UK Prime Minister Gordon Brown says he may seek to change a European Union target to boost biofuel usage to 10% of road fuel by 2020. UK Energy Minister Malcolm Wicks says the goal should be changed because of growing concern that it’s contributing to food shortages.

The dirty little secret of biofuels: It takes a lot of dirty fossil fuel to produce “clean” ethanol. Despite the hype, ethanol doesn’t produce a net energy gain because corn production requires large amounts of fertilizer, herbicides and pesticides. The production and application of these chemicals requires large amounts of energy. The corn must be harvested and hauled to production plants to be distilled into alcohol, which requires more fuel. Finally, the ethanol must be distributed to users. Then it’s time to think about the air and wastewater created by ethanol production.

David Pimentel, a researcher at Cornell University, and Tad Patzek, a researcher at the University of California at Berkeley, concluded that it takes 29% more energy to make corn-based ethanol than the energy released when ethanol is burned as fuel. Wood biomass takes 57% more energy to convert into ethanol than it provides as fuel and switch grass takes about 50% more energy to convert to biofuel than it releases in an engine.

Backers say the additional crop plantings are good for the environment. But Timothy Searchinger, a researcher at Princeton University, found that production of corn-based ethanol nearly doubles greenhouse emissions over 30 years and ethanol derived from switchgrass and other plants increase emissions by 50% if grown on land previously planted to corn used for food.

Ethanol made from cellulose, the fibrous material found in plants, contains less energy than fuel derived from corn. If forest or grassland is cleared to plant crops used to make ethanol, it’s usually done by burning off the existing vegetation, and this releases huge amounts of carbon dioxide. Some say the problem could be resolved in part by using agricultural waste or trash as the feedstock for ethanol or by growing grass on marginal land that won’t support commercial crops. But that will require new technology because only sugars and seeds now can be distilled efficiently into alcohol. Chevron (CVX) is working with major universities in an effort to develop plants that make better feedstock for cellulosic ethanol and to improve processing methods.

Rule of thumb: If you subsidize something, you get a lot of it. In 2007, there was an oversupply of ethanol, squeezing profit on the top line as production costs continued to rise. Ethanol has traded at a premium to gasoline, but last summer, it traded at or below the price of gasoline. This hammered the stock of ethanol producers and Microsoft (MSFT) founder Bill Gates announced that Cascade Investment planned to sell its 21% stake in Pacific Ethanol.

Ethanol looks like a scam to shovel federal tax dollars from non-farm states to the heartland while politicians pocket fat campaign contributions from producers. It would have been less harmful for the environment and food prices if Congress had just transferred trainloads of money to the Midwest and dropped all the save-the-world ecological claptrap.

It shouldn’t surprise anyone that you get politically based decisions when you substitute mandates from Washington for the ruthless efficiency of the free market.

In a report for the Cato Institute, a Libertarian think tank based in Washington, D.C., James Bovard wrote: “The Archer Daniels Midland Corporation has been the most prominent recipient of corporate welfare in recent U.S. history. ADM (has) lavishly fertilized both political parties with millions of dollars in handouts and in return (has) reaped billion-dollar windfalls from taxpayers and consumers.”

Relax, it’s only your money. What this really means is that you can forget about that “no blood for oil” contretemps because the next environmentalist battle cry will be: No apes for biofuel!

Is oil the next bubble?
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