Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Wednesday, July 12, 2006

The Morality of Using Food to Fuel Our Cars

Somehow forgotten amidst our (meaning environmentalists) love affair with the idea of using corn and soybeans to fuel our planes, trains, and automobiles is the debate about the morality of using these crops for fuel when major swaths of the world population are still hungry. I also have a gathering unease about the already piggish interests that are pushing for more ethanol production. Taken together, I am rethinking the wisdom of the whole undertaking.

On the face of it, using ethanol as a replacement for foreign oil seems a no-brainer. It is a renewable resource. We have scads of farms that need more demand and higher prices for corn. Plus, the emissions from the tailpipe are significantly less, though there is still much debate over how much emissions are saved in the whole bushel-to-gas-tank process. It will create American jobs, farmers love it, and we get to stick it in the eye of the Canadians, Russians, and oil sheikhs.

Sorry to ruin the fairy tale. First, this week, the Proceedings of the National Academy of Sciences, estimated that if all the corn in this year's crop were used for ethanol production, we could satisfy only 12 percent of our energy needs. Add the entire soybean crop, and we can squeeze out another 9 percent. Of course, we would have neither of those bountiful harvests to eat, but hey, we could all use less corn syrup in our diets, and only the long-haired communal hippies are eating soy. All jokes aside, whether or not we exported directly to countries with staving populations, creating such demand for these crops would raise the global price of this commodity. Raising the price means that the poor countries who need it most will be able to afford less of it. This is sort of like how the American addiction to oil feeds the Iranian mullahs, even though we do not buy directly from them. Our demand fuels rising prices, which means that the mullahs can command a higher price elsewhere on the world market.

Second, ethanol can not be competitive with fossil fuels in the near future without massive government subsidies. Herein lies another problem. Despite their carefully crafted image to the contrary, the corn-growing lobby is one of the fattest recipients of government subsidies we have. There is no compunction about it, either. Several leaders of corn-growing regions cite the availability of easy federal dollars as the reason for the explosion in permits for ethanol processing facilities.

Third, because of the rush to get the federal dollars, ethanol processors are short circuiting the environmental benefits by using dirty coal to power their plants. A recent Grist article quoted energy analyst Robert McIlvaine as predicting that 100 percent of new ethanol plants will use coal, thanks to its predictable price and supply instead of the relatively cleaner natural gas. This all defeats the purpose of transitioning to this clean source in the first place.

Given the incredible logistical complexities and economic cost of replacing the fueling infrastructure for our transportation needs, it might be a boondoggle to attempt it in the first place. The price of bottled water is still more expensive than a comparable amount of gas. Not that we should give up.

Stationary generators of power are most capable of achieving our goals with federal subsidies. Forget about cars, for now. We should put our talents toward generating clean energy in stationary applications, such as power plants. These technologies are much closer, and will not require the massive re-working of our infrastructure. Then, we should deal with automobile pollution by migrating towards electric generation. This technology exists today with plug-in hybrids. Plug-ins will allow a Prius, for example, to use more energy from electricity. The car is plugged in at night, and in the morning, it's ready to go. If you find yourself short, then gas can cover the shortfall. In Austin right now, one could purchase a plug-in, and charge it with clean energy from the Green Choice program. Then, the decrease in demand for fossil fuels from stationary applications will cause the price of oil to fall, and allow us to re-capture the money and power that is currently going overseas.

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