Market News

 May 17, 2010
Why Corn-Based Ethanol Sucks

 by Richard T. Stuebi

While it is increasingly recognized that subsidies for corn-based ethanol are bad policy, a nod must be given to C. Ford Runge, a professor at the University of Minnesota, for his pithy and merciless analysis in his note "Biofuel Backlash" published in the May/June issue of Technology Review.

In the space of just a few short paragraphs, Prof. Runge cites the work of Earth Track (a firm dedicated to exposing subsidies detrimental to the environment) projecting $400 billion of U.S. subsidies to ethanol between 2008-2022, notes a recent estimate by the Earth Policy Institute that the 2008 U.S. corn crop diverted for ethanol production would have been sufficient to feed 330 million people for a year, and provides a reference to modelling that indicates a near-doubling of greenhouse gas emissions due to changes in land-use patterns associated with corn-for-ethanol production.

It's amazing that such awful policies, which are so adverse on so many dimensions, can survive. But, in the gameboard that is U.S. energy, environmental, and agricultural policy, only grand compromises supported by the big boys can get enacted -- which are then extremely difficult to overturn when they are seen to be nothing more than gifts to their well-positioned and deep-pocketed sponsors and supporters.

Reiterating a point I've made before: I have nothing against ethanol per se. Cellulosic ethanol, if it can be accomplished cost-effectively, is a promising prospect for reducing greenhouse gases and reliance on Middle Eastern petroleum without chewing up valuable foodstuffs. But corn-based ethanol plainly sucks. And, the notion of using corn-based ethanol as a bridge to cellulosic ethanol is dubious at best.

The old adage says that a camel is a horse designed by committee. Would it were that U.S. biofuels policies were as lovely as a camel.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.