Here is what I learned. First of all, by most recent accounts, production of ethanol has become much more efficient in the last 20-30 years. The original article (1998) attacking ethanol for consuming more energy to produce than it yields were from Cornell Professor David Pimentel, and apparently was based on data about production dating from the '70s and '80s. Subsequently, his analysis was challenged by M. Wang and D. Santini of Argonne National Labs, who wrote:
"Prof. David Pimentel's 1998 assessment of corn ethanol concluded that corn ethanol achieved a negative energy balance (which is usually defined as the energy in a product minus energy used to produce the product). Unfortunately, his assessment lacked timeliness in that it relied on data appropriate to conditions of the 1970s and early 1980s, but clearly not the 1990s... With up-to-date information on corn farming and ethanol production and treating ethanol co-products fairly, we have concluded that corn-based ethanol now has a positive energy balance of about 20,000 Btu per gallon."
This, in fact, seems to be the concensus of analysts now, although the process of making this kind of assessment is very tricky, since a lot of factors must be taken into account to cost out both ethanol expense as well as the true costs of the oil-based energy needed to produce it. For example, because it easily picks up harmful impurities, ethanol can not be mixed with gasoline in pipelines, but must be shipped separately by tankers (car, rail, ship).
There are other issues as well, the foremost being land use. In the U.S., ethanol is fermented from corn (mostly the kernels and cobs). Corn is not only a big consumer of fertile land and nitrogen fertilizers, but is also itself consumed by people: directly as corn meal and as a vegetable, but mostly as animal feed and sweetener (the much-maligned "high fructose corn syrup" used in highly processed junk foods). It has been demonstrated that the ethanol fuel program has increased the price of foods dependent on corn. It will never be possible to grow enough corn in the U.S. to allow ethanol to replace petroleum-based fuels -- there simply is not enough arable land. Furthermore, taking land out of forest and grass in order to grow corn will increase the net amount of greenhouse gasses emitted into the air.
On the other hand, ethanol is a relatively "clean" fuel: it's main combustion byproducts are water and a small amount of carbon dioxide; it does release some other chemicals as well (mostly due to organic impurities), but not as much as gasoline or diesel fuel. By volume or weight it is less efficient energy-wise than gasoline, but it can -- and does -- replace some gasoline in powering vehicles, and thus reduces total harmful emissions. Currently, ethanol is required by (federal) law to make up 15% of the fuel sold at "gas" stations. Engines have accordingly been modified to allow ethanol to be burned at this concentration. Some vehicles and other machines have even been modified to burn pure ethanol.
Ethanol needn't be fermented from corn. Brazil has a very large ethanol industry -- heavily government subsidized (see below) -- which is derived from sugar cane. It is also possible to distill ethanol from a "mash" of cellulose instead of corn or cane; in fact, various "trash" plants can be used, including crop wastes, weeds, brush etc. For a technical article on this kind of ethanol, see this article from the AAAS. This kind of production requires more raw materials, but avoids some of the problems of planting, cultivating and harvesting corn. The ethanol from any source can also be obtained by using enzymes instead of traditional fermentation. This is discussed in the AAAS article just cited.
So, it's a mixed bag. The organic farmers point out that locally-grown ethanol can be used more efficiently if grown locally with natural fertilizers. This reduces the transportation costs and makes it a good source of energy for modified farm equipment. It can also be produced, as I just mentioned, from various farm wastes instead of corn . They also note that the subsidies that the government now pays go mostly to the big producers of ethanol, such as Archer-Daniels-Midland and Monsanto, instead of "family" farms.
I found the article from the Cato Institute (http://www.cato.org/) to be quite interesting. They point out that the government can promote a product in several ways: by providing direct subsidies -- in the form of tax credits, for example -- or by requiring its use, or by protecting it with tariffs. In the case of ethanol -- uniquely -- the federal government is doing all three. The Cato report argues that none of these supports is justified by the practical benefits of ethanol use. Incidentally, the tariff support is designed to hinder the importation of Brazilian ethanol, which is, as I said previously, heavily subsidized by that country's government. (One might also suspect that Cuba, which also has a large sugar cane crop, might also be in the sights of the tariff makers.) Cato points out that the amount of ethanol that we can produce will hardly make much of a dent in the global warming problem. Cato also wonders why the big agribusiness companies that make most of the ethanol need subsidies when the government requires the use of ethanol -- originally justified to make it a substitute for the gas additive MBTE, which turned out to be a serious groundwater polutant.
The Union of Concerned Scientists piece contains the following critique of the tax credits:
"Today’s biofuels tax credits are expensive and ineffective. They cost taxpayers more than $5 billion per year, yet they have no effect on biofuels production. In fact, the tax credits do not even benefit biofuel producers or farmers, but instead the money goes to oil companies to simply comply with the Renewable Fuel Standard.
The Billion Gallon Challenge shows how a different type of tax credit – a Biofuels Performance Tax Credit – would be more effective in jumpstarting the advanced biofuels industry. A performance-based tax credit would:
- Reward biofuel producers for performance improvements. The amount of the tax credit would be based on the emissions improvement over today’s conventional biofuels. The greater the emissions improvement, the higher the tax credit.
- Clean up all types of biofuels. Since both conventional and advanced biofuels are eligible for the tax credit, both would have an incentive to reduce emissions.
- Save billions of taxpayer dollars and spur investments in biofuels-production technology."
I highly recommend the papers cited here, especially the UCC and Cato reports. Their conclusions suggest that adding ethanol incentives and tariff renewal into the Obama tax-cuts-for-the-rich deal is simply throwing good money after bad. It is clear that the move is simply a way of attracting farm-belt votes to the president's odious "compromise".