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Another Shot in the Ethanol Wars

Posted by: John Carey on November 11, 2008

Ethanol has taken a beating this year. Not only is the industry sucking up taxpayer dollars through subsidies, critics charge, but the use of corn and other crops for fuel has caused food prices to climb, hurting consumers around the world. Big Food (aka the Grocery Manufacturers Association) has been hammering home this ‘food vs. fuel’ argument with a well-financed anti-ethanol campaign.

But now comes a counterattack. Several major ethanol producers, led by POET, have created a new K Street trade group, Growth Energy, to fight what they call “Big Food’s Big Smear campaign.” The main argument: If ethanol had been responsible for the recent high prices of corn, and if these high prices then had caused big increases in the cost of food, then why are food prices still high? After all, corn prices have plunged despite strong demand for ethanol. “Food prices and ethanol production are not strongly linked,” argues Dave Vander Griend, CEO of ICM, one of the new group’s members: “Food vs. fuel was nothing more than a sham cooked up by the food industry.” Growth Energy has started to run advertisements touting ethanol and blaming the food industry for high food prices.

Who’s right? As usual, there’s an element of truth on both sides of this debate—and the issue is far more complex than the ads on either side acknowledge. Clearly, diverting corn to make fuel makes corn prices higher than they would otherwise be. But that’s only part of the story. High oil prices also push up food costs, while ethanol replaces enough gasoline to have a moderating effect on prices at the pump. Plus, it’s not like there’s a shortage of corn. This year brought another good corn harvest, with plenty to export and a surplus of many millions of bushels.

Eventually, this controversy will die down if the biofuel industry is successful in moving away from corn and other food crops as a source to prairie grass, wood waste, algae, or other feedstock. Until then, though, the fight is a growth industry for lobbyists.

Reader Comments


November 13, 2008 9:50 AM

Still left as an open debate is the question of the net energy balance for corn-based ethanol. If more fossil fuel energy is expended to produce the ethanol than it replaces, it's a bad deal regardless of what impact it does or does not have on food prices.

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BusinessWeek correspondents John Carey and Mark Scott, cover the green scene, keeping on top of the business aspects of energy, the environment and climate change, as well as the technologies, policies, markets and people that are shaping how the earth's resources will be used in the century ahead.

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