The U.S. is putting a lot of its energy chips on ethanol. President Bush wants to increase U.S. ethanol production by close to 600% by 2017, so U.S. companies are racing to make ethanol out of just about anything.
The technologies under development are wide-ranging: One MIT professor is even working on a process to make ethanol out of algae.
Still, right now most of the ethanol in the U.S. is being made out of food grains -- primarily corn. As of March, there were 55 corn ethanol plants under construction in the U.S., and many more are planned.
And that means it's time for a reality check. Not only is corn-based ethanol a problem practically, morally and environmentally -- it might be a loser on the investing front as well.
For one thing: While the ethanol boom is helping to produce record-high prices for corn farmers, corn ethanol producers aren't faring so well. Shares in Archer Daniels Midland (ADM, news, msgs), the country's biggest ethanol producer, skyrocketed late last year, but have hardly budged since January.
But let's backtrack to two practical questions: Where will all that corn come from -- and where is all that ethanol going to go?
First problem: If we were to produce Bush's goal of 35 billion gallons a year of ethanol with only corn, we'd have to start growing corn on an additional 129,000 square miles, according to the National Environmental Trust. That's an area about as big as Kansas and Iowa combined.
And here's the second problem: Ethanol buyers are few and far between. It's true that automakers are beginning to build flex-fuel cars, which we'll need to burn the 85% ethanol-15% gasoline mixture people mean when they say "ethanol." But consumers won't shell out for those cars till ethanol is widely available, and oil companies and gas station operators won't shell out for the massive infrastructure upgrades it will take to deliver ethanol around the country till there are a lot of cars on the road to put it in.
So viewing any kind of ethanol as a quick fix for our energy problems is foolish.
Meanwhile, corn ethanol has additional problems of its own. It does save energy, according to the Department of Energy, which calculates that burning ethanol yields 25% more energy than it takes to produce and harvest the corn and make it into ethanol. But as for cutting pollution ? Don't count on it.
Much of the electricity used to make ethanol comes from coal-burning power plants, which produce more greenhouse gases than the ethanol saves. And don't forget the cost to the environment of growing all that corn, including runoff from the huge doses of chemical fertilizers used in commercial corn production, and the loss of forests and grasslands that have been chopped down and plowed up to make room for cornfields.
Then there's the moral issue: With millions around the world barely able to feed themselves, do we really want to turn food into fuel? Surging demand from fuel producers for corn has helped push food prices to record highs not just in the U.S. but also around the globe, from Mexico to China. After all, corn isn't just for tortillas and corn on the cob. It goes into nearly everything we eat. It's a key ingredient in almost every packaged food we buy. And it's fed to cattle, pigs, chickens and even farmed fish.
Eat at McDonald's and you're essentially eating corn. The fast-food chain's shake is produced with corn; so is the burger.
"I would never invest in corn-based ethanol for my clients," says Tom Moser, an Arizona financial adviser who specializes in socially responsible investing. "They are very sensitive (about) putting food in someone's gas tank."
Which raises the question: With all these drawbacks, should the production of corn ethanol really be stepped up ?
Corn ethanol farmers and corn ethanol plant developers such as Jim Geist of Great Western Ethanol say yes -- absolutely. How a corn-ethanol plant will work
Geist says he and his fellow corn growers are successfully working with seed suppliers to get bigger yields with smaller applications of fertilizer and pesticide. Farm economists think it's possible to produce 15 billion gallons of ethanol without sacrificing food supplies or driving up food prices, he says. "We'll make sure we're part of a solution and not a problem."
Environmentalists don't buy those arguments. But some acknowledge that developing a distribution system for corn ethanol could pave the way to something better.
What might those better things be ? Almost anything, it turns out.
Though it's easiest to make ethanol from the sugar in corn -- or from sugar cane, as Brazil does -- you can make it from just about anything that can be turned into sugar. (Likewise, you can make biodiesel, another clean fuel, from just about anything that contains fats. Just ask Seth Warren and Tyler Bradt, who recently finished a 21,000-mile drive from Alaska to Tierra del Fuego in a firetruck that ran on locally available fats from salmon oil to waste grease.
What's more, many other sources produce energy much more efficiently than corn does. An acre of algae, for instance, produces up to 100 times the energy of an acre of corn.
But getting other sources into commercial production is a lot harder than making ethanol out of corn; whiskey distillers have been refining that process for centuries. Ethanol, after all, is just another form of alcohol.
"Yes there are all these things to be nervous about with corn ethanol," says Judy Greenwald, the director of innovative solutions at the Pew Center on Global Climate Change. "But it's a step on the path."
Researchers are now moving further along that path, working to develop fuel from such diverse materials as citrus waste (by a company named Xethanol (XNL, news, msgs)), municipal garbage and old tires (BRI Energy) and straw and agricultural waste (Iogen). Tyson Foods is exploring making biodiesel out of excess animal fat.
MIT's Isaac Berzin has come up with a method for making both ethanol and biodiesel from algae, and figured out how to clean up greenhouse gases in the process. His company, GreenFuel Technologies, grows algae in the exhaust from power plants, where it feeds on carbon dioxide that would otherwise go into the atmosphere.
None of these techniques is in commercial production yet, but chances are that some of them will get there.
So don't give up on investing in alternative fuels altogether. The odds are, you'll find better places than corn to put your money before long.
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