When Renewable Isn’t Sustainable
When Renewable Isn’t Sustainable:
Agrofuels and the Inconvenient Truths
Behind the 2007 U.S. Energy Independence
and Security Act
By Eric Holt-Giménez and Isabella Kenfield
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TABLE OF CONTENTS
The Fracturing of the Agrofuels Consensus--1
Food: The Canary in the Mineshaft----------2
From Oil Dependency to Agrofuel Dependency:
The Hidden Agenda----------------------5
When the road to energy independence is an expensive dead end-------6
Taxpayer dollars feeding our other dependency: Big Grain--------6
The agrofuels industry: Concentrated growth--------7
Agrofuels: Renewable… but not Green-----------8
Big Biotechnology: The biggest Agrofuel Polluter---------------------9
Second Generation to the Rescue?---------------10
Alternatives: Building the next food and energy context--------------11
The U.S. Moratorium on Agrofuels—A Necessary First Step--------11
Building Social Movements for Food & Fuel Sovereignty-------------12
Agrofuels Expansion ---------------1
Increase in Grain Prices----------2
The North-South Connection--------5
Biotech’s Monopoly Profits--------8
Certified Sustainable Agrofuels--10
From Oil Dependency to Agrofuel Dependency: The Hidden Agenda
Despite massive increases in U.S. ethanol production, the RFS targets—36 billion gallons per year by 2022—far exceed the U.S.’ current capacity for fuel crop production. Of the mandate, less than half—15 billion gallons—will come from corn ethanol. Achieving this volume will require 45 million acres—nearly 50 percent of the country’s current corn acreage. (Even if all of the U.S.’s 90 million-acre corn crop were converted to ethanol, just 12-16% of our gasoline would be replaced—barely enough for current ten percent ethanol blends (E-10), much less the 98% blends suggested in the Energy Bill. )
The remaining 21 billion gallons in the RFS are defined as “advanced biofuels.” This futuristic sounding term actually includes any fuel crop other than corn, including soybeans, oil palm, sugarcane and jatropha. While politicians have pinned their hopes on cellulosic ethanol made from native grasses or genetically-engineered (GE) fast-growing trees, by most accounts these fuels will need years and billions of dollars in research and infrastructure development to become commercially viable. The 36 billion gallon mandate only replaces some 7% of our current fuel use—about 1.5 million barrels of oil per day. Regardless of the technology, the next inconvenient truth lurking in the 2007 U.S. Energy Act is that the United States is geographically incapable of producing enough agrofuels to meet the RFS mandate. According to the Organization for Economic Cooperation and Development (OECD), North America has no significant additional cropland available for agrofuels. Politicians are planning to buy agrofuels from the Global South to make up the shortfall.
This is why the term “advanced agrofuels” is strategically vague. It must include imported agrofuels, primarily from Latin America. According to the OECD, 84% of the world’s additional land available for agrofuels is in South America and Africa. Astonishingly, this fact is not mentioned in the media, or by our politicians. This is despite the fact that in 2006, imported ethanol accounted for 13.5% of ethanol used in the U.S.. Countries that export ethanol to the U.S. include Costa Rica, El Salvador, Jamaica, Trinidad-Tobago, and Brazil, our major supplier. In 2005, the U.S. imported 31 million gallons of ethanol from Brazil. Then, in 2006, Brazilian imports jumped to 434 million gallons. Rather than ensuring energy independence, the RFS mandate reflects an agreement between industry and politicians to legislate the U.S.’s dependency on imported agrofuels.
When the road to energy independence is an expensive dead end
The need to reduce U.S. dependence on foreign oil has led many people to embrace agrofuels as a replacement for fossil fuels. Some assert that agrofuels will help moderate high oil prices or even help conserve oil. But agrofuels are an additive, not a replacement. Far from providing a transition from our dependence on petroleum to renewable energy sources, the agrofuels boom will simply extend the present petroleum-based economy and the era of peak oil—with all of its negative consequences. Why pursue this option? Because with an estimated one trillion barrels of oil reserves left on the planet, the price of oil is hovering at $100-a-barrel. The higher the oil prices, the more ethanol costs can rise while remaining competitive. With agrofuels, the planet’s energy crisis is potentially an $80 - $100 trillion bonanza for both Big Oil and Big Grain companies. Rather than conserving, this strategy allows oil companies to pump every last drop of oil from reserves in the world’s hard to reach, environmentally fragile areas, inviting us to consume our way out of over-consumption. There will be no renewable “transition” with agrofuels; only a longer, more expensive road to the oil economy’s inevitable dead end.
Taxpayer dollars feeding our other dependency: Big Grain
The big drivers of the agrofuels boom are the multinational corporations in the agribusiness, petroleum, biotech and automotive industries seeking to extend their market power. Over the past three years, venture capital investment in agrofuels has increased by nearly 700%. Private investment in agrofuels is pouring in to public research institutions, setting the agenda not only for agrofuels, but for public research in general. New corporate partnerships are being formed between agribusinesses, biotechnology companies, oil companies and car manufacturers. Billions of dollars are being invested in the agrofuel sector in a development often likened to a ‘green goldrush,’ in which countries are rapidly turning land over to agrofuel crops and developing infrastructure for processing and transporting them. While the rest of the world is heading into economic recession, these corporations are expanding and making unprecedented profits. How? Taxpayer dollars.
Archer Daniels Midland, the largest U.S. (and multinational) grain processor, now gets 25% of its operating profit from agrofuels, including both ethanol and biodiesel. In anticipation of passage of the Energy Bill, ADM’s stock surged nearly 20% from August to mid-December. The company announced that it was “optimistic about the expanded role [agrofuels] will play in improving energy security, strengthening rural economies and helping to improve our environment.”
In order to establish the international agrofuels market, these corporations require extensive government subsidies, tariffs and tax breaks. Corn and soybeans are the most subsidized crops in the U.S., raking in a total of $51 billion in federal handouts between 1995 and 2005. Ethanol subsidies amount to as much as $1.38 per gallon—about half of its wholesale market price. In 2006, the combined state and federal support for the U.S. ethanol industry was between $5.1 and $6.8 billion. According to Don Briggs, president of the Louisiana Oil and Gas Association, the 2007 U.S. Energy Bill is “a giant ethanol subsidy.”
“The ethanol boondoggle is largely a tribute to the political muscle of a single company: agribusiness giant Archer Daniels Midland,” states a recent Rolling Stone article. ADM has a historic and large presence in Washington. In the 1970s, as ADM began searching for ways to diversify profits from corn, the corporation began producing ethanol. ADM established a relationship with Sen. Bob Dole of Kansas, a.k.a. “Senator Ethanol.” During the 1992 election, ADM gave $1 million to Dole and his friends in the GOP (compared with $455,000 to the Democrats). In return, Dole helped the company secure billions of dollars in subsidies and tax breaks. In 1995, the conservative Cato Institute, estimating that nearly half of ADM's profits came from products either subsidized or protected by the federal government, called the company ‘the most prominent recipient of corporate welfare in recent U.S. history.’ Since 2000, the company has contributed $3.7 million to state and federal politicians.
The agrofuels industry: Concentrated growth
According to the Renewable Fuels Association (RFA), the ethanol industry’s lobbying group, out of a total of 134 operational ethanol processing plants in the U.S., 49 are presently farmer-owned associations, accounting for 28% of the nation’s total capacity. That is rapidly changing. Out of a total of 77 plants now under construction, 88% are owned by large corporations. When completed, the farmer owned percentage of total plant capacity will fall to less than 20% (note: RFA and the USDA were recently accused of underreporting the number of ethanol plants under construction, so the degree of corporate control may well be higher). Five corporations control roughly 47% of all ethanol production in the U.S. ADM and POET, the two largest corporate ethanol producers, control 33.7% of all ethanol production. The top 10 producers together control an estimated 70 percent. Because of the economies of scale of its plants, and the fact that it can dominate the grain market in both food and fuel crops, ADM is emerging as the hegemonic player in the U.S. While other ethanol companies are struggling with shrinking margins due to high corn prices, ADM has strengthened its market share, and its profits.
Concentration of ownership of global agrofuels production by U.S. agribusiness is proceeding apace. Having recently bought the majority shares in Brazil’s largest ethanol distillery, U.S.-based Cargill is now the largest shipper of both raw sugar and soybeans from Brazil—the former for ethanol feedstock, the latter either feed or biodiesel. Cargill also has the largest capacity for processing oil seeds in Paraguay.
The prospects for consolidating corporate monopolies through the agrofuels boom are staggering. New corporate partnerships and mergers are being formed at a dizzying rate: ADM with both Monsanto and Conoco-Phillips; BP with DuPont and Toyota, as well as with Monsanto and Mendel Biotechnology; Royal Dutch Shell with Cargill, Syngenta, and Goldman-Sachs, and DuPont with British Petroleum and Weyerhauser. In June 2007, BP, Associated British Foods, and chemicals producer DuPont Co. announced that they will invest $400 million to build an agrofuels plant in England.
ABOUT THE AUTHORS
Eric Holt-Giménez is Executive Director of Food First/Institute for Food and Development Policy.
Isabella Kenfield is a program consultant with Food First and an associate at the Center for the Study of the Americas (CENSA).