The Impact of Liquid Biofuels

Otto Doering, Purdue University

Department of Agricultural EconomicsPurdue University

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Background:

Viewing the larger scope- liquid fuels concerns•1970 versus 2005•Supply Driven•Demand Driven

Department of Agricultural EconomicsPurdue University

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Supply Driven:

•Ethanol (grain and cellulosic)•Liquids from Coal•Hydrogen•Middle East & USSR•Price

Department of Agricultural EconomicsPurdue University

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Demand Driven:

•Price•Rationing•Regulation

New Technology/Conservation•Transportation Infrastructure

Department of Agricultural EconomicsPurdue University

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Viewing ethanol in it’s limited context

Ethanol higher corn prices higher ethanol costs more subsidy

Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

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Department of Agricultural EconomicsPurdue University

Ehanol value/price margin –additive or other

Gasoline Ethanol Gas/Ethanol

Department of Agricultural EconomicsPurdue University

Date Oct RBOB Oct RBOB Equivalent + $0.51 Differential

5/1/07 $1.96 $1.95 $1.82 +0.137/5/07 $2.07 $1.87 $1.89 -0.029/21/07 $2.11 $1.57 $1.92 -0.34

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Key areas of environmental impact:

Water Quality:•Production Plants•Crops – grain or cellulosic!•Land use – land quality & intensity•Carbon Ratio•Energy Ratio

Department of Agricultural EconomicsPurdue University

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Policy Considerations

Department of Agricultural EconomicsPurdue University

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Trajectory of Current Ethanol Policy

Department of Agricultural EconomicsPurdue University

•Crop Prices & Cropping Impacts•Subsidy/Renewable Fuel Standards Costs

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Role of Transition Policy

•Improved Energy output per water/energy input•Long term sustainability life cycle based•Reduced loadings of nutrients, pesticides & sediments•Lower net Carbon emissions

Department of Agricultural EconomicsPurdue University

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Where Might We Go?

Department of Agricultural EconomicsPurdue University

•Link to demand and consider cost effectiveness•Consider Biofuels in the context of liquid fuels overall•Consider a Transition Policy with performance standards

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