Greenwire, Ben Geman
Published April 8, 2009
Increased corn ethanol production accounted for 10 to 15 percent of total increased food costs during a recent period, according to a new Congressional Budget Office study that pro- and anti-ethanol lobbies quickly claimed as validation of their positions.
CBO's report surveys ethanol's role in rising corn prices, which in turn helped boost overall food costs more sharply in recent years. Food prices rose by more than 5 percent in 2008, compared to 4 percent the year before and almost 2.5 percent in 2006, CBO said.
From April 2007 to April 2008, higher corn prices from expanded U.S. ethanol consumption -- which topped 9 billion gallons last year -- accounted for 0.5 to 0.8 percentage points of the 5.1 percent increase in food costs as measured by the consumer price index, according to CBO.
But the report adds, "Over the same period, certain other factors -- for example, higher energy costs -- had a greater effect on food prices than did use of ethanol as a motor fuel."
The study comes at a sensitive time because the ethanol industry is lobbying U.S. EPA to allow higher levels of ethanol in gasoline than the 10 percent limit for most engines and vehicles.
Two ethanol industry trade groups quickly called the findings proof that ethanol production, despite consuming growing amounts of corn, has not been a major factor in food prices.
"While ethanol opponents may try to hold up this CBO report as proof of ethanol's impact on food prices, a close and honest review of the report reveals that many other factors, especially prices for oil and energy, have greater influence over what Americans pay at the grocery store than does ethanol production," said Bob Dinneen, president of the Renewable Fuels Association.
Tom Buis, the head of a newer industry group called Growth Energy, called the report evidence that the effect of ethanol on food prices is "minimal" and that energy costs have played a leading role. "But now that corn and energy prices have fallen dramatically, we hope CBO will look at why grocery prices have not dropped accordingly," he said.
But food industry groups drew the opposite conclusion and also cited other data in the study that tallies ethanol's effect on the costs of government food aid programs. It finds that ethanol's share of greater costs for the Supplemental Nutrition Assistance Program -- which used to be called the food stamp program -- and child nutrition programs was $600 million to $900 million in fiscal 2009.
"Today's Congressional Budget Office numbers once again remind us of the unintended negative consequences associated with our nation's current policies which promote and mandate the conversion of massive amounts of corn and other food crops for biofuels production," said a joint statement today by the Grocery Manufacturers Association, American Meat Institute, National Turkey Federation, and National Council of Chain Restaurants.
Climate impact
The report also touches on another controversial topic: whether ethanol will ultimately help or harm the fight against global climate change.
The report, citing research by the Energy Department's Argonne National Laboratory, notes that in the near term, producing and using ethanol creates about 20 percent less greenhouse gases than equivalent amounts of gasoline.
But it adds that the result is "less clear" in the long run, because increased production could lead to large amounts of forests and grasslands being converted to farms. This could more than offset these carbon reductions, because stored carbon is released when these lands are cleared.
The report also notes that cellulosic ethanol, made from feedstocks like wood chips, grasses and agricultural wastes, could provide much greater emissions reductions than corn ethanol. But cellulosic ethanol is not currently being commercially produced.
A major 2007 energy law greatly boosted the national biofuels mandate to reach 36 billion gallons annually by 2022. Corn ethanol peaks at 15 billion gallons, while next-wave or "advanced" biofuels -- including cellulosic ethanol -- eventually make up the other 21 billion gallons of the mandate.
The study finds that meeting the expanded mandate could reduce transportation-sector greenhouse gas emissions by roughly 6 percent by 2022, which would be slightly more than 2 percent of total U.S. emissions that year.
"However, that potential would be realized only if cellulosic ethanol could be produced on a large scale and if the effects of changes in land use did not offset the reduction that producing, distributing, and consuming ethanol could make in greenhouse-gas emissions," the report states. It also notes projections by DOE's Energy Information Administration that the targets for advanced biofuels will not be met until 2027.
The study, using Argonne's estimates of corn ethanol's lower lifecycle greenhouse gas emissions compared to gasoline, finds that levels of ethanol used in the United States last year reduced transportation sector emissions by less than 1 percent. They reduced gasoline consumption by roughly 4 percent last year.
Donald Carr, a spokesman for the Environmental Working Group, said the study "confirms the limitations" of ethanol as a way to displace fossil fuels or curb greenhouse gas emissions.
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