Biofuels are the future?


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.

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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