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Water, Energy Stage Daring Economic High-Wire Act

Commodities / Renewable Energy Dec 19, 2010 - 03:54 AM GMT

By: Barry_Elias


Good news: The United States has doubled its renewable-energy production (nominally and percentagewise) during the past 13 years, according to the United States Energy Information Association (EIA).

Or is it?

Kenneth Mulder, Nathan Hagens, Brendan Fisher recently co-authored a paper titled “Burning Water: A Comparative Analysis of the Energy Return on Water Invested,” which was published in Ambio: A Journal of the Human Environment by the Royal Swedish Academy of Sciences.

They claim that “the most water-efficient, fossil-based technologies have an EROWI [Energy Return on Water Invested] one to two orders of magnitude [10 to 100 times] greater than the most water-efficient biomass technologies.” This implies biofuel-energy technology may reduce the available supply of fresh water globally.

“In addition, some biofuel policies can increase food prices and world hunger, fostering instability and strife, especially if scaled up enough to make a meaningful difference in global carbon-dioxide (CO2) emissions.”

Stephen Pacella and Robert Socolow, both Princeton researchers, estimate a 1-gigaton (1 billion tons) reduction in carbon emissions by 2050 would require 250 million hectares of high–yield energy crop plantations. This represents roughly 16 percent of total global cropland. The EIA determined annual carbon emissions in 2005 were 28.2 gigatons worldwide and are expected to rise to 43 gigatons per year by 2030.

Dennis Avery, Senior Fellow and Director of the Center for Global Food Issues at the Hudson Institute, expects demand for food and feed on farmlands to more than double by 2050. Currently, there isn’t much excess supply of food and feed. When coupling a 100 percent increase in demand with a 16 percent decrease in supply, shortages become more probable.

Moreover, research suggests the conversion of grassland and forests into biofuel plantations would increase net carbon emissions. The carbon stored in trees and soils would more than offset the reduced emissions realized with renewable fuel technologies over many decades.

Currently, certain states have implemented the Renewable Portfolio Standard (RPS), which stipulates the minimum percentage of total energy derived from renewable sources. In Europe, a system of renewable-energy credits and production credits are used to increase demand for these technologies by providing a more liquid and adaptable market mechanism.

Renewable-energy credits involve decoupling energy generation from the environmental attributes, which can then be traded on a market-like exchange. Production credits permit the resale of renewable energy by non-utilities back to the utility at a premium relative to cost.

Data from the U.S. Energy Administration Association suggest our energy expenditures as a percentage of GDP have risen in the past decade to 8.8 percent from 5.9 percent (in 1980 it was the highest at 13.2 percent). As we harness our intellectual capital more effectively, demand for energy increases.

We need to be careful in how we satisfy this demand: we don’t want to create net liabilities in the process.

The net effect of biofuel production may actually decrease the available supply of water and food (despite increased demand), while increasing the supply of carbon emissions: a non sequitur that is diametrically opposed to the policy intent.

Our national economic security rests in this ecological balance.

By Barry Elias


Barry Elias provides economic analysis to Dick Morris, a former political adviser to President Clinton.

He was cited and acknowledged in two recent best-sellers co-authored by Mr. Morris: “Catastrophe” and “2010: Take Back America - a Battle Plan.” Mr. Elias graduated Phi Beta Kappa from Binghamton University with a degree in economics.

He has consulted with various high-profile financial institutions in New York City.

© 2010 Copyright Barry Elias - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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