, why not take the good, ditch the bad and put the billions of savings to other uses?

Forget it. The United States and Canada use a wall of import duties and tariffs to repel Brazil's sugarcane ethanol, and protect corn ethanol. They do so in spite of the barrage of evidence that the latter is harmful to taxpayers and the environment and is pushing up food prices around the world.

In Canada, the House of Commons just approved a bill that will require gasoline to have 5-per-cent ethanol content by 2010. Europe is implementing aggressive biofuel content rules. The Americans treat corn ethanol as a birthright.

The Brazilians are old ethanol pros. Sugarcane ethanol came to life in the 1970s, when the twin oil shocks made gasoline prices unaffordable. The government subsidized production and encouraged auto makers to engineer cars that could run on ethanol.

The effort was pretty much a dud. The engine technology was abysmal and falling oil prices soon made gasoline attractive again. In the 1980s, Brazil killed the subsidies.

But Brazil saw a long-term future in sugarcane ethanol, and it slowly came back to life. The fuel could create jobs in the deregulating agriculture industry, reduce the dependence on foreign oil and give motorists a choice at the pumps. Technological improvements would allow car engines to run on various ethanol-gasoline mixtures. 

At the time, sugarcane's relative environmental benefits were of no concern. 

The attraction was low cost and high efficiency in a country too poor for high-tech alternatives to gasoline and diesel.

Sugarcane is everything corn is not. Corn is a food. Turning it into fuel raises food prices because of competition for arable land. In the United States alone, one-third of the corn crop goes to ethanol production. In the European Union, some 15 per cent of arable land will have to be devoted to biofuel production to meet content mandates. Yes, sugar is food. But it is not a staple.

Sugarcane ethanol is inexpensive to produce. It requires no irrigation and only small amounts (relative to corn) of fertilizers and pesticides. It grows year round. The factories where sugarcane is turned into ethanol are clever little contraptions. The waste material is burned to produce steam, which spins a turbine to make electricity. About 3 per cent of Brazil's electricity comes from the ethanol factories. The figure is expected to rise to as much as 15 per cent by 2015.

Where sugarcane shines is in efficiency. One hectare yields 7,500 litres of ethanol. One hectare of corn produces about 4,000 litres, according to the United States Department of Agriculture. The Brazilian sugarcane association, known as Unica, claims one unit of energy is required to produce nine units of sugarcane ethanol. The ratio for corn is far worse, at one to two. Did we mention Brazilian ethanol gets no subsidies?

To be sure, sugarcane is not perfect. Since most of it is harvested by hand (mechanization is coming), the working conditions can be grim, and flash burning is often used to clear the foliage around the plants to make access easier. Burning creates carbon dioxide. While sugarcane is grown near Sao Paolo, well south of the Amazon rain forest, the argument can be made that the land devoted to sugarcane displaces other crops, resulting in deforestation elsewhere.

Add up the pluses and the minuses and sugarcane ethanol blows corn ethanol off the farm. So why not import it?

Because ethanol is all about transferring wealth to the American and Canadian corn industries. The subsidies are rich, the market is guaranteed through content goals. The American corn ethanol machine will tolerate no threats. The new U.S. Farm Bill proposes to extend the ethanol import tariffs - 54 cents (U.S.) a gallon - for another two years.

Canada's corn ethanol industry, while smaller, also sucks up a fortune in subsidies for dubious environmental benefits and unwelcome upward pressure on food prices. If Canada wants ethanol, import the good stuff. If it wants to be serious about the environment, kill domestic ethanol subsidies and plow the money into technology devoted to making the oil sands cheaper. "The oil sands need enormous investment to make them environmentally sustainable," says Annette Hester, a research fellow at the Canadian International Grains Institute.

The chances of either happening are small. The Canadian and American ethanol policies border on the insane.

Flex fuel reigns in Brazil

In Brazil, 90 per cent of new cars are 'flex-fuel' vehicles - they can burn any combination of gasoline and ethanol.

By 2012, half of the Brazilian car fleet (25 million vehicles) will be flex-fuel vehicles.

Brazilian gasoline contains no less than 25 per cent ethanol.
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