Signs of Collapse for Biofuel Movement

In recent years, many argued that the path away from Middle East oil and toward reduced vehicle greenhouse gas emissions would be led by a switch to ethanol and biodiesel. That argument—and the biofuels movement championed by entrepreneurs, industry leaders, and some researchers—is quickly dying. In the past week alone, VeraSun—the largest public ethanol producer in the country—filed for bankruptcy, and Germany became the first country to formally scale back its commitment to biofuels.

From the beginning of the biofuels movement, three critical questions have remained unanswered:

  • Cost

    Can biofuel be produced in quantity at a competitive price to conventional fuels?

  • Food Prices

    Can biofuel feedstock—the stuff used to make fuel—avoid being diverted from use for food?

  • Emissions

    Can you produce biofuels without harming the environment?

The answers to these questions appear to be: no, no, and no—especially for ethanol derived from corn, and biodiesel from soy or palm oil.

The first question is the one crippling much of the US biofuels industry. VeraSun, which filed for bankruptcy last week and secured some bank financing to reorganize, said its only alternative was to shut down production—despite its large scale operations and the United States’ commitment to ethanol.

The numbers just weren’t there, as prices for corn and natural gas—the main feedstock and the fuel used to turn it into ethanol—increased this past year while retail prices for ethanol failed to keep pace. As companies cancel planned ethanol and biodiesel plants, the road to viability for biofuel alternatives becomes rockier—even with government subsidies.

The so-called second generation of biofuels, such as cellulosic ethanol made from feedstocks including wood chips and switchgrass, face similar financial challenges. One company, Xethanol, changed its name and is switching its strategy from cellulosic ethanol to methane.

“You can make cellulosic at a price but it’s not going to be economical when there are depressed prices for ethanol.”

David Ames
president and CEO, Xethanol (now Global Energy Holdings Group)

Biofuels with a Tarnished Image

Meanwhile, as biofuels disrupt food supplies in developing nations—see “As the prices for soybeans rise, so does hunger in Indonesia”—the image of biofuels becomes tarnished. The latest poster child for biofuels’ negative image is palm oil, the rising demand for which had some countries chopping down rainforest to plant palm trees. Negative press led Germany to rescind its commitment to using a higher percentage of biofuel in its diesel—while outright banning biodiesel derived from soy or palm.

With Germany backing away from its biofuel commitment, the focus turns to the United States. The State of California is wrestling with how to achieve the goals of its Low Carbon Fuel Standard (LCFS), signed into law in 2007. The LCFS aims to reduce the carbon intensity for gasoline, diesel, and other fuels by 10 percent by 2020—but ethanol producers are struggling and researchers continue to debate whether increased reliance on biofuels will have a positive or negative effect on carbon emissions. Last month, California Air Resources Board posted its draft regulations, which are still very much under review.

President-elect Barack Obama wants a carbon copy of the same goals as part of a National Low Carbon Fuel Standard—with the additional requirement of 60 billion gallons of advanced biofuels to be phased into our fuel supply by 2030. In his campaign, Obama expressed support for the multi-billion dollar annual government subsidies that domestic ethanol has long enjoyed—as well as the 54-cent-a-gallon tariff that the United States slaps on imports of ethanol made from sugar cane.

The outcome of debates in Sacramento and Washington, DC—and the resulting government mandates, incentives, and subsidies—will likely determine if biofuels can be brought back from the brink of collapse.


  • Will S

    The points are by and large valid, though I (and the IEA) expect the price of oil to rise again, perhaps to oscillate in the neighborhood of $100. Such a price would improve the cost posture of biofuels, but I also believe their to be issues with the food supply, as well as water consumption, fertilizer costs, soil management, etc.

  • Todd W

    Lower oil prices will likely slow alternative fuel and energy development for the immediate future, maybe for years, which is cause for concern as the general public will lose interest until the next energy crisis. Advocates need to continue their support for alternative fuels while it is still a hot topic; keep your neighbors interested, push government to adopt technologies and support development, furthermore, we as individuals should live the lifestyle – maybe we can win people over by capitalizing on their envy.

  • Samie

    Drying up of biofuels I say:

    Thank God!!!

    Can the biofuel be produced in quantity at a competitive price to conventional fuels? NO

    Can the biofuel feedstock—the stuff used to make fuel—avoid being diverted from use for food? NO

    Can you produce biofuels without harming the environment? NO
    (But… you NEVER get to a point where emissions =0 so any alternative hurts the environment think of the energy it takes to produce any product and the inputs involved)

    Anyways, this is why I’m a cranky butt sometimes because people don’t stop and realize what happens when you replace fuel for fuel. Even cellulose ethanol has its problems (land, not using only waste stock ect…)so really I think this question is for those diesel vehicles that need the extra torque not the average Ford Focus. I feel we should stop wasting time and money on things like E85 but I’m not against developing technologies. More thought needs to put into these short-term alternatives, before everyone goes crazy over them also things like this give the greenies a bad reputation among the general public.

  • Joe Lovshe

    You don’t need to be as smart as a wall street banker to know that biofuels should be called BIOFOOLS, taking a finite supply (food) and trying to satisfy an infinite demand (fuel) will only break your heart everytime. Pursuing all the current biofuels is like walking ten miles west when you need to be ten miles east. you are now twenty miles from where you need to be. Between federal and state government taxpayers were stuck for 33 billion dollars to subsidize the growth, production and use of 7 billion gallons of Ethanol that’s $4.71 dollars per gallon of this junk besides what we pay for it at the pump. Hopefully Obama is smarter than George Bush and can abandon this crap and fast

  • Shines

    If we would only recycle organic waste for fuel. For example I’ll have to rake the leaves this weekend and every time I mowed my lawn this past summer – if the leaves and clippings could have been used for bio fuel that would be OK. Of course once consumers realize how much organic material is needed to make a gallon of gas or diesel we’d realize how absurd our efforts were. There is only a small portion of the Earth’s surface that can grow crops. There is a much larger area that can harvest solar, wind, tides and currents.
    And we need to quit being afraid of nuclear power. The sun after all is a nuclear furnace that is supplying the Earth with most of its energy in the first place.

  • sean t

    I’m with you Shines. Solar energy is the way to go, especially w/ electric cars.

  • Nelson O

    There are always alternatives for biofuel.
    Before getting negative on alternative fuel, we should investigate on Jatropha Seeds, Algae and Pongamia pinnata.

  • Eldon Shannon

    Sadly the government lies to us about corn ethanol and some other biofuels because special interests give congressmen so much money.
    Obama has pledged to continue support for corn ethanol because he received a lot of money from farm groups and promoters.

  • Shines

    Nelson O,
    You are right – the right kind of bio fuel…
    Corn ethanol is NOT the right kind.
    We will have to let our president elect know that we cannot support food crop ethanol or boifuels that cause more damage than they help. Especially with our economy in this downturn we will need to make the most intelligent choices on alternative fuels.

  • Samie

    I’m glad you brought up Jatropha Seeds, and Algae though Algae would have the best promise because this would require the least amount of space. But these biofuels are underdevelopment so it is uncertain that they could meet a mass market any time soon. We can’t dictate how other countries use their land resources and in many cases biofuels are grown for countries like the U.S. at a vast deterioration of wildlife habitats, forests and local food crops. We should be careful with these things in that it does not move use past petroleum because petroleum would always be produced due to these alternatives not being able to supply a majority of the fuel needs on a global market. I don’t see any real gains in combustion rates compared to gasoline and they maybe less efficient ie lower MPG’s compared to gasoline so why fuel for fuel? Alternative fuels one could say would be grown in other countries to supply the U.S so you just shift around dependency to new foreign countries. You could say why not produce it here but if we don’t produce the products cheap enough you get cheaper produced biofuels that are imported into the U.S or the domestic fuel even with subsidizes are produced too high to compete in the gasoline markets. this is a big problem for any fuel for fuel scheme even for lovers of natural gas CNG markets who don’t believe even without the question of limited supplies, that you naturally get more cheaper imported fuels coming into the domestic market again all these fuels are just short-term ideas….

  • Royce

    Some of you guys that have negative posts about bio-fuels are not thinking clearly. Remember last month when gas was over $4 per gallon, imagine the price if the bio-fiels mixed with the fuel did not exist. Bio-fuels like Ethanol and Bio-diesel and thier availability kept the price from going even higher. I am talking about $7 per gallon gasoline, so be greatful we where producing bio-fuels. Also, ethanol and bio-diesel both produce alot less pollution than conventional fuels. If you live in a major city this is a big problem.

    I have no doubt the prices will rise again and soon. If you don’t support the bio-fuels business be prepared to pay the price – and it want be cheap.

  • B. Nicholson

    Here’s an idea! Tax OPEC oil with import duties. Don’t tax non-cartel oil. Give countries that don’t join or send representatives to OPEC an incentive to stay independent.

    Drop ethanol duties, since Brazil is our friend. OPEC is not.

  • bill cosworth

    Everyone on this site is negative

    Hybrid cards were invented by the American car companies dummies.

    Its this a hybrid site.

    Jezzz.

    Oh we cant do it.

    Come on we did. Ford sold the technology to Toyota.

    Didn’t we do that with the VCR Too.

    Sell all the american inventions to japan so the japanese can get rich?

  • DJB

    Biofuels are a problematic distraction from what we need to be focusing on: powering cars with sources of energy that cause no pollution.

    We have the technologies: plug-in hybrids and hydrogen fuel cells. It’s just a question of investing in the fueling infrastructure and subsidizing these vehicles enough to get them off the ground.

    We need to tax gasoline more, like Europeans do, to move this process along.

    Finally, and most importantly, we need to focus on urban planning: build places that are denser and more mixed use so that walking, biking, and public transit become options that large numbers of people will accept.

  • Samie

    Negative, more like not dreaming. Yes it is a hybrid car site so should the website not report on biofuels? Bill tell me why the American car companies are lagging behind in hybrid car sales oh for the last ten years. Just because you invent something doesn’t always mean its going to be successful.

    Royce said “Also, ethanol and bio-diesel both produce a lot less pollution than conventional fuels” Not always true please look at some scientific studies on this.

    I don’t know why this seems negative all I say is that people should think beyond short term ideas. To bring up issues that are important to discuss and debate about is good and I believe that those who follow every green movement without actually looking into these technologies is no different than those zombies that believe everything from the talking point media personalities.

  • Nelson O

    After thousands laid off at GM, Chrysler and Ford.
    Can anyone tell me why the “Big 3 No More” bringing back Mustang V8, Challenger and Camaro ??? I won’t be surprise to see the Firebird next year. Maybe they will make a Hybrid Firebird…..Probably not so “Cool” right ?

  • Daniel O.

    I think biofuels and ethanol is a waste of money for such lil benefits. I Say go for EV’s ,PHEV’s, and Hybrids thats the best way for now. Also maybe soon electromagnetic motors which i think is the best way to go and are awsome. I also think Solar Ink is going to help too be affordably for mass market.I hate oil companies!!!!

  • CAT

    Anne Korins (co-director IAGS) mentions that methanol might be a better alternative to both ethanol and hydrogen. Methanol is easily and cheaply produced from coal, something in great abundance in the states. Methanol can replace ethanol for blending in gas and is more easily stored than pure hydrogen. It would be easier to distribute as well through the existing gas distribution channels.

    See details at http://radicalislam.org/content/anne-korins-oil-solution

  • hybridman2

    Everyone but big business and gov’t. bureaucrats had this figured out awhile ago. You can’t make a biofuel to replace our current energy needs without making the food industry turn upside down. Ethanol is not the way to go- it does not have the energy content of gas and you need more of it to go the same distance- making it way too expensive.
    You can also only have about 15% or less as an additive in gasoline or it starts eating away at your seals and gaskets of your engine.
    You also need an infrastructure in place- we can see by this article that isn’t going to happen if the market won’t support it.
    So what do we do?
    We MUST rely on alternative fuels that don’t require infrastructure changes- it’s that simple.
    Hydrogen by itself will not work-again because of infrastructure needs.
    But On-Demand hydrogen will work, and is working. Even if it results in an overall increase of 20% across America and around the world, think of the implications (Hybrid water power is actually doing better than 20%, but let’s assume low for the argument’s sake).
    We currently get 25% of our oil from OPEC. If we can replace some of our gas with water with an on demand hydrogen generator, we will effectively be cleaning the environment and saving gas as well as diminishing the cartels power to manipulate our economy.
    I’ll continue to argue for on-demand hydrogen generators until I’m blue in the face, ut many of us have found at least a partial solution, which is far better than anyone else, and cheaper too.
    hybridwaterpower is the answer for now.

    Bob

  • AP

    This is what happens when governments mandate technologies, instead of setting up a pricing structure to encourage alternatives to develop. Adding incentives to products only makes them viable temporarily, then they die. You need long-term demand to make it work.

  • rickw

    People seem to hate ethanol, but I don’t understand why. In my mind, corn-ethanol should be pursued to replace 5-15% of our oil and to get infrastructure in place for cellulosic ethanol. Why?

    1. Even if ethanol is a bit more expensive than oil, that money is being paid to farmers and distillers in the USA. Remember, 60% of our oil is imported and much from countries that we seem to go to war with every decade or so. And since USA is a net importer of stuff, all those imports hurts the dollar exchange rate, making all imports more expensive.

    2. When oil goes up in price, EVERYTHING goes up in price. With food, for instance, oil helps make fertilizer, runs the tractors, helps transport the raw goods to the processor and finally to the store. Oil helps you get to the store to buy it.

    3. USA has about 5% of the population of the globe, but burns 25% of the oil. China and India, per capita, burn just a fraction of what we do. (Europeans burn about 1/3 as much per capita as we do.) What’s gonna happen when those China/ India adopt more “western” living standards? Yep, higher gas prices. So we need to work on driving smaller cars, taking public transportation, driving hybrids, and suplementing our oil with biofuels,

  • owlafaye

    As we became aware of the pollution problems, our focus should have been on improving the refining of the fuels we were using at that time rather than seeking other fuels. Research to reduce the sulfur in our diesel and lubricating oils was ignored yet laws for lower levels of pollution involving these sulfurs were being put into effect. Typical to a capital/profit/greedy society…we ignored the huge problem of sulfur contamination and looked for new alternative fuels to make money. Now we are stuck with the ethanol foolishness and various plant oil schemes, none of which make any sense when you consider the quantities needed to make an impact, and a negative impact at that.

  • Joe Osse

    Yeah! Good idea!

    Why fund rogue nations as Venezuela and Iran buying their oil if Brazil is friendly and has lots of cheap, clean ethanol to sell?

  • Joe Osse

    Oh, and sorry: I intended the comment above as an answer to B. Nicholson’s one, way above this last one of mine…

  • loan

    I like this article

    even though oil prices, of late a significant decline, still in need of biofuel. Because when a mine will be closed due to oil reserves have been exhausted or not feasible at the mine again.

    http://sidethinkings.blogspot.com/

  • Jin Micro

    I don’t know why this seems negative all I say is that people should think beyond short term ideas.
    My thoughts exactly. Lol
    - Forex Contest