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Biofuels are the future?
November 8, 2007
Ricardo Hausmann, director of Harvard University’s Center for International Development, says that biofuels can be (and maybe already are) competitive with fossil fuels at "something like current prices":
Brazil has been exporting ethanol to the US at an average delivery price of $1.45 for an amount with the energy equivalence of a gallon of petrol. It is doing so profitably and in increasing amounts, in spite of a 54 cents a gallon tariff to protect American maize-based ethanol producers. Many countries are following suit.
Ethanol is an inconvenient chemical compound that is corrosive and soluble in water, thus limiting its immediate market to that of a gasoline additive. However, this is just the Betamax phase of the industry. There is plenty of private venture capital money being poured into finding more efficient ways of extracting energy from biomass and delivering it to transport and power systems. Over time, the technology will also become more flexible, allowing more crops to be used as feedstock, not just the current choice of sugarcane, maize and palm oil. New technologies will be able to extract energy from cellulose, allowing the use of pastures such as switch grass as well as the refuse of current food production. The cheque is in the mail.
Another very striking prediction:
[The] increase in the price of agricultural land and of food will relieve governments from the current political pressure to protect the agricultural sector. Governments that, as a consequence of the land glut, have been protecting and subsidising farmers will see them grow rich either because they “plant” biofuels themselves or because other producers switch into them, lowering the supply and increasing the price of other crops.
By contrast, consumers will be less enthusiastic and demand that something be done about the price of food.
The obvious solution will be to cut back on protectionism and liberalise trade in agriculture.
Read the rest of his column for the FT here.
I wonder if agricultural protection will surrender so easily. As I noted in my previous post, Hillary Clinton is as keen as Ricardo Hausmann on biofuels–but she went out of her way to specify home-grown biofuels. There’s saving the planet and protecting farmers: it’s a question of priorities.
