Ethanol is as hot as an internal combustion engine these days. Judging by the press it's been getting, embracing ethanol seems to be as American as setting off fireworks on the 4th of July. But there are numerous complexities to the issue, particularly as it relates to ethanol sources, farming, production infrastructure, and current economic dynamics. Ethanol presents many new opportunities, but it’s not going to alter the realities of the global marketplace.

The Pros

Ethanol has a lot going for it. Though its environmental footprint isn't entirely ideal, it has numerous advantages over gasoline. To begin with, ethanol used as transportation fuel doesn’t produce as many greenhouse gas pollutants as gasoline does. And it's a bona fide renewable resource. Depending on what source we use for the ethanol (see below), we can grow or gather the raw materials to produce it from readily available sources. If we could produce enough ethanol, we could reduce our dependence on oil.

Gas prices have gotten higher in recent months, putting a strain on the economy and creating inflationary pressures. It's unlikely that the price is going to go down. As China's and India's economies grow, the worldwide demand for oil will continue increasing, and prices are going to go up. If U.S. consumers want to avoid higher prices at the fuel pump, then we've got to develop an alternative.

Oil is a finite resource, and we always knew that we would have to transition away from it--we should take this opportunity to begin that process. A step in that direction will help the U.S. attain a degree of energy security that it currently doesn't have because of its reliance on foreign supplies of petroleum. And ethanol would be a boon to U.S. farmers, who are already beginning to benefit from elevated prices for corn. Finally, there’s the issue of self-sufficiency: It would be satisfying if we could utilize our own agricultural and scientific wherewithal to develop an energy solution.

The Cons

But ethanol does not represent a quick fix for our current energy crisis: It will take time to ramp up production, and even if it does become widely available, not all cars can use it.

The term used for the raw material used to produce ethanol is "feedstock." In the U.S., corn is the primary feedstock for ethanol production. Pretty much everyone agrees that corn-derived ethanol is not the ultimate solution; it requires a lot of expenditure of fossil fuels (gas, or even coal) to harvest and process the corn into ethanol, effectively creating greenhouse gas pollutants and lowering the overall environmental advantages of using ethanol instead of gasoline.

In contrast, cellulosic feedstock--derived from such sources as sugar beets, sugar cane, switchgrass, and even municipal solid waste--is acknowledged as a much better source of ethanol, but the technology for its production into fuel is not commercially viable at the moment. Basically, scientists haven't yet hit upon an enzyme that's robust enough to convert it into ethanol on a scale that's needed for mass-production. Analysts say that the right technology might be as long as 10 years away, though the Canadian company Iogen and the Spanish firm Abengoa have developed viable technologies that are garnering some attention.

Currently, the infrastructure for ethanol production in the U.S. is being built primarily around corn. The folks who are building the facilities are corn farmer’s cooperatives and agribusiness like Archer Daniels Midland—which means that, even if a cellulosic feedstock is ultimately better, there will be pressure in the future to maintain a corn-based supply chain.

There is also the matter of producing so-called field corn, the variety used for ethanol production, which is different from sweet corn, the breed grown for human consumption. The Renewable Fuels Association, an ethanol lobbying group, claims that growing corn for ethanol production doesn't take away from human food production. Yet if it becomes more economically advantageous to grow corn for ethanol production, it seems logical that there would be pressure to shift agriculture to ethanol-producing corn.

Warren Staley, the chairman of the agribusiness Cargill, expressed concern about this issue in May, saying, "We have to look at the hierarchy of value for agricultural land use: food first, then feed and last fuel. Today we are providing subsidy to fuel uses while often erecting barriers to new food and feed technologies."

It is undeniable that ethanol has already had a powerful impact on America’s agriculture economy. U.S. farmers this year have been seeing an increase in the price of corn, and they're justifiably ecstatic. Yet U.S. farmers won't necessarily be the ones to benefit from ethanol production in the long term. The Bush administration recently floated a proposal--to the chagrin of domestic corn growers--to lower tariffs for ethanol imports, which would allow the price of ethanol from other countries, such as Brazil, to be more competitively priced. While the idea of sharing the wealth is certainly appealing, the import of ethanol from other countries raises an issue similar to the organic vs. local foods conundrum: the fossil fuels used to transport ethanol from other countries begins to subtract from the overall environmental gains of using ethanol. Ethanol is a commodity like any other; if producers outside of the U.S. can manufacture it at a price that's better than U.S. producers can, then U.S. farmers might not benefit, and the country may find that it is once again at the mercy of foreign-based energy producers. That may seem an unlikely scenario now, but if demand for ethanol continues to build, policymakers may be forced to meet the growing demand by allowing the import of ethanol from outside the U.S.

More significantly, if ethanol tariffs are lowered, it's possible that feedstock growers and ethanol manufacturers from other countries could start producing ethanol that is better priced than U.S. blends. This scenario suggests a repeat of the outsourcing of U.S. manufacturing jobs, where production is shifted to markets where costs are lower.

Lastly, there's the matter of what we’re growing. Not all of the corn used as ethanol feedstock is genetically modified, but some of it is. Let's set aside for the moment the basic issue of genetic modification's downsides: You're not necessarily going to be eating the corn, so what's the big deal? The issue is that seed companies that sell to farmers might patent a higher ethanol-yield variety of corn, which they would sell at a premium to farmers: good business for seed suppliers but a bad environmental and agricultural policy. Further, unless Earthbound Farm is planning to create its own ethanol blend, you can be pretty sure that the corn that is being grown for ethanol production is not being grown organically. There's little incentive to do so, because it's not primarily intended for the food-supply chain (though some of it may end up there). The toll this takes on the environment has been documented in numerous studies of conventional agricultural: cancer-causing pesticides leach into the environment, the soil is destroyed and depleted of nutrients. If corn or other ethanol feedstocks are not grown organically, we are creating yet another infrastructure of chemical toxicity. And that's what we're supposed to be getting away from.

The Verdict

The issue is not as clear-cut as we might like, but transitioning to an ethanol-based fuel is ultimately for the good. It has to be done wisely, and we have to acknowledge that corn-based ethanol is not the end of the road. There may be other and better systems that emerge, but, given the constraints of our current fuel and automobile infrastructure, corn-derived ethanol will allow us to begin to move away from oil. If the government can provide additional funding and support to research cellulosic feedstock conversion, this will help to quicken the pace that cellulosic ethanol can become a reality. The situation changes all the time, and an enterprising inventor may come up with an option that's better than anything the U.S. is currently considering. One way or the other, it's essential to transition from an oil economy to another system.