Does the conventional wisdom about ethanol for fuel make economic sense? In general the answer is clearly "No!" If you are a corn or sugar cane producer, the answer is certainly "Yes!" With all economic analysis, measures of success vary among parties.
If one is just a consumer of gasoline in the US, which is mandated by law to have at least 10% ethanol, the answer is no. Ethanol, when blended with gasoline, is less fuel efficient and creates more emissions through incomplete combustion.
Although ethanol had been envisioned to reduce dependence on foreign oil, the opposite has occurred. It takes more fuel to plant, tend, and harvest corn and sugar cane, and then to process it, than the resulting ethanol saves. Additionally, ethanol blended gasoline is more expensive to purchase, and since it is less fuel efficient, it is less efficient to use.
Further, when existing crops such as corn and sugar cane are taken off of the food market to ethanol, the price of those crops goes up, as does the price of food. Higher food prices lead to both local and global insecurity. Is getting less mileage, creating more pollution, and spending more at the grocery store worth it?
From a farmer's point of view, using crops which are often subsidized, even sometimes subsidized to destroy, in a useful manner is good. Arguably, higher prices lead to higher output and that is better for the agriculture sector in general. A strong agricultural sector leads to greater food security.
So who is right? From an economic efficiency point of view, the consumer is right and the farmer wrong. The costs to the consumers far outweigh any potential and specific gains to farmers and the agricultural sector. Additionally, the detrimental impact of increased air pollution also tilts the scale in favor of the consumer.
Clearly, using corn or sugar cane to make ethanol for fuel doesn't make overall economic sense.
Here is some video discussing the issue further:
Showing posts with label emissions. Show all posts
Showing posts with label emissions. Show all posts
Wednesday, June 25, 2008
Thursday, June 12, 2008
Carbon Offsets
Whether you believe in global or warming or not, money is being made selling what are known as carbon offsets. According to TerraPass,
A carbon offset is a certificate representing the reduction of one metric ton (2,205 lbs) of carbon dioxide emissions, the principal cause of global warming. Although complex in practice, carbon offsets are fairly simple in theory. If you develop a project that reduces carbon dioxide emissions, every ton of emissions reduced results in the creation of one carbon offset. Project developers can then sell these offsets to finance their projects.
Of course, TerraPass doesn't do this out the kindness of its heart, one has to be a member, which is either pay as you go, or business programs.
What will not be discussed is whether carbon offsets is a moral good or not, rather this is a discussion of whether it is or isn't economically efficient.
In one respect, TerraPass follows the existing model of the market for pollution credits in the US. Power plants and major industrial entities receive pollution credits and are able to sell them to more polluting entities. The incentive to become a lesser polluter is there. However, the incentive must be greater than or equal what that capital could earn versus other projects. It has proven to be a successful program, to one degree or another.
While this program may work for businesses, as there may also be government subsidies, whether it makes economic sense for individuals is another matter entirely. Consumers must be willing to part with $9-$26 to "reduce their carbon footprint." Does that purchase make economic sense?
Arguably, the answer is "no." That money could be used to finance home conservation projects, like installing weather stripping or building a cistern. What TerraPass is making money on is a sense of moral guilt. Those who are most concerned with global warming are buying feel-good credits to tell their friends they live a "carbon neutral" lifestyle.
As stated above, if you are really concerned about reducing your carbon footprint, consider conservation and home energy efficiency projects. I maintain another blog that discusses green roofs, which I think is economically efficient at reducing air pollution and storm water runoff (http://www.cleanerairforcities.blogspot.com)
A carbon offset is a certificate representing the reduction of one metric ton (2,205 lbs) of carbon dioxide emissions, the principal cause of global warming. Although complex in practice, carbon offsets are fairly simple in theory. If you develop a project that reduces carbon dioxide emissions, every ton of emissions reduced results in the creation of one carbon offset. Project developers can then sell these offsets to finance their projects.
Of course, TerraPass doesn't do this out the kindness of its heart, one has to be a member, which is either pay as you go, or business programs.
What will not be discussed is whether carbon offsets is a moral good or not, rather this is a discussion of whether it is or isn't economically efficient.
In one respect, TerraPass follows the existing model of the market for pollution credits in the US. Power plants and major industrial entities receive pollution credits and are able to sell them to more polluting entities. The incentive to become a lesser polluter is there. However, the incentive must be greater than or equal what that capital could earn versus other projects. It has proven to be a successful program, to one degree or another.
While this program may work for businesses, as there may also be government subsidies, whether it makes economic sense for individuals is another matter entirely. Consumers must be willing to part with $9-$26 to "reduce their carbon footprint." Does that purchase make economic sense?
Arguably, the answer is "no." That money could be used to finance home conservation projects, like installing weather stripping or building a cistern. What TerraPass is making money on is a sense of moral guilt. Those who are most concerned with global warming are buying feel-good credits to tell their friends they live a "carbon neutral" lifestyle.
As stated above, if you are really concerned about reducing your carbon footprint, consider conservation and home energy efficiency projects. I maintain another blog that discusses green roofs, which I think is economically efficient at reducing air pollution and storm water runoff (http://www.cleanerairforcities.blogspot.com)
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