In its most recent semi-annual World Economic Outlook, the IMF compared the costs of different ways of making ethanol and biodiesel.
For its analysis, the IMF assumed that:
- oil traded at $65 a barrel, i.e. about the average for 2007,
- crops traded at the average price for the first half 2007.
As for ethanol, only sugar-cane based Brazilian ethanol is cheaper than gasoline. Sugar-beets and cellulosic waste based ethanol are more than twice as expensive as gasoline.
Cost of production per liter:
- Sugar beets, European: $0.76
- Cellulosic waste: 0.71
- Corn, U.S.: 0.40
- Gasoline: 0.34
- Sugar cane, Brazilian: 0.23-0.29
Sugar-cane is cheaper to make because it requires fewer production steps than corn ethanol. Sugar-cane ethanol plants also are fueled by sugar-cane fiber, unlike corn-ethanol plants, which typically run on natural gas or coal.
As for biodiesel, none of the current crop can compete on price with conventional diesel, except perhaps for jatropha tree based diesel. In particular, European Rapeseed oil based diesel is more than twice as expensive as diesel.
- Rapeseed oil, European: $0.87
- Soybean oil, U.S.: 0.66
- Jatropha, Indian: 0.40-0.65
- Palm oil, Malaysian: 0.54
- Diesel: 0.41
The IMF report is likely to exacerbate the food-vs.-fuel debate, between biofuel supporters and those who complain that using grains for fuel has played a role in increasing the price of staples such as meat and cereal.
Source: WSJ, 12/10/07
