Dousing ethanol with truth
Phil Price
Issue date: 11/6/07 Section: Business
Making too big a bet on ethanol would leave Canada exposed to weather-induced crop swings and tied to a fuel that at best can meet only a tiny fraction of demand, the pair concluded in a recent article in the Cato Institute's Regulation magazine.
"By displacing gasoline with ethanol, we are displacing geopolitical risk with yield risk," they argued. "And historical corn yields have been twice as volatile as oil imports."
In addition, it is not entirely clear that continued diversion of North American corn production into ethanol would be in the best interests of humanity. North America, according to the United Nations Development Programme, produces 47 per cent of the world's corn supply, the vast majority of which is consumed by the world's poorest nations.
If the recent spike of corn prices are any indication, widespread diversion to ethanol production could make corn prices unmanageable by those most vulnerable to food prices.
It is becoming clear that the issue of environmental sustainability is a Pandora's box of trade-offs, and the altruistic motives of the environmentalists will need to be weighed against the price of corn, a world staple.
As businesses, governments and individuals continue to seek respite from the vagaries of the oil market, one thing is obvious: the easy answers hide significant costs.
"By displacing gasoline with ethanol, we are displacing geopolitical risk with yield risk," they argued. "And historical corn yields have been twice as volatile as oil imports."
In addition, it is not entirely clear that continued diversion of North American corn production into ethanol would be in the best interests of humanity. North America, according to the United Nations Development Programme, produces 47 per cent of the world's corn supply, the vast majority of which is consumed by the world's poorest nations.
If the recent spike of corn prices are any indication, widespread diversion to ethanol production could make corn prices unmanageable by those most vulnerable to food prices.
It is becoming clear that the issue of environmental sustainability is a Pandora's box of trade-offs, and the altruistic motives of the environmentalists will need to be weighed against the price of corn, a world staple.
As businesses, governments and individuals continue to seek respite from the vagaries of the oil market, one thing is obvious: the easy answers hide significant costs.
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