The Fuel Ethanol Phenomenon
- July 2004
This Opinion was featured in the July 2004 issue of the the Anglia Farmer
Prospects for fuel ethanol seem assured - but some level of government incentive is necessary to kick start the industry, says David Walker.
When were farmers last faced with a truly new market opportunity that was not little more than a niche market, soon to be crushed by over supply in the rush to cash in on initial promotion?
Probably the development of frozen concentrate orange juice market after it was "invented" in Florida in 1947. But don’t feel badly about not knowing this. It was more than fifty years ago and not something for UK farmers.
But the fuel ethanol phenomenon is something that is with us now, has positive envrionmental credentials, and could and should be exploited by us. That the merchants of New York have recently selected it for futures trading surely indicates that it has come of age.
The first commercial ventures to produce fuel ethanol were in the 1970's following the oil crisis. But the decline in oil prices put a damper on that party. Of late with several years of high oil prices, increasing concern about the environment and improvements in ethanol production techniques, there has been a very rapid increase in production, particularly in the US.
For the record Brazilian is the largest producer of fuel ethanol, converting half its sugar crop. The US is number two, using more maize for this than it does wheat for all food purposes. And both the international sugar and feed grain markets are feeling the effect of this added demand.
Shorter term prospects for fuel ethanol are still dependent on current oil prices and the fraught politics of the Middle East. In the longer term, however, fuel ethanol prospects seem assured. With diminishing international oil reserves, other acceptable and cost-effective alternatives seem allusive. And the willingness of society to bear the costs of environmental solutions seems well entrenched.
In a UK context some level of government incentive will be necessary to kick start the industry. The very high level of taxes on transportation fuel suggests lots of latitude for this.
The international community with the 1997 Kyoto protocol and the EU with its 2003 bio fuels directive are breathing down on the government’s neck, so one might have expected it to have made some progress with this. The issue is even in line with its current environmental mantra when it comes to things agricultural.
A recent request for industry comment on a 29-page "strategy for non-food crops and uses" suggests otherwise and seems to be too little, too late.
There is, of course, every reason to expect such a document to be an environmentally friendly blend of conventional wisdom and political correctness. Unfortunately, it seems to go a little further than this, as it attempts to create two fundamentally erroneous perceptions.
The suggested need for "scientific discovery" and "research and innovation at every stage of the production process" makes no sense in the context of fuel ethanol phenomenon. It smells of an excuse to delay.
The suggestion that it will have a "negative effect on bio diversity" also defies logic. Fuel ethanol is produced from conventional crops using conventional technology. Surely, it is not reference to fuel ethanol use?
July 2004
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