Sugar Cane Ethanol Saving the World

To the dismay of energy consumers throughout the United States it seems that one of the most environmentally friendly, economically feasible and energy efficient fuels in the world may never reach US markets. Sugar cane ethanol, a fuel that is nearly six times more economical to produce than corn ethanol and has a much smaller environmental footprint then other fuels, is being denied to US consumers. Perhaps the most attractive benefit sugar cane ethanol presents is its production capability outside the Middle East (a place where US officials would like to curb energy reliance on in the near future). Despite these overwhelming benefits and more, the ethanol tariff currently intact makes it impossible for US consumers to start moving from a continually depleting energy source in oil to an infinitely reproducible energy source in sugar cane ethanol. If the United States eliminated the ethanol tariff and opened trade completely with sugar cane producing countries dependence on the Middle East and other unstable suppliers of oil would be decreased substantially, global greenhouse gas emissions would be minimized, world food prices and energy prices would decrease, developing countries economies would grow and US consumers would benefit both morally and financially.
In the recent presidential election few issues caught the attention of voters like the United States quest for energy. Only the war in Iraq and the current economic crisis at hand were more important to the average voter. Americans have started realizing that relying on unstable countries in the Middle East for oil creates a liability that needs to be eliminated as soon as possible. One of president Barrack Obama’s main goals while in office involves developing an alternative energy sources to curb Americas detrimental addiction to oil. According to the president’s official website $150 billion will be allocated over the next ten years to, “catalyze private efforts to build a clean energy future”. Obama’s official website goes on to say that he wants to eliminate our current imports of fuel from the Middle East and Venezuela in the next 10 years, reduce greenhouse gas emissions by 80% in the next 40 years, and ensure that at least 10% of our energy comes from renewable resources by 2012. Considering that sugar cane ethanol reduces greenhouse gas emissions, can increase mileage in ethanol based cars, and is 100% renewable, it seems like something worth looking into.
When presenting people with the overwhelming benefits sugar cane ethanol provides, it usually leaves them perplexed and wondering why US officials have barely scratched the surface of researching this alternative fuel for domestic use. It seems that the answers to all of our energy problems could be held within the high cellulose content of a sugar cane plant but nobody wants to act on this revelation. The reason for this lack of initiative probably lies somewhere in the midst of corn ethanol lobbyist in Washington and sheer ignorance to the benefits that sugar cane ethanol could provide consumers and the government alike. Looking at why current corn ethanol producers in the United States oppose lifting the ethanol tariff can help us gain insight as to why the government would tax imports on one type of fuel, ethanol, and not tax oil imports from Middle Eastern countries, even though we are supposedly moving in an opposite direction
They say that money is the root of all evil and this situation is no exception. The fate of corn ethanol producers across the United States rests on a single piece of legislation that is currently under attack by an array of US senators. The current tariff restricts imports of sugar cane based ethanol by imposing a $0.54 tax on every gallon of ethanol imported from abroad and raises terms of trade to make them illogical to export. This tariff is in place to insure the sustainability of US corn ethanol producers and protects them from foreign competitors who would otherwise be able to offer ethanol at a far lower price due to geographical and other competitive advantages. To say things bluntly, the US has begun an inferior attempt at developing an oil alternative (corn ethanol) and is trying to correct geographical disadvantages by imposing what some sugar cane ethanol producing countries say is a violation of World Trade Organization policy. There are countless global benefits to be gained from the abolishment of this tariff, and only minor national losses. When you start to explore some of the advantages dismantling this tariff would result in and combine them with the stated goals of our newly elected government officials, it is hard to imagine a future for corn based ethanol producers. That is of course only if the government actually implements their new energy/environmental policies they have promised voters (which often times they don’t).
The environment is one issue Washington and the rest of world have found growing in importance for the past decade. Scientists say greenhouse gas emissions are the main cause for the rise in global temperatures. Educated researchers are urging governments around the world to enact policy changes that offset emissions their countries industrial sector emits. Such acts like the Kyoto Treaty have governments purchasing carbon credits trying to counteract their carbon footprint. With global warming and greenhouse gas emissions on the minds of everyone, sugar cane ethanol stands out in a crowded marketplace full of fuels detrimental to the well being of our earth and future populations. The waste from a sugar cane ethanol plant can actually power the entire process of converting sugar cane into ethanol. In Brazil, one of the few completely energy independent countries in the world, ethanol plants produce enough energy just from the production process to not only power their entire operation, but usually end up selling excess energy back to the city power grid. The best thing about powering sugar cane ethanol plants is that when sugar cane waste is burned to power the plant, much less carbon is emitted into the environment, when compared to corn and especially oil refineries. Again the positive impact on the environment is just one of the many benefits the world could see from the dismantlement of this tariff.
The easiest way to explain the phenomena of sugar cane ethanol is to simply say that it’s more efficiently produced, more environmentally safe and ultimately less expensive than corn based ethanol. We have seen over the past few years that America is trying to wean itself from oil by developing corn based ethanol plants and technologies. This industry does create jobs for many unemployed Americans and also has a positive effect on the environment, but the benefits simply do not outweigh those of producing and importing sugar cane ethanol when looking at the issue in a global sense. Developing countries around the world have a plethora of sugar cane arable land and could become major players in the alternative energy game. This has many top officials in Washington starting to gain a sense of just how much this alternative fuel can benefit the environment. Here is a clip from Senator Feinstein’s proposal to congress in hopes of abolishing this tariff mainly stating the environmental effects sugar cane produced ethanol could have on the world.
“Here is how: the fuel we burn to power our cars is a major source of the greenhouse gas emissions warming our planet. In California, it accounts for 40 percent of all of our emissions. To reduce this impact, we need to increase the fuel efficiency of our vehicles and lower the lifecycle carbon emissions of the fuel itself.”…
“Unfortunately the ethanol tariff puts a trade barrier in front of the lowest carbon fuel available, making it considerably more expensive for the United States to lower the lifecycle carbon emissions of transportation fuel.”
Clearly Mrs. Feinstein and the five other Senators that signed off on this bill are adamant about their point of view on the tariff. The bill dubbed S. 622, that Senator Feinstein is pushing for, ensures parity between the subsidies paid to ethanol producers and the tariff imposed when importing the good. These imbalances between the subsidies and tariffs are causing importers a competitive disadvantage rendering their decision to import one sided. Although in cases of a particularly good year, meaning high yields in ethanol producing countries, importers have still seen slight profits.
When considering why ethanol producers outside the US have an advantage over domestic producers, a couple factors need to be looked at. The main reason sugar cane ethanol is much more economical to produce than corn ethanol lies in the refining process. Instead of having to convert carbohydrates to sugar, cane ethanol automatically converts while maturing in its growth stage. In contrast, a considerable percentage of the corn ethanol production process is spent converting corn carbohydrates to sugar. This time, like in every other aspect of business, means more cost and thus less profits for the more time consuming corn ethanol producers.
When questioning why American producers don’t just convert their crops to sugar cane, geographic factors come into the picture. Brazil, the world’s number one producer of sugar cane, has so much more sugar cane farmable land than the United States; it creates a much larger economy of scale. This means that every sugar can plant Brazil produces causes the average cost of each unit produced to decline. On the other hand, the United States only has a fractional amount of sugar cane farmable land when compared to Brazil and other major sugar cane producers. Simply put, without the ethanol tariff currently in place, American sugar cane producers cannot compete with Brazilian producers. This may sound like eliminating the tariff would spell doom for American corn farmers, and it may for some, but we need to look at this situation globally and not just in a monetary sense.
The tariff currently in place is causing world food prices to increase and ultimately the cost of filling up gas tanks in the US. With the removal of the tariff, food prices would decrease and the price of gasoline would drop dramatically. One expert on trade from the International Food and Agricultural Trade Policy Council said, “If we wanted to achieve the energy goals in the U.S. we would disassemble a lot of the protectionist policies”. There is however a loophole in this tariff that has Caribbean countries stacking up with sugar cane ethanol refineries. According to a 25 year old trade agreement with a number of Caribbean countries, ethanol can be exported to the United States from these countries without being taxed by the ethanol tariff. There is a problem becoming evident in these tariff free countries that may begin hurting current ethanol prices in the US. As we all know, when a profitable opportunity presents itself, firms will enter the marketplace until this opportunity becomes unprofitable. This is what is happening in the Caribbean and soon the duty-free amount of exports will annually be reached and profits will begin to decline causing these producers to raise their prices, or become extinct.
The opportunity cost associated with the switch from corn based ethanol must also take into account the added stability the United States would gain from exchanging energy reliance from an incredibly unsound Middle East to a more US friendly South America and pro-American Caribbean countries. Former president George Bush and current President Barrack Obama have repeatedly spelled out that we will not be relying on these areas in the future for energy. What they don’t discuss is how we are going to achieve this goal, which is kind of important to say the least. The economics and geographic advantages associated with sugar cane production give southern hemisphere, mainly Brazil and other South American countries, a comparative advantage when it comes to sugar cane ethanol. This means that until the United States can develop a more efficient way to grow sugar cane, they will import it from abroad.
It is clear that if the tariffs restricting trade of sugar cane to the United States are eliminated, consumers will benefit in multiple ways. Food prices around the world will be reduced, developing countries will see a rise in standard of living and the price of filling your gas tank will be drastically reduced. One of the largest carbon emitters in the world, the United States, will reduce carbon emission immensely and will have a gigantically beneficial impact on the world environment. There are negatives that come with a complete dismantlement of the tariff, including possible job losses in the corn industry but we have learned that after everything is said and done the benefits will significantly outweigh the negatives.