GoodFuels

Positives for Ethanol In CBO Report

Don’t let the headlines fool you - there is actually some pretty positive news for ethanol in the Congressional Budget Office report issued yesterday, “The Impact of Ethanol Use on Food Prices and Greenhouse-Gas Emissions.”

Despite the decidedly negative spin in the media, the report actually shows that a) other factors actually had a bigger impact on food prices last year than ethanol did and b) that ethanol is reducing greenhouse gas emissions.

The CBO considers the period from from April 2007 to April 2008 and determines that “the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index (CPI).”

However, the next sentence in the report summary states that over the same period, “certain other factors—for example, higher energy costs—had a greater effect on food prices than did the use of ethanol as a motor fuel.” But, when talking about how much impact the higher food prices are having on federal food assistance spending, the report only focuses on that portion attributable to ethanol use, which is not really fair. Those “certain other factors” should have taken their share of the blame as well, don’t you think?

In addition, the report notes that ethanol’s effect on future food price inflation is “uncertain because the forces determining that impact move in opposite directions.”

Federal mandates now in place require additional use of ethanol in the future, which would continue to put upward pressure on prices. In contrast, increases in the supply of corn from cultivating more cropland, increasing crop yields, or improving the technology for making ethanol from corn or other feedstocks (raw materials) would tend to lower food prices.

Regarding the emissions side of the equation, the report states that “in the short run, the production, distribution, and consumption of ethanol will create about 20 percent fewer greenhouse gas emissions than the equivalent processes for gasoline. For 2008, such a finding translates into a reduction of about 14 million metric tons of carbon dioxide and equivalent gases (a standard measure of greenhouse-gas emissions).”

The report also indicates that could improve substantially if cellulosic ethanol becomes commercially available, although they don’t seem to be very optimistic that will happen. Meanwhile, those of us who believe in good old American know-how and ingenuity believe it will.