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Biofuels – Agricultural Issues and Outlook: Some Comments Kurt Klein University of Lethbridge Lethbridge, Alberta NAAMIC Workshop IV: Contemporary Drivers of Integration Cancun, Mexico June, 2007 Recent Headlines in Canada Fuel Ethanol and Food Supply

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Biofuels agricultural issues and outlook some comments l.jpg

Biofuels – Agricultural Issues and Outlook: Some Comments

Kurt Klein

University of Lethbridge

Lethbridge, Alberta

NAAMIC Workshop IV:

Contemporary Drivers of Integration

Cancun, Mexico

June, 2007

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Recent Headlines in Canada

Fuel Ethanol and Food Supply

Join us for this unique networking symposium on one of today's hottest topics -- biofuels

Ottawa's 5% biofuel program backed

Biofuel credentials questioned as Canada hikes up ethanol targets

Canada Falling Behind U.S. Ethanol Industry

Alberta Boosts Homegrown Renewable Fuels

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Objectives of Biofuel Policy

  • Reduce greenhouse gas emissions

  • Enhance and stabilize farm incomes

  • Rural development

  • Energy security

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Reducing Greenhouse Gas Emissions

  • Modern agricultural practices use fossil fuels

  • Fuel also needed to process biofuels

  • Life cycle studies show:

    • 20-40% ↓ from cereal-based ethanol

    • 70-90% ↓ with cellulosic ethanol

    • 40-60% ↓ with canola for biodiesel

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Achieving GHG Reductions Through Biofuel Use is Expensive

  • EU studies:

    • Abatement costs via ethanol

      • $286 to $1429 per tonne of CO2 equivalent.

    • Abatement costs via most economic means

      • $30 per tonne of CO2 equivalent.

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Shifting marginal land into crops

Increased fertilizer and chemical use

More nutrient leaching

Negative Environmental Consequences

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Negative Environmental Consequences

  • More monoculture and soil erosion

  • Increased demand for water

    • 1 litre of ethanol requires 4-8 litres of water

  • Deforestation

    • Habitat losses could endanger several animal species

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Agriculture --Grain Prices Rising

  • Higher input costs for:

    • Beef

    • Dairy

    • Hogs

    • Poultry

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Gross income ≠ net income

Capitalization of higher grain prices into higher prices for inputs:

Fertilizer and machinery prices ↑

Farm land prices ↑

John Deere and Agrium share prices have almost doubled since last summer.

Winners are land owners

Not tenants or farm workers

Will Higher Grain Prices Lead to Improved Net Farm Incomes?

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Cellulose for Ethanol

  • Much more energy efficient

    • 1.3 from cereals

    • 16 from cellulosic biomass

  • Iogen awarded US$80 million by US Dept. of Energy (Feb. 2007) to establish a cellulosic ethanol plant in Idaho

    • March 19 budget item

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Logistical and Cost Problems

  • Harvest, collection, storage, distribution

  • 100 million litre per year plant requires:

    100 truckloads per day, each hauling 32 large round bales

  • Costs of harvesting, storing and transporting

    • $0.40/litre of ethanol.

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Biodiesel – Opportunities and Obstacles

  • Environmental benefits:

    • Cuts exhaust emissions, particulates, odour

    • Reduces GHG emissions 40-60%.

  • A lot of interest:

    • Canola Council of Canada, farm groups, etc.

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Cost, Technical Problems for Biodiesel

  • Higher cost of canola as feedstock

    • Price increased 49% since last year

  • Quality, cost and consumer issues

    • Animal fats, used cooking oils unlikely to be accepted by major fuel distributors

    • Flow problems in cold weather

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Biofuels vs. Livestock Feed

  • Higher grain prices

    • Plants currently under construction in the US could more than double present capacity

  • Grain prices may rise further

    • Ethanol production likely↑even if oil prices↓and existing plants struggle financially

    • Need to cover only variable costs

  • Prospects good for grain farmers … but not for livestock production

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Distiller’s Dried Grains for Livestock

  • 100 kg of corn fermented in a dry-grind ethanol plant yields:

    • 36 litres ethanol, 32 kg DDGs, 32 kg CO2

  • DDGs: high protein content but also problems

    • Flowability

    • Monogastrics

    • Lysine digestibility

    • Nutrient variability

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New biofuel plants may reduce employment and economic activity elsewhere:

↑ local wage rates

↓livestock production, processing, transport

Net gains in employment and economic activity usually less than gross gains

Local employment opportunities

Few permanent jobs created:

Iowa: 35 new jobs at 190 million litre plant

Lloydminster: 26new jobs for 130 ml/year

What about Rural Development?

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Conclusions activity elsewhere:

  • Biofuel industry is expanding rapidly (with govt.)

  • Likely to severely hurt livestock sectors and raise prices for food

  • Many environmental negatives