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Biofuels
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[StR]Bish
post May 6 2008, 08:53 PM
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Hi guys. Been a while since I last posted here. Been eagerly waiting for AoM2 - if it'll ever come. How you's all been anyway? I'm hoping to return sometime this year, the Legacy tourney looks like a bit of fun, for nostalgia's sake anyway. At the moment, though, I can't do much because i'm tied up with work, study and...wow (cough)

Anyway, I need a bit of help on the hot topic of 'Biofuels'. I don't think it's been discussed here, I read a topic on 'Jervon's Paradox' a while ago which was very interesting but couldn't find something that narrowed in on this issue. If you're unaware of the issue then you can get a very brief overview from this link: http://web.ebscohost.com/src/detail?vid=1&...40sessionmgr109 However, there's much more too it. I have an exam on Friday regarding the topic and a reasonable amount of knowledge on it; I definitely know my contention/stance on the issue. I just wanted to get all your unprofessional ;P opinions on it to clear up any grey areas.

The world's biofuel industry is being accused of driving up world food prices and causing instability and starvation in developing nations. It is also estimated that one tank of biofuels is approximately made from resources that would feed one human-being for an entire year.

So let's start with the headline of the aforementioned article:

Should we feed our cars over our people?

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sKiLLfrEE
post May 7 2008, 07:31 AM
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QUOTE([StR]Bish @ May 7 2008, 01:53 AM)
Should we feed our cars over our people?
*



Of course since people get you nowhere...opposed to cars.

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Roark
post May 7 2008, 08:05 AM
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I don't really care for the feed X over Y arguments, as markets will naturally sort that stuff out. I have two main problems with biofuels. (1) They are incredibly inefficient. For some ethanols, especially corn, you have to spend just as much energy producing/processing the stuff as you will end up getting out of the fuel. (2) The government has declared it to be the alternative fuel of choice, and has propped up the industry against normal market forces that would create a fairer and more efficient allocation.

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[StR]Bish
post May 7 2008, 08:13 AM
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That was the rhetorical question to start the debate lol.

From what i've gathered, large-scale organisations that are involved in the production of biofuels have been successful in lobbying goverments to provide enormous amounts of subsidies. So to them, the question isn't that rhetorical.

Biofuels is supposed to be the future. the supposedly 'environmentally-friendly' alternative to fossil-fuels that is aimed at reducing greenhouse emissions. Well..does it? Cuba is apparently the only sustainable country on the planet. Ever since the U.S has imposed sanctions on them they've had to grow their own crops and other foodstuffs to keep their country afloat. There is a major food-crisis in the world at the moment, with all third-world countries living on a subsistent existence and rising inflation rates not aiding the situation.

It arguably makes the situation of climate change much..much worse. Tropical rainforests must be cleared in order for farmers to grow biofuel crops. As I said, Cuba is the only sustainable country on the planet, most countries are struggling to produce enough food for themselves let alone invest it in fuel. Deforestation accounts for approximately 18% of the world's greenhouse gas emissions. Doesn't sound like a very environmentally-friendly alternative to me.

Governments should have also taken into account the fact that the world's population is increasing rapidly. by 2030 the population would have increased to such an extent that food production would need to increase by 50%. By 2080 it is estimated that the figure would need be doubled. Mr. Bush called for a huge increase in ethanol use that would carry over the next decades. More acreage is now devoted to growing corn than in 1944. Farmers planted 90.5 million acres in 2007, 15% more than 2006. If the White House are succecssful in increased ethanol production then in due course 40% of that corn ends up in petrol tanks and the world will find itself having a difficult time feeding itself.

Biofuels has hardly even begun yet, it's only a phantom in the imagination of the buyers of food. Because this notion of innovation is going around, food-sellers are holding onto large proportions of their resources. Why? Because they hope to sell it to people who drive cars...
In the amount of ethanol needed to put a guy on a business class flight, you could be feeding a subsistent farmer in Africa for the same amount. There's no comparison, so what are the goverment trying hoping to achieve? What other benefits are there out of biofuels that are greater then the detrimental affect of death by starvation?



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Orion_Zorn
post May 7 2008, 09:36 AM
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Well I posted here awhile ago about how the US tells African nations to not subsidize their farming (government subsidized fertilizer) but then subsidizes its own farming. To me, it seems that people in power do understand that the world population is growing, and that resources are getting scarce, and that more people means more competition for the remaining resources.

I don't think the US really cares if people starve. I cannot think that anyone seriously looking at Ethanol (almost all of the presidential candidates pushed ethanol until the articles started coming out pointing out how bad it was) would not realize that it is a bad idea.

Also, I have read a few times that US farm subsidies in the past meant that US food was super cheap, and small local farmers without technology could not compete. If we did NOT subsidize our food, we would not 'feed the world' as we do. Basically, if we really practiced free market policies, (many) other countries would not be starving, because they would have more farmers. Instead, those farmers went to the cities and got jobs in factories...and now that other countries relied on cheap US food, a price hike hurts them a lot. If we had just not subsidized our farming, other countries would have more farming of their own, and not be in such bad shape. I have only read a little on this though, hard to say exactly what would have happened if we had never subsidized our food.

My theory is that the energy companies will always fight solar power. I can't have a small coal furnace in my home that generates electricity, but I can put up a small solar panel - and not need to buy power from any company at all. I would bet that energy companies don't want consumers to buy a product once, they want continuous income. Sell me electricity, and I am always a customer, sell me a solar panel once, and I might not be a customer for decades, until I needed another panel.

imo this is why all politicians promote ethanol, and not solar or wind power. i can't feasibly make my own ethanol, but I can set up a solar panel.

I mean, the oil companies get billion dollar tax breaks every year, but we can't subsidize solar power?

This post has been edited by VnX_Zorn: May 7 2008, 09:39 AM

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Roark
post May 7 2008, 09:58 AM
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No we shouldn't subsidize solar power. Or oil. Or farming.

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Orion_Zorn
post May 7 2008, 11:11 AM
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my point was, what possible reason could they have had to subsidize ethanol over solar? Not everyone thinks subsidies are a bad thing, obviously most politicians feel they are ok since we continue to allocate tax dollars towards subsidies. I am asking, what possible reason could those people have had to subsidize ethanol over solar or wind power?

As I said, that would enable people to be energy independent. The big energy companies don't want people to be energy independent, even though we hear every day how the US should be.

edit: there is one flaw with the free market though. It's reactionary. I think one of the positives of subsidies is that you can plan ahead. they made the wrong choice, but if you notice, they were subsidizing corn and ethanol over a year ago that I know of. imo politicians did this because they knew that mexico's biggest and only real oil reserve is dying off, and within a few years, mexico will not be able to export oil.

just pointing out that one benefit of subsidies is that you can plan ahead, instead of waiting for gas to hit whatever price point needed to get consumers to demand an alternative.

edit2: to be clear, I think not having subsidies at all would still be the best choice.

This post has been edited by VnX_Zorn: May 7 2008, 11:17 AM

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KS_Rockstar
post May 7 2008, 01:23 PM
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I highly recommend this book:
Common Wealth: Economics for a Crowded Planet
by Jeffrey D. Sachs.
Link: http://www.amazon.com/Common-Wealth-Econom...10184421&sr=8-1

One of the main points is that, no, markets will not just sort that stuff out both from an environmental stand point and economical and a sustainability stand point. It's an easy read and a good unbiased read.

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Orion_Zorn
post May 7 2008, 02:42 PM
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I would think that 'the market' is just popular opinion. Popular opinion usually sides with what is cheapest, but it doesn't have to be that way.

If everyone wanted solar/wind/water power even though it was more expensive than the coal based electricity that most of the US uses, we would have it. But most people only look at the cost to their lifestyle, so we will burn coal for electricity until the mercury content in fish is so high, we can't even eat them.

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Roark
post May 7 2008, 03:25 PM
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I've never had too much respect for Sachs. I read his previous book "The End of Poverty" and was throughly unimpressed. His general idea on fixing the world's poverty problems is rooted in foreign aid. While that book did an excellent job of highlighting many problems in poor regions of Africa, Poland, Russia, etc. his answers to those problems were uninspired and pretty short-sighted. I'd hardly call his approach "unbiased" as he has a pretty consistent ideological viewpoint (his columns have also championed high-tax high-welfare societies for example). He's an unapologetic opponent of the Hayek model of public economics (Austrian School).

Why wouldn't markets sort these things out? A market is not a good or evil entity, but a process by which scarce resources are distributed, according to logical constraints such as quantity/cost of supply and the interactions with consumer demand.

This construct applies perfectly to things like energy. The environment is a bit more difficult, as energy markets tend to have many negative externalities that aren't internalized in the cost of those energy sources. But I'm not arguing that the government shouldn't regulate these. Obviously the protection of public goods are well within its jurisdiction. But subsidies make a mess of these markets, and don't solve any of the externalities problems.

This post has been edited by Roark: May 7 2008, 03:27 PM

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Orion_Zorn
post May 7 2008, 03:38 PM
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If you remember the thread about Peak Oil, one of the last questions you asked was 'is there any evidence that the World oil supply will drop any quicker than the US oil supply did?'

It might, it might not, but what if it does? Changing over the world to run on solar, wind or wave power won't happen overnight. The hirsch report stated that if we waited until we hit the Peak to start investing in renewable energy, the world would 'endure 20 years of energy shortages'.

Where is the price point that would push people to start investing in other energy sources? If it is beyond the peak, we will have energy shortages for 20 years while we try to ramp up alternative energy.

And I would think that the energy provided by fossil fuels, being more efficient, would make it easier and cheaper to build alternative energy systems, right? So by waiting, it makes it even harder for us to change over.

Maybe the peak isn't here yet, maybe the decline would be slow, I am just saying that the market is always reactive, and if things change quickly, we are screwed.

subsidies aren't the ideal solution, but do we want to wait to see how fast the oil declines after the Peak?

There is a country in Europe that gets 80% of its energy from wind power (Sweden?). When I am paying $6 a gallon for fuel oil to heat my house, the people there will be laughing at me...they planned ahead, we have not.

Well actually we did, we invaded Iraq. Just ask McCain. ;)

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Roark
post May 7 2008, 03:50 PM
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Sweden also taxes at an effective rate of 51% of its GDP (compare to 27% for the US). While you are paying $6 a gallon for fuel, they will be envying you, not laughing.

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Orion_Zorn
post May 7 2008, 08:31 PM
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I said $6 for a gallon of fuel oil. Heating oil, to heat my house with.

I might be mistaken, but I assumed that most of sweden heats using electricity since 80% of their energy comes from wind power. Since the wind doesn't have peak supply issues it should be about the same price, as my heating oil costs go up.

what does the tax rate matter?

Also, you aren't replying to the main statement: markets are reactionary, which can cause problems. True?

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KS_Rockstar
post May 7 2008, 10:01 PM
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My point about markets and the point made in the book is that they do not take into account the long term (in this case environmental) effects of the supply and demand for the various goods.

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Roark
post May 8 2008, 12:38 AM
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Markets are perfectly capable of handling short term vs long term effects. What you are describing are externalities, negative effects of consumption that aren't reflected in the cost (usually because they deal with damage to public goods). There are some ways that the market can deal with this, like with Coasian bargaining, but generally the government has to take steps to regulate damage to public goods. One such way (beyond legislated regulation) is a tax, where the govt attempts to "internalize the externalities" by adding the marginal *public* cost of consumption to the market price. We see these on cigarettes, alcohol, gasoline, etc. These aren't bad things, and are in perfect keeping with most public economics theory. I'm not saying the government shouldn't be involved, since this is obviously their entire purpose for being. What I'm saying is that the manner in which they currently get involved, and the subsidies they have chosen, have created an enormous mess out of the whole thing.

QUOTE
what does the tax rate matter?

I'm pointing out that there is no free lunch. Sweden's wind power infrastructure was not cheap, it was paid in part by taxing the bejeesus out of the populace (they have one of the highest tax rates in the world, and it's almost entirely income tax as their corporate tax rate is lower than the US corporate tax rate). They have no reason to laugh at your high gas bill when they don't get to keep any of their own income.

QUOTE
Also, you aren't replying to the main statement: markets are reactionary, which can cause problems. True?

Reactive in that things will be humming along, peak oil will hit, and the economy will violently crash? No, I do not think that will happen. As the price of oil rises, the financial incentive for innovation in alternatives rises with it. The "peak" will not consist of wells suddenly running dry, our oil prospectors are too good for that. This will be a methodical rise in prices to accompany a methodical strain on supply and increase in demand.

Even assuming the peak is NOT around the corner, we are all fairly certain that demand will climb quickly and steadily over the next decade (and with it, prices). I am not worried at all about alternatives, as the markets will turn to them in droves as this happens.



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