Brazil: The future of biofuel in Minnesota?

Sometimes, critics point to the cost of flex-fuel vehicles. But let’s have a quick macroeconomics lesson, shall we? Today’s lesson is called Economies of Scale. The more you build something, the less it costs to build. If the government required all vehicles built, or imported, in the US to be flex-fuel, than the unit cost to produce them goes down. Suppliers will be forced to ramp up production of compatible parts, thus reducing their cost. Eventually, the increased cost is reduced to a nil change. As far as ethanol is concerned, we should be focusing on sugar-based ethanol, instead of corn. It take one barrel of oil to produce 1.3 barrels of corn-based ethanol. The ratio for sugar-based ethanol is 1-8 by comparison. We have plenty of areas in this country to ramp up sugar production. Sugar beets in the northwest. Sugar cane in Hawaii, Puerto Rico, and the southeast. And we could always import more sugar. It is not a panacea, but this effort could replace up to 30 percent of our current consumption of oil. It would be a nice bridge to our eventual conversion to hydrogen fuel cells.

Helm Matthews, in his enthusiasm for sugar-based ethanol, notes that there are plenty of areas in the United States where sugar can be produced -- sugar cane in Hawaii, Puerto Rico, and the southeast, and sugar beets in many other states. Agronomically, that is true. But economics matters also. The USDA has on numerous occasions evaluated the cost of producing ethanol from domestic sugar and they have always concluded that it doesn't make economic sense. Production costs in the USA are simply too high, protected from competition from cheaper producers (like Brazil) by import tariffs and quotas.

Oh yes, there will be some sugar-ethanol produced in the United States soon, but only under a new program which will involve the U.S. government buying up "surplus" sugar (expected as a result of freeing trade with Mexico) and selling it at a loss to ethanol makers.

Conrad Wilson himself alludes to the subsidies that support corn ethanol, but he only scratches the surface. A typical U.S.-made flex-fuel vehicle, the Chevy Tahoe, consumes around 1,000 gallons of ethanol a year if run exclusively on E85 (based on EPA fuel-economy ratings). That translates into a $500 per year loss to the federal treasury PER VEHICLE (because of the tax credit paid to ethanol blenders) and, depending on the state, typically another $100 in state production payments or foregone state road or sales taxes. If half the U.S. gasoline-powered fleet ran on E85, and the subsidies were kept in place, that would mean a subsidy cost to the nation of around $50 billion a year.

And that's at current subsidy rates. If most of the ethanol used in the USA were to come from cellulosic sources, which under the latest Farm Bill will benefit from a federal tax credit of $1.01 per gallon, you would have to double those figures.

If you are interested in knowing where E85 is sold in Minnesota and the upper Midwest, and which vehicles can use the alternative fuel, you can find the info on this website: www.CleanAirChoice.org

BTW, there are an estimated 200,000 flex fuel vehicles on Minnesota roads right now.

Too often, the arguments against sugar-based ethanol are based on current economics and government regulations/subsidies. I still argue: change the paradigm, and you change the economics. So, usually, arguments about costs based on current economies and regulations are effectively rendered mute, because the points I make require a radical shift in the paradigm. You folks need to have vision. As I noted, sugar-based ethanol is only one part of the solution. We just need to get away from sucking on the corn lobby's teat. This is the word of the Helm. You may be seated.

"BTW, there are an estimated 200,000 flex fuel vehicles on Minnesota roads right now."

Great. So, if they are all running on E85, they are costing the federal government alone some $100 million per year (via the volumetric ethanol excise tax credit), just to keep tanked up on ethanol. And that's not counting the millions of dollars in addition that will be spent by the State of Minnesota to subsidize in-state ethanol production.

Display your "ethanol guzzler" bumper sticker proudly, is all I can say.

I believe your characterization of the ethanol “solution” in Brazil was inexcusably one-sided (Brazil: The future of biofuel in Minnesota?). A picture is painted of a cheap, efficient, green alternative to gasoline, and happy Brazilians using smart economics to pick whichever happens to be cheaper at the time.

What you failed to mention is that it takes almost a gallon of oil to produce a gallon of ethanol. The corn must be fertilized, harvested, moved, heavily processed, and moved again before it is ready to be purchased at the pump.

If we start using more ethanol than gas because it’s cheaper, we’re arguably doing more damage to the environment that just using plain old gas.

*sigh* I spelled "mute" wrong in my second comment. It should've been "moot". Stupid dyslexia. Oh, and to the last commenter, I will repeat: it takes one barrel of oil to produce 1.3 barrels of corn-based ethanol. The ratio for sugar-based is 1-8.

Oops. Looks like I said "mute" when I meant "moot." Stupid dyslexia.

Hi there,

Thought you might like a fresh outlook on the ethanol issue, from a new MN resident who just moved here. I never even heard of ethanol until we moved here last year from FL. I do know that it's use burned out the oxygen sensors and messed up the fuel injectors in both my wife's 2005 Honda Civic and my 2006 Honda CRV. Total cost to me app. $1200 to repair. Mechanic said it is a common problem on cars that use ethanol and it doesn't get ANY press in the media at all! He also recommended that we not use it in small engines like lawn mowers, ATV's, motorcycles, boats etc., all of which we have. I now have to find stations that sell me NON/ethanol gas(regular gas to non-MN residents)which of course is at a HIGHER price to me! No thanks! Ethanol is not the answer, and will not be the fuel of the future. Hydrogen fuel cell cars will be the answer but will take time. FL is considering a start up Hydroygen program much like CA's program which has been very successful! Check out Honda's website about their new Hydrogen fuel cell Civic. Hydrogen can be synthisized from MANY sources, alot of which we don't EAT! Also, water out the tailpipe is a GREEN by-product I can live with! MN residents SHOULD be interested in that as they brag about their eco-friendly lifestyles all the time, LOL!