Biofuel Investing: Biofuels May Harm More than They Help

Are biofuels just as harmful as fossil fuels?

Right now, there is a bit of a conundrum in biofuel investing. Popular biofuels like ethanol that comes from corn are causing a great deal of trouble in terms of environmentally friendly investing. Why? Because recent studies are showing that producing biofuels can actually cause more harm to the environment than good. There are two main problems plaguing biofuel production right now on the level of environmental friendliness:  land use, and refining and producing biofuels.

in terms of land use: If US farmers and Big Ag concerns like Archer-Daniels-Midland (ADM) concentrate only on corn for ethanol, than the soybeans they usually rotate in have to be grown somewhere else. This means that land has to be cleared somewhere (right now Brazil is the place — deforesting the Amazon) to grow the soybeans no longer grown here. Crops planted to provide biofuels absorb less carbon than rainforests and natural scrubland. This is a problem becoming rather apparent in Indonesia as land is cleared for palm oil plantations.

The other problem is that of refining and producing biofuels. While the finished product may give off less harmful emissions than their Big Oil counterparts, the bottom line is that there are still emissions involved in refining and producing biofuels. Corn requires an especially rigorous process that yields little in the way of efficiency. So the emissions involved in producing biofuels may actually cancel out the good effects they have. Or, in some cases, even supersede them. The New York Times points this out about what we are using for biofuels:

Dr. Searchinger said the only possible exception he could see for now was sugar cane grown in Brazil, which take relatively little energy to grow and is readily refined into fuel. He added that governments should quickly turn their attention to developing biofuels that did not require cropping, such as those from agricultural waste products.

Corn ethanol is not the only available biofuel, it is merely our biofuel of choice right now. There are other, more sustainable ways to develop biofuels. Until then, it is possible that biofuel investing may become seen as un-environmentally friendly as investing in Exxon (XOM).

Disclosure: I do not own stock in ADM or XOM.

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