| If the federal government is serious about committing $2 billion to renewable fuels technologies, it’s made a poor business case for doing so – and it is serious. Budget 2007 offers $1.5 billion per year as an "operating incentive" for producers of bioethanol and biodiesel. It also creates a $500 million fund, to be managed by Sustainable Development Technology Canada (SDTC), to build large-scale production facilities for renewable fuels. "Next-gen biofuels," as they are known by the folks at SDTC, "will provide… alternate sources of revenue for those in the agriculture, forestry and waste management sectors" with "no fuel versus food debate." No debate? The massive $2 billion subsidy provided to ethanol producers by Budget 2007 will remove agricultural land from food production.
Bioethanol is made by fermenting sugar from plants. Plant starches can also be converted into sugar. Brazil manufactures ethanol from sugar cane, the best feedstock for plant sugars. Northerly countries like Canada, the U.S. and European nations manufacture ethanol from starch, produced mostly from corn and sugar beets. Production of ethanol from corn uses eight times more energy than from sugar cane. Corn-based ethanol cannot compete with sugar cane ethanol without massive subsidization and tariff protection from more efficient producers, mostly in the developing countries. Many critics claim that ethanol produces no more energy than is consumed in growing, harvesting and transporting it.
Recent advances in technology have shown that ethanol can also be made from cellulose, the primary component of green plants. One Ottawa-based company, Iogen Corporation, operates a demonstration facility that converts straw, corn stalks, switchgrass and other agricultural waste to ethanol, using a steam-explosion technology and enzymes to convert cellulose into sugar. Future sources of cellulose might include the pine beetle-ravaged forests of British Columbia, or even municipal solid waste. Ethanol would find a major market south of the border, where a new ethanol economy has been decreed as a potential cure for the nation's "addiction to foreign oil."
Iogen Corporation is now lobbying the federal government for a big chunk of the budgeted SDTC fund to build a $300 million plant for the commercial production of ethanol from cellulose. However, an ad hoc committee of the Council of Canadian Academies (CCA) reports that "there is a significant gap between aspiration and current reality" when it comes to identifying emerging technological opportunities in Canada. We must understand current reality before we can aspire to a new ethanol economy.
SDTC claims that biomass from crops could generate enough fuel to merely augment about 50 per cent of today's consumption of gasoline. However, a recent report by the Library of Parliament advises that massive investment in biofuels would be of small benefit if we cannot cut our dependence on fossil fuels. If 10 per cent of Canada's gasoline were replaced with ethanol from corn, Canada's greenhouse gas emissions would drop by only one per cent, and it would consume 36 per cent of Canada's farmland. Planners do not consider the cost of collecting and transporting cellulose, but Iogen estimates that replacing only 10 per cent of Canada's gasoline with cellulose ethanol would mean collecting and transporting one-third of the annual production of 40 million tonnes of straw from the prairie provinces. As SDTC puts it, "(Such) projections need to be considered in light of sustainability for all sectors beyond transportation."
One such sector is food. Canada's taxpayers already line the pockets of a well-connected sugar oligopoly with subsidies while maintaining the price of domestic sugar well above the world price with stiff tariffs and quotas. In 1995 The Canadian International Trade Tribunal (CITT) imposed massive duties on sugar imported from the U.S., under Article 303 of NAFTA, to block U.S. confectioners from purchasing cheap sugar on the world market and re-exporting it to Canada at higher prices. However, Canada was forced to drop its action and to accept lower export quotas to avoid a protracted trade battle with U.S. sugar producers. While Canada resists the temptation to purchase cheap ethanol from efficient Brazilian producers, and cheap sugar on world markets, new ethanol production subsidies will have the perverse effect of diverting corn away from grocery shelves when corn prices are at their highest in decades.
This is not only a "fuel versus food debate." As farmers allocate more land to corn, less will be used to produce cotton for the textile industry. U.S. production of cotton will decrease by 5.28 million hectares in 2007, almost 14 per cent. As production of cotton decreases, textile manufacturing costs increase. Gildan Activewear Inc. of Montreal recently laid off 465 employees in Canada and the U.S. and 1,365 in Mexico as a result of closing five facilities. The environment is also a big loser. 700,000 acres of the Florida Everglades has been "reclaimed" for growing sugar cane. In California, it takes 15,434 litres of heavily subsidized water to grow one dollar's worth of sugar beets.
According to the CCA, "Canada itself has little history of systematic national foresight" when it comes to research funding. Iogen itself is a prime example. In 1986, when crude oil prices fell, Canadian support for Iogen dried up and the company had to lay off half its staff. Research and development of new technologies requires long-term vision and funding to allow organizations to attract needed researchers. Now on the verge of commercial success, Iogen is considering construction of North America's first commercial cellulose ethanol plant – in Idaho. The Ottawa corporation has joined with Goldman Sachs and Royal Dutch/Shell Group to become Iogen BioRefinery Partners, of Arlington, Virginia. The U.S. Department of Energy plans to invest up to $80 million in Iogen to build a plant near Idaho Falls.
Leadership in science and technological development can't be bought. Biofuels pose economic, environmental and technological issues. Public research funding decisions should be made by independent research-funding bodies and not by politicians looking to ride the renewable fuels bandwagon.
Production facilities and operating incentives make poor use of research funding. More needs to be done to align the interests of the energy industry with those of Canadian taxpayers before we enter into long-term partnerships. The energy sector currently invests only 0.75 per cent of its revenues in research and development – less than one-fifth of the Canadian industrial average. Cellulose ethanol offers great potential for a clean alternative to gasoline, but until the technology is developed to utilize sources with lower carbohydrate (sugar) content, and until we know more about the costs in terms of agricultural loss and energy inputs for collection and transportation, why not just purchase cheap ethanol from Idaho, subsidized by the uncomplaining U.S. taxpayer?
David P. Williams is a business audit consultant and freelance writer. |
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