Biofuels represent one of the segments of alternative sources of energy, and are derived from raw plant materials, primarily from corn, sugar and vegetable oils. However, before biofuel energy can be used on a global scale, science and technology will have to resolve a number of important issues. The reality is that along with environmental benefits and savings, biofuels have also contributed to an increase in the world food and cattle feed prices, shipping costs, and increased use of land to harvest biofuels.
Reasons for growing global biofuel demand
Whereas in the past spikes in oil prices have been short lived and often the result of military conflicts in the Middle East, the present prices have remained at an all time high due to an increased demand for oil, especially from rapidly developing countries. In addition to large-scale industrial growth, consumers in these countries are also demanding a higher standard of living, all of which requires enormous energy consumption to meet these growing appetites. For example, almost two-thirds of recent global growth in oil demand has come from China and other expanding middle-income economies. Because the prices for oil have remained high for a such a long period of time, many countries such as the US have exerted more sustainable effort and provided funding for research, development and subsidies of biofuel technology as an alternative source of energy. As a result of these efforts, global biofuel production has tripled from 4.8 billion gallons in 2000 to about 16.0 billion in 2007, but still accounts for less than 3 percent of the global transportation fuel supply. Notably, 90 percent of production is concentrated in the United States, the European Union and Brazil. Other countries such as Malaysia and China are also in the process of developing and implementing their own biofuel energy programs.
Increasing food prices
Over the last decade, the rapid expansion of biofuel production has brought up serious concerns about the impact of rising commodity prices on the global food system. According to the International Monetary Fund, world food prices rose 10 percent in 2006 because of increases in wheat corn, and soybean prices, mostly from demand-side factors, one of which has been biofuel demand. This increase in prices has been particularly devastating for developing countries with huge populations living at or below the poverty line, such as China, Mexico and Indonesia. In response, the Chinese Government put a moratorium on expanded use of corn for ethanol because of rising feed prices. China has also promoting other feedstocks that do not compete directly with food crops, such as cassava, and sweet sorghum. Mexican and Indonesian governments have had to take similar measures. Particularly, Mexico capped tortilla prices in early 2007 to contain food price inflation from higher priced corn imports, and that same year the Indonesia increased the export duty on crude palm oil, also used in biodiesel production, to slow the rising cost of domestic cooking oil.
Increasing feedstock costs
Another concern with regard to profitability and sustainability of biofuel energy has been feedstock costs. Ultimately, the profitability of biofuels depends on the availability of low-cost feedstock. Thus far it has been increasingly difficult to maintain prices low enough to maintain profit and price advantage over crude oil. In 2003-2004, feedstock costs ranged from 37 percent for sugarcane-based ethanol in Brazil, to 40-50 percent for corn-based ethanol in the United States. Sugar beets represented 34 percent of the cost of sugar-based ethanol production in the EU. With rising commodity prices, these cost shares are even higher now. The ratio of crude oil prices to feedstock prices is an indicator of the competitiveness of biofuel derived from different feedstocks. For example, the ratio of crude oil to corn prices rose sharply after 2004, as oil and ethanol prices increased and corn prices were stable.
However, the ratio dropped sharply after September 2006, making biofuels less cost competitive. In Southeast Asia and Europe, biodiesel producers also faced declining competitiveness as soy and palm oil prices rose in 2006-07. Moreover, the competitive edge of such biofuels as ethanol is further reduced due to shipping costs as shipping ethanol is more expensive than crude oil. Ethanol cannot be transported by low-cost pipelines because of potential contamination from ethanol’s propensity to absorb wate,r and to dissolve impurities on the inside surfaces of multiproduct pipelines. To resolve this issue, Brazil and the US are considering building dedicated pipelines for ethanol, which may prove economical as production expands.
Land Concerns
Environmental concerns with regard to potential land requirements if biofuels become a more mainstream fuel also need to be taken into account. According to research from the University of Minnesota, devoting all U.S. corn and soybean acreage to ethanol and biodiesel production would offset only 12 percent and 6 percent of gasoline and diesel consumption for transportation fuel, respectively. Replacing all current gasoline consumption with ethanol would require more land in corn production than is presently in all agricultural production. Moving forward with dedicating so much land to meet such a small share of transportation fuel demand would not be profitable or sustainable, and therefore is highly unlikely. Also, expanding feedstock production in countries like Indonesia, Malaysia, and Brazil that would encroach on fragile rainforest areas and wildlife habitats, remains a major concern and drawback to expansion of biofuel production.
Other considerations
It is also important to note that while biofuel has similar attributes as oil-based fuel, it is not a perfect substitute. Biofuels can be used in existing gasoline and diesel engines in blends of up to 10 percent in the case of ethanol and 20 percent for biodiesel with little or no engine modification. However, ethanol has only two-thirds the energy content of gasoline, and biodiesel has 90 percent that of diesel. As a result, a car will get fewer miles per gallon the greater the biofuel blend.
Current Conclusion
Overall, the future of biofuel energy will depend in large part on technological advancements and efficiency gains. Ideally what needs to be achieved is higher biomass yields per acre and more gallons of biofuel per ton of biomass.This could steadily reduce the economic cost and environmental impacts of biofuel production, and make it a viable alternative source of energy.
