The Law of Unintended Consequences and Biofuels Subsidies

Ronald Bailey | January 8, 2008

Researchers at the Smithsonian Tropical Research Institute (STRI) argue that American biofuel subsidies are boosting deforestation in the Amazon. How? STRI's staff scientist William Laurance explains the cascade of effects that occur as the result of $11 billion per year in corn subsidies.

The US is the world's leading producer of soy, but many American soy farmers are shifting to corn to qualify for the government subsidies. Since 2006, US corn production rose 19% while soy farming fell by 15%.

The drop-off in US soy has helped to drive a major increase in global soy prices, which have nearly doubled in the last 14 months. In Brazil, the world's second-largest soy producer, high soy prices are having a serious impact on the Amazon rainforest and tropical savannas.

"Amazon fires and forest destruction have spiked over the last several months, especially in the main soy-producing states in Brazil," said Laurance. "Just about everyone there attributes this to rising soy and beef prices."

High soy prices affect the Amazon in several ways. Some forests are cleared for soy farms. Farmers also buy and convert many cattle ranches into soy farms, effectively pushing the ranchers further into the Amazonian frontier. Finally, wealthy soy farmers are lobbying for major new Amazon highways to transport their soybeans to market, and this is increasing access to forests for loggers and land speculators.

Remember the First Law of Ecology is "everything is connected to everything else." That especially applies to markets.

Whole STRI article here.

Comments

|1.8.08 @ 2:13PM|#

There's also an extended expose in this month's Brew Your Own that says that increases in barley (and therefore, beer) prices have been the result of increased acreage for corn.

Not okay.

|1.8.08 @ 2:18PM|#

But what chance does Amazon deforestation have to stand up to votes in the Iowa caucuses? Little to none, obviously.

|1.8.08 @ 2:19PM|#

I hate to repeat myself, but

J sub D | January 4, 2008, 11:27am | #

Leading Bioenergy Crops Bad for the Environment, Says Science

Has anybody here at the venerable Hit & Run ever argued otherwise?
Seriously, anyone?

VM|1.8.08 @ 2:20PM|#

yes - they argue that science is irrelevant.

[ducks]

|1.8.08 @ 2:21PM|#

J sub D: It's OK to repeat yourself. But sometimes articles are blogged as informational, not meant to tweak some H&R commenter or other.

Brandybuck|1.8.08 @ 2:31PM|#

Most environmentalists reject market economics. As near as I can tell, more radical you are about the environment, the more you sneer at markets. They have a religious faith in central behavioral planning, and no amount of unintended consequences will dissuade them.

|1.8.08 @ 2:38PM|#

Interesting cascade effect.

But... if (and this "if" is a big one, as Ron argues that biofuels are NOT a panacea) biofuels were shown to be better for the environment than fossil fuels AND make sense economically for the US, should we then not pursue this option because other market actors will then make their own decisions and then act accordingly, with possible negative effects?

robc|1.8.08 @ 2:56PM|#

tk,

It depends who the "we" is that will be pursueing the option.

|1.8.08 @ 2:59PM|#

All of the biofuels as presently manufactured should be considered nothing more than as a stopgap and as a way to push the development of future technology.

My own belief is we'll probably have better battery technology and fuel cell stuff that will take over for use in transport. The only advantage of biofuels is to substitute for petroleum-based liquid fuels in a pinch. Oh, and to find a use for the "waste" soybean oil that is considered a by-product of producing soybean mash. Pretty good to use for waste oils as well, if you don't mind the extra tinkering necessary to deal with your raw material.

A lot of the alternative energy groups I've worked with are extremely pragmatic, green, and seem to be mainly interested in getting off the grid and producing their own energy. "Eco-libertarianism" does exist. Interesting to see how this will play out.

|1.8.08 @ 3:18PM|#

Farmers also buy and convert many cattle ranches into soy farms, effectively pushing the ranchers further into the Amazonian frontier.

That doesn't make any sense. Is it cheaper to purchase already-cleared land, or to clear new land? Either way, someone's taking a loss when farmers buy cattle ranches.

R C Dean|1.8.08 @ 3:25PM|#

Either way, someone's taking a loss when farmers buy cattle ranches.

The environment takes a loss, I believe is the point.

LarryA|1.8.08 @ 3:30PM|#

That doesn't make any sense. Is it cheaper to purchase already-cleared land, or to clear new land? Either way, someone's taking a loss when farmers buy cattle ranches.

Not really. It takes better land to grow soy than to feed cattle. Ranchers feeding cattle clear poor crops and encourage grass. Cattle drop fertilizer everywhere. So it makes sense for the rancher to sell his improved land to farmers at a profit, and clear more forest to start over. Agricultural gentrification.

Guy Montag|1.8.08 @ 3:49PM|#

Finally, wealthy soy farmers are lobbying for major new Amazon highways to transport their soybeans to market, and this is increasing access to forests for loggers and land speculators.

Now there is some progress! How long until we see Amazon racing on the SPEED channel inbetween NASCAR seasons? NHRA on ESPN2 fills the gap a little, but I still feel empty.

|1.8.08 @ 4:25PM|#

Brandybuck sez:

Most environmentalists reject market economics. As near as I can tell, more radical you are about the environment, the more you sneer at markets. They have a religious faith in central behavioral planning, and no amount of unintended consequences will dissuade them.

Wait, I'm confused. Environmentalists hate biofuels for exactly the reason Ron writes about, and have been running this sort of issue up the flagpole for a long time.

It's almost like...you don't know anything about environmentalists or environmnetalism. But that's crazy. Otherwise, how would you know that they all reject market economics?

R C Dean|1.8.08 @ 4:29PM|#

Environmentalists hate biofuels

Odd. I could have sworn at least some of them were pushing biofuels to solve Teh Warming.

|1.8.08 @ 4:31PM|#

If we had a GlobalGovt, those amazonians would have to apply for permits to burn down the rainforest. And the Ministry of Cereals would set production goals in five year increments. And fuel rations would be allocated according to one's value to society. And..

never mind

Ventifact|1.8.08 @ 4:34PM|#

Remember the First Law of Ecology is "everything is connected to everything else." That especially applies to markets.

Most environmentalists reject market economics.

A lot of the alternative energy groups I've worked with are extremely pragmatic, green, and seem to be mainly interested in getting off the grid and producing their own energy. "Eco-libertarianism" does exist. Interesting to see how this will play out.

That half the words ecology and economy are identical is, as I'm sure you didn't doubt, no coincidence. Not only did ecology make use of the same Greek root oikos for home as economy, the seminal ecologist Darwin drew heavily from the economic treatise of Malthus when putting together his own ideas (i.e., umm, On the Origin of Species etc.).

Many environmentalists reject market economics, but even among those who do as a moral preference, some embrace market economics as a practical engine for driving the change they seek. Just yesterday I was downtown in Seattle (WTO funland?) and wandered into an office for a company that certifies and advertises buildings as green (including some real highrise stuff, not just dorky cabins). They had 3 basic criteria for their certification (laid out more particularly in 10 practical considerations), and one of the three was profitability. They are not in the business of pushing the wrong way against the prevailing pro-market orientation of our country, or alienating potential allies/customers. And that's a meaningful slash.

"Eco-libertarianism" is a tricky bit to me though, because an emphasis on self-reliance is a de-emphasis on market trade. (Let's ignore questions about the validity of "libertarianism" without market trade.) The loss with such eco-libertarianism is in the efficiency of specialization and economies of scale (which overlap). The same manpower and other economic resources spent rigging and maintaining small-scale green operations would generate more environmental benefit if coordinated through the larger scales and specializations of a market. Even those who are uninformed or delusional enough to like biofuel as a "solution" don't think Manhattan should grown its own supply rather than importing it.

Unfortunately, popular social-environmental consciousness has identified a scattered sampling of environmentally harmful things in our world, and as those are the only ones most people are aware of, they are disproportionately villified and avoided, to the point that their avoidance actually leads to more negative environmental impact than simply using the original "bad" thing would have. Two of the biggest "baddies" are: lots of packaging on consumer goods and transport, especially for food.

A few days back I ran across a flier advertising "waste-free" Christmas gifts. They were "experiences instead of stuff." It doesn't take too much to think it through and realize that attending a football game, with all that goes into making a pro game happen, will entail the use of massive amounts of electricity, among other things. The "waste" comparison is ludicrous, except that we are made aware of plastic wrapping we throw away without being prompted to imagine how other forms of amusement impact the environment.

Similarly for food, some things grow well in some places, and much better other places, and only weakly in still other places. If you live in a place where 10 acres are needed to generate the tomatoes that could be grown on 1 acre in another state, or where more chemicals are needed to make the farming viable, you are making an unnecessary drain on the land resources of the world as a trade-off against the environmental impact of transportation in hauling produce in from a more fertile place. Is it worth it -- who knows? No one stops to consider, and I suspect it's often far from worth it.

Ventifact|1.8.08 @ 4:50PM|#

I wanted to add another example, and in order to prove that I'm capable of a reasonably sized posting, I'll mention it. I tried shopping at Trader Joe's, a granola-y store full of organic, natural, etc. food. The produce cost more but it was always on the verge of spoilage. I concluded (maybe I'm wrong) that some combination of a lack of preservation methods intended to provide "fresher" food for customers actually meant the produce was often going bad. Now imagine, if the store just manages to sell stuff to me before it's noticeably rotten, how many shipments they receive that they can never sell because it goes off too soon. All this is hidden waste (though perhaps it is secretly reflected in the high prices at the store? ... the market strikes again!) resulting from consumers' strange avoidance of mainstream, large-scale means of preserving food and providing it unrotten.

|1.8.08 @ 6:07PM|#

Since 2006, US corn production rose 19% while soy farming fell by 15%.

Does that really show much of a trend? There has been only two harvests since 2006. So that means that there has been only one season of decline? Also this stat really doesn't show the US farmers were planting more corn than soy beans, only that they harvested more. I'm guessing that the two different crops can have different yeild per acres as compared to previous years even in the same weather conditions.

The drop-off in US soy has helped to drive a major increase in global soy prices, which have nearly doubled in the last 14 months.

Really, a 15% drop in US production caused the price to double? Been a long time since I've taken an econ class, but something about this just doesn't sound right...

There are plenty of reason to not like bio fuels, but this just seems like a poorly drawn conclusion from sketchy data.

fyodor|1.8.08 @ 6:12PM|#

tk,

As robc's response to you was probably meant to imply, the point of Bailey's post is not to argue against the use of biofuels per se but to argue against their public

|1.8.08 @ 11:59PM|#

Obligatory Switchgrass Reply™

http://www.treehugger.com/files/2008/01/switchgrass_yields.php

"Switchgrass Yields Five Times More Energy Than is Used to Grow it

...

Vogel and his colleagues conducted the first large-scale field study of switchgrass by monitoring its growth on the borders of 10 farms in Dakota; they noted the amount of seed, fertilizer and fuel used, the amount of precipitation and the amount of grass harvested over the span of 5 years. Using data from corn ethanol plant technologies and smaller-scale switchgrass conversion studies, Vogel estimated that an average of 60 GJ per hectare could be obtained if the switchgrass were converted into bioethanol."

not much of an ethanol fan myself, but the prominence of Corn and Soy are due to farm subsidies, not free-market demand.

back40|1.12.08 @ 7:25PM|#

RE: the switchgrass switch.

To have a useful comparison you need to count the ethanol from corn leaves, stems and cobs too. If cellulose can be converted then maize makes far more of it than it does of the starchy grains that we can ferment with current technologies. The combined ethanol yield of grain and stover would be the proper comparison to grasses.

This is well known in another context: silage. Those who raise ruminants, especially dairy cattle, grow maize for silage. The whole maize plant is chopped and piled to ferment. Only the barest stub of the plant is left in the field. On a dry matter basis (not counting water weight) even switch grass would have a hard time competing, especially since different varieties of maize are grown for silage. Those varieties grow far taller and produce more leaves, increasing silage yield rather than grain yield.

It's still a bad idea to burn food, but the story was crooked. This matters since we should not be surprised to find maize still being grown, and probably subsidized, even when cellulosic technologies mature. The maize-industrial-government complex is in place and very powerful. Once again we are more likely to see maize re-purposed than displaced by some other crop.

TokyoTom|1.17.08 @ 3:19AM|#

Ron, is this article about ending subsidies for corn - which have been driven by rent-seeking corporations and not enviros - or bashing enviros for the fact that market economies continue to strip out resources from commons (a result of the lack of effective ownership and difficulties in capturing the beenfits of positive externalities) - for which enviros are not responsible either?

Why not focus on real factors, instead of taking unproductive pot shots?