Jan 12, 2009

Ethanol: Good or Bad?

I passed by the gas station earlier today and they had a big sign up saying something like, "Save the world! Use ethanol fuel!" It made me wonder, does ethanol fuel actually help the environment? I decided this is the subject of a slightly scientific inquiry (by slightly scientific I mean not very scientific, but whatever).

First off, let's take a rate of increase of CO2 in the atmosphere, r. If ethanol burns cleaner than gasoline (according to Wikipedia it does) then there will be a decrease in r: Δr1 < 0. However since it is not pure ethanol being burned and simply an additive to gasoline, Δr1 would not be as large as it would be if it were pure ethanol being burned.
So from this first glance, ethanol is good for the environment (assuming a reduction in the r is good). However let's dig into the economics a little bit. If ethanol burns cleaner than gasoline and the price isn't that high in comparison, it will increase demand for ethanol. This is a demand shift, which results in an increase in both the equilibrium price and quantity. So price of ethanol increases. This now causes an increase in supply, because ethanol is now more profitable. This causes an increase in demand for the inputs of ethanol, which at this point in time is mainly corn. So the price of corn will increase too.

There are many effects of an increase in the price of corn, two of which I will look at. The first is that the quantity supplied will increase. This requires more land to grow the corn on. While a good chunk of this is done in the US and the EU from subsidized farmers, another good chunk is done in Brazil and other places where there is a lot of forest. The forest gets cut down to make room for cornfields. Since forest is one of the big things that reduces CO2 in the air, we will end up increasing r by chopping down forest: Δr2 > 0. This is probably not a big number, but is there nonetheless and changes the net effect on r.
Another effect is, well the increase of price in corn. How many people eat corn worldwide? Also an increase in the price of corn will increase the price of corn alternatives (price of corn increases, people want to buy alternatives, increase in demand for alternatives, increase price of alternatives). That will impact people who don't even eat corn!
This second effect is why I find that people who want to both save the rainforest and save the starving kids in Africa can't really get both of what they want. Due to scarcity, these two causes are often at odds with one another. We can make things better for the environment, at the cost of social welfare, or we can increase social welfare at the cost of the environment.

One more thing to look at is something like moral hazard. Here is where incentives come in. The issue here is that since ethanol burns cleaner, people may feel less guilty about driving. So they drive more, offsetting some reduction in r that they may have added by using ethanol instead of pure gasoline. It may or may not be a concern, but it is still something to think about. So this means that Δr1 is larger (read: less negative) than we originally thought above and could even be positive.

Let's take a look: net effect Δr = ΣΔri
Since all the changes could be positive, it is possible that the net effect could be positive. However making a guess at the values of the Δrs, I'll say that the net effect is negative, but not that negative. Using ethanol may reduce r, but it is not as much as you would think from an initial look at the problem. Furthermore it may not actually make r negative, which would be necessary to offset any damage humanity may have done.

3 comments:

Guillaume Theoret said...

The current trend of Ethanol bio-diesel is overall bad.

You made several wrong assumptions in your post, the foremost of which is about corn.

First, corn is not that great at producing bio-fuel. The only reason we use it is because the American government (in its infinite wisdom) highly subsidizes farmers that grow it.

Your assumption that people will just produce more corn I would argue is wrong as well. Corn needs lots of nutrients and good weather conditions to grow. We're lucky in North America that corn is relatively easy to grow but try it in most of Africa and you'll notice a completely different story. We already produce so much corn here. Almost all the processed food we eat contains it. From corn oil to corn starch to other corn-based products. Take a look at the ingredients of some boxed food you have in the freezer and you'll see. So we're already close to maxed out on corn production. I'm sure we could ramp it up some more if needed but producing less of something else but nowhere near an order of magnitude needed to run all cars on bio-diesel.

Corn is a terrible terrible idea anyway since it's a net LOSER of energy.

http://www.futurepundit.com/archives/002881.html

It costs more energy to produce and process the corn than the corn-based fuel can give back. In fact nearly all organic fuels are net losers.

The only net winner is Brazil's sugarcane. You figured Brazil could start growing corn but they in face have better. Brazil's climate is one of the only well suited to grow sugarcane though so most of the world isn't going to be producing massive amounts of sugarcane for fuel.

I haven't checked recently but the prices of corn and substitutes spiked greatly when it started being burned for fuel:


From here: http://www.earth-policy.org/Updates/2008/Update69.htm

The world is facing the most severe food price inflation in history as grain and soybean prices climb to all-time highs. Wheat trading on the Chicago Board of Trade on December 17th [2007] breached the $10 per bushel level for the first time ever. In mid-January [2008], corn was trading over $5 per bushel, close to its historic high. And on January 11th, soybeans traded at $13.42 per bushel, the highest price ever recorded. All these prices are double those of a year or two ago.

As a result, prices of food products made directly from these commodities such as bread, pasta, and tortillas, and those made indirectly, such as pork, poultry, beef, milk, and eggs, are everywhere on the rise. In Mexico, corn meal prices are up 60 percent. In Pakistan, flour prices have doubled. China is facing rampant food price inflation, some of the worst in decades.

So it's not a small increase. It's a HUGE increase. We're literally taking food out of people's mouths and burning it in our cars since we can pay more for it.

You did CS so you can figure this out: What happens when you apply Amdahl's Law to organic fuel?

A: It can't get much more efficient. There's an upper limit on how efficient it can get because the vast majority of energy is wasted at a level we can't do anything about. If you waste 90% from the start (You can read this: http://www.upei.ca/~physics/p261/Content/Sources_Conversion/Photo-_synthesis/photo-_synthesis.htm on photosynthesis. The conclusion is: "The overall efficiency is then .286x.43x.8x.67 = .066 or 6.6%"), a 10% increase in efficiency (which would be a massive increase considering the already high level of technology involved) only gives you a 0.66% total output increase since the 10% increase is only on 6.6% of the input. Biofuels are not going to get much more efficient compared to something like photovoltaics.

Ethanol fuels are a morally bankrupt and technologically infeasible strategy.

Rob Britton said...

Wow, maybe I should stick to writing about things where I can at least pretend to know what I'm talking about ;)

Michael S said...

rob, one other factor to consider is that ethanol enriched fuel is consumed by standard non-hybrid combustion engines more quickly by volume than normal gasoline. I'm not precisely sure as to the general ratio (del. On engine throughput) but I've experienced around 2/3 efficiency (a tank of ethanol will be depleted in 2/3 the time a gas volume would be) so that will obviously have and impact on demand.

-michael