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Is Ethanol Causing Food Disruption and Contributing to Climate Change?

If you are a socially responsible investor, you may want to rethink any commitment you have to ethanol and its use as a fuel supplement, oxygenate, and climate change solution.

The U.S. Energy Information Administration (EIA) reports that U.S production of ethanol (the predominate biofuel in use) is the highest it has been since Jan. 2012.

Source:U.S.Energy Information Administration (EIA)

The UN is rethinking ethanol
However, the UN Intergovernmental Panel on Climate Change (IPCC) reports in two of its own Working Group Reports that ethanol may not be all it's cracked up to be. The IPCC states in its Working Group III – Mitigation of Climate Change report, chapter 8, page 21:

...for some biofuels, indirect emissions—including from land use change—can lead to greater total emissions than when using petroleum products... 

In addition, IPCC states that ethanol has a lower energy density...

However, ethanol has about a 35% lower energy density than gasoline, which reduces vehicle range—particularly at high blend levels...

...making it a less effective fuel.

Reducing human food stocks?
There is also strong debate that production of ethanol from human food stocks reduces the available food for human consumption, resulting in global food stress. Princeton University researcher Tim Searchinger conducted research and found that:

Many models... are predicting that even in the long run, much of the food diverted to biofuels will not be replaced... In the short-term, farmers have less ability to boost food production, so more of the crops diverted to biofuels must come from the food eaten by people. These even greater impacts on hunger are likely to continue if governments continue to demand that biofuel production grow at a rate faster than farmers can fully match.

Forbes magazine also reports that U.S ethanol consumption alone accounts for food losses that could feed hundreds of millions:

In 2014, the U.S. will use almost 5 billion bushels of corn to produce over 13 billion gallons of ethanol fuel. The grain required to fill a 25-gallon gas tank with ethanol can feed one person for a year, so the amount of corn used to make that 13 billion gallons of ethanol will not feed the almost 500 million people it was feeding in 2000. This is the entire population of the Western Hemisphere outside of the United States. 

Alternatives to the alternatives
A variety of alternative energy sources show long-term promise, and alternatives that do not draw from human food stocks should be the preferred alternatives. Recent research indicates that isobutanol may be a good alternative to ethanol. It is less corrosive, absorbs little water, has a higher energy content, can be produced in existing retro-fitted ethanol plants, and can be produced from waste cellulose products rather than human food stocks.

The U.S Department of Energy confirms this research with research of their own led by the Oak Ridge National Laboratory:

Using consolidated bioprocessing, a research team led by James Liao of the University of California at Los Angeles for the first time produced isobutanol directly from cellulose. The team's work... represents across-the-board savings in processing costs and time, plus isobutanol is a higher grade of alcohol than ethanol.

"Unlike ethanol, isobutanol can be blended at any ratio with gasoline and should eliminate the need for dedicated infrastructure in tanks or vehicles," said Liao,... "Plus, it may be possible to use isobutanol directly in current engines without modification." 

All investors, and especially socially responsible investors, may want to check out companies such as Dupont (NYSE: DD  ) and BP (NYSE: BP  ) , which are collaborating on their Butamax project. These two large companies have the resources to pursue and market Butamax isobutanol products, and now the legal standing as they won the patent case brought against them by rival Gevo. Butamax reports that they are still using human food stocks in their process but they are pursuing alternative stocks.     

Intrexon (NYSE: XON  ) is taking a different approach. Intrexon is working to use the methane components of natural gas as the stock for microbial conversion to isobutanol. This process will not use human food stocks and will take advantage of abundant natural gas resources. While natural gas is a fossil fuel and environmental purists may argue against its use, it does produce a viable liquid fuel substitute to ethanol for use in existing engines. You can read additional details in this article.

Frankly, ethanol presents a dilemma for socially responsible investors. It also presents a dilemma for a number of other reasons. If alternative energies are to be mandated upon the consumer then we should use the best alternatives. Isobutanol looks to be a better solution to ethanol both socially and economically. 

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Read/Post Comments (5) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 13, 2014, at 2:28 PM, Decoy0527 wrote:

    I do believe the use of ethanol shows use that the law of unintended consequenses if still in force. Happens frequently.

  • Report this Comment On July 14, 2014, at 8:35 AM, funfundvierzig wrote:

    DuPont's business model of FOOD-to-FUEL & FABRICS is not only environmentally destructive but economically damaging, exacerbating food price inflation and drawing down limited global food supplies. This flawed DuPont business paradigm embraced by its "Sustainability"-driven executives is not ever likely to make much money for DuPont shareholders. ...funfun..

  • Report this Comment On July 15, 2014, at 10:38 AM, GrowthEnergy wrote:

    We can have renewable fuels and feed the world. A 2013 World Bank study clearly demonstrated that the primary driver of increased global food costs is the rising price of energy, not higher farm commodity prices or ethanol production. This analysis has been validated by the U.S. Department of Agriculture and countless other objective economic studies. Corn is only a fraction of overall food and grain costs. For every $1 spent at the grocery store, more than $0.82 goes to pay for energy intensive operations such as processing, packaging and marketing. The less than $0.18 remaining goes to farmers, and of that, about 3 pennies go to corn.

    Only 17.5 percent of net corn acres—not 40 percent as Big Oil often incorrectly cites—are used for renewable fuels because only the starch in the corn is used to produce ethanol. The rest is returned to the food chain in the form of a high protein, highly nutritious animal feed for cattle, hogs, poultry and other animals around the world.

    Since its introduction in 2005, the Renewable Fuel Standard has been a resounding success. American jobs have been created that cannot be outsourced. Rural communities have been revitalized. Our nation’s energy independence has been increased. What’s more is that all of this significant progress has been made while providing consumers with a choice and much needed savings at the pump.

    Advanced biofuels also have the potential to reduce greenhouse gas emissions by over 100 percent in comparison to gasoline, according to the Argonne National Laboratory and others. Ethanol reduces greenhouse gas emissions by an average of 34 percent in comparison to gasoline, and that figure is even higher when controversial land-use change models are excluded.

    These biofuels are the solution to our nation’s devastating addiction to oil, not the problem.

  • Report this Comment On July 16, 2014, at 12:09 AM, funfundvierzig wrote:

    Notwithstanding the PR dissimulation of the lobbyists for DuPont and the producers of bad-mileage, engine-destroying ethanol, the manufacture of fuel from food requires an enormous amount of energy to plant, irrigate, harvest, process and to separately distribute ethanol. Moreover, the increased use of fertiliser requires, guess what?...natural gas. Ethanol saves little if any energy, and may be energy negative!

    Is anyone going to tell us with a straight face that DuPont's and BP's huge joint venture in Hull, England, which gobbles up 1.1 million tonnes of wheat annually to churn out costly biofuel does not affect the price and supply of wheat available for human food?

    Now with the super-abundance of lower cost natural gas and oil produced in the mid-section of the United States, costly ethanol becomes even less attractive and competitive.

    What are millions of hungry children on the globe to do? Gnaw on DuPont's corn-made carpets and drink down biofuel made out of bread?


  • Report this Comment On July 16, 2014, at 6:28 PM, dmesmerf wrote:

    The right edges of the italics paragraphs in this article have been cut off. Please pay attention to your formatting, Motley Fools. After that, we can concentrate on feeding the world.

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Jonathan Cook

Jonathan Cook is a former software engineer who decided to get out of the corporate rat race. Long ago he took on the attitude of long term investing and now enjoys pursuing his dreams in early retirement. He periodically contributes to the Motley Fool.

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