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Ethanol, biofuels policy needs to be modified, but not rejected

The public debate that has erupted in recent weeks over ethanol is, in part, an illustration of the law of unintended consequences. Just a year or so ago, ethanol made from corn and blended into gasoline was seen as a win-win proposition. Making ethanol from corn would reduce America's dependence on foreign oil and it also would boost profits for America's farmers.

But it turns out that things were not quite that simple.

Today, increased corn production and higher corn prices due to ethanol demand are being blamed for spikes in food prices in the United States and serious food shortages around the world.

Some argue that ethanol subsidies have caused farmers to grow more corn at the expense of other crops, causing a reduced supply of those crops and, thus, higher prices.

Some analysts say that this factor probably accounts for only about 5 percent of recent increases in food prices. The U.S. Agriculture Department estimates that 20 percent of recent food price increases are due to demand for ethanol and corn.

A damaging drought in Australia also is blamed for some global food shortages, but most experts agree that the larger culprit impacting food prices is higher energy costs for processing and transportation.

Still, having a debate over ethanol is appropriate. Listening to experts on both sides of the issue is part of the education process. And if the debate leads to rethinking and reworking the federal government's escalating mandates for ethanol, that can result in a more-balanced picture that still supports ethanol, but not at the expense of other biofuels, including biodiesel.

It's reasonable to plan on renewable biofuels replacing some percentage of the oil imported by the United States.

Reducing America's dependence on foreign oil with biofuels, along with renewable energy supplies and new conservation technologies, is vitally important. But ethanol from corn is not the answer. It is a reasonable first step, but it is not a long-term solution.

Abig part of the problem is that corn is not the best source material for making ethanol; it takes almost as much energy to grow corn and produce ethanol as the ethanol produces when burned in an engine. Also, it should be noted that ethanol contains less energy per gallon than gasoline.

But the biofuels industry still is in its infancy and new developments — in growing and processing techniques — will surely improve the economics of biofuels, including ethanol.

Brazil has had great success with ethanol made from sugar cane, which boasts a higher energy payback than corn. In the United States, the biofuels future is thought to be with so-called cellulosic ethanol, which involves making fuel from any growing material. So, instead of corn kernels, the cornstalks can be processed, leaving the kernels for feed stock. Cellulosic ethanol also can be made from wood chips and, more importantly, switch grass, a perennial prairie grass that is easier and less energy-intensive to grow and doesn't have to be replanted every year like corn.

But for now, cellulosic ethanol, using products outside the food market, is at the demonstration phase. Larger-scale, commercial operations probably are a few years away. That means corn can be something of a bridge technology.

While ethanol and the related impact on the corn market are believed to be causing a relatively small increase in food prices, ethanol is helping when it comes to gasoline prices. As hard as it might be to believe, commodity analysts with Merrill Lynch suggest that gasoline prices would be about 15 percent higher without ethanol.

This week, it was reported that 20 senators are asking the federal Environmental Protection Agency to waive or restructure the mandated fivefold increase in ethanol production by 2022, which Congress passed last year.

Some restructuring of that mandate might be called for, but corn and ethanol should remain a part of the nation's energy policy. Scaling back some support for corn would allow additional incentives to be applied to cellulosic ethanol and biodiesel, which offers several advantages over ethanol.

Biofuels should be part of America's energy picture. Improved technology and policy adjustments can minimize the biofuel impact on food prices while still supporting farmers and reducing the dependence on foreign sources of oil.

It is appropriate to rethink and maybe adjust the current ethanol policy to make sure that other bio-fuels that might lack the Corn Belt's political clout are given fair treatment. But that rethinking should not be a rejection of ethanol or other biofuels.

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