Runaway food prices have compelled some lawmakers to question the policies adopted to develop the biofuel industry.
In order to cut dependence on oil imports Congress has granted the biofuel industry a 51 cents per gallon tax credit and passed a law mandating a five fold increase in output over the next 15 years.This means production is set to increase from 7 billion gallons a year today, to 36 billion gallons annually by 2022. About 15 billion gallons will be produced from corn, and the balance from next generation raw materials such as wood chips, straw, corn stalk and grass.
Presently almost 25% of US corn production is being used to produce ethanol, raising corn prices. Although corn is used to feed livestock, it has put pressure on prices of wheat, soybean and other crops also, as farmers divert divert land to grow corn. Higher corn prices have translated into higher prices for eggs, milk and meat. There is mounting evidence as well that producing ethanol from corn may not be as environmentally friendly as was once supposed, and may in fact lead to an increase in green house gases as farmers clear virgin land, releasing carbon into the atmosphere.
These developments have forced politicians to have a re-look at the ethanol policy. Both Obama and Clinton have asked that it be reconsidered in the light of the current food crisis, while 24 Republican senators including McCain have written to the Environmental Protection Agency asking them to repeal ethanol output targets. Lawmakers also want the subsidy on ethanol production to be scrapped, given the increase in fuel prices and also because the industry has now come of age and can do without the protection.
US farmers on the other hand feel that there is no reason for any controversy.They explain that the area under corn plantation increased 19% last year over 2006. While conceding that the increase was largely met by diverting land under soybean cultivation, they point out that the crop production of 50 bushels of soybean per acre and 150 bushels of corn per acre yields the same amount of oil and protein, i.e. food per acre.The cost of production is also the same. On top of it you get about 420 gallons of ethanol an acre from corn, after extracting the oil, protein and minerals for other uses, which makes it a kind of bonus for free.
The opponents of the ethanol industry are unlikely to succeed given President Bush's support for it, and the importance of the farm states in an election year.But it will certainly hasten the switchover to the production of next generation biofuel from wood chips, corn stalks and grass, which is more environment friendly.