Comments on: Ethanol and Mr Vinod Khosla

By: The “dot-corn” Bubble

The “dot-corn” Bubble — Thu, 03 Apr 2008 14:41:14 +0000

[...] blog in August 2006, I had written about Vinod Khosla’s investments in corn-based ethanol. In that article I had reasoned from basic economics. (It is a fairly long post but I think it is well worth [...]

By: World is Green : Business Strategy and Sustainability Khosla, The Pragmatist «

Thu, 21 Jun 2007 22:41:10 +0000

[...] ted in Ethanol for a while and he did have some great debates over it. One good summary is provided by Atanu Dey (Atanu’s post explains the economics behind the general energy solutions). [...]

By: Pratap Kumar Panda

Pratap Kumar Panda — Sat, 17 Feb 2007 17:22:16 +0000

Nice discussion indeed.
Which are the chief ethanol producing companies in India. Do they play a role in the development of bio fuel.
Please inform.

Yours sincerely

Pratap K

By: Raymond Johnson

Raymond Johnson — Sun, 12 Nov 2006 04:11:32 +0000

I really appreciate the economic slant on a discussion that is often only fueled (pardon the pun) by emotion. The market is a beautiful thing. However, even Adam Smith acknowledged that governments have a role to play in a free market economy. I believe the market, if left alone, would show cellulosic ethanol eventually emerging as a dominant energy source. The problem is, by the time pure market forces arrive at that conclusion, the environment would be suffering greatly. Global military build up and conflict could be disasterous. Why not allow the government to nudge the market along to help save the envirnoment and the lives of young men and women in the military? I would much rather have my tax money pay for cellulosic ethanol research than bombs. I agree with the statement from the article: “…self interested behavior and social welfare are not necessarily mutually antagonistic”. I applaud Vinod Kholsa and sites like http://www.investincelluloseethanol.com . No one should feel guilty about becoming rich while saving the environment.

By: Dr.M.S. Iyengar

Dr.M.S. Iyengar — Wed, 06 Sep 2006 12:23:25 +0000

Why look only to ethanol production. More remunerative is to produce compressed natural gas and food grade carbon dioxide from sugar/molasses. For instance it is possible to produce 950 CM/T CNG from sugar or 400 CM/T from molasses.

By: Sharad

Sharad — Sat, 26 Aug 2006 13:21:14 +0000

Dear Atanu,

Allow me to digress from the present post to ask you a question that is related to ideas. I am posting this comment here not knowing where else I should.

I would be interested to know the dynamics of ideas. How do they propagate? Is the networking effect one talks of in marketing (and now with community mechanisms like blogs and websites) the dominant mode? What would be the time span of an idea before it dies down? Does the social environment at the time play a large role (an idea being premature or late relative to its relevant time)? I keep turning to translation of ideas to action as being the ultimate vindication of an idea. Would you credit death of OLPC in part to your blog?

Knowing the dynamics of ideas (if there is such a thing that social science has observed and codified) can help us determine if ideas that we agree with are making progress and gaining enough momentum to effect the future policies and events. It may also help us know what actions would be needed to increase the probability of favorable outcome.

Sharad

By: Kiran Varanasi

Kiran Varanasi — Fri, 18 Aug 2006 09:29:16 +0000

Dear Atanu
Thanks for a great analysis of the debate. However, I believe you have missed a crucial connection – that is very relevant with respect to India (and the third world)

Energy crops are a perfect way to resolve the WTO stalemate.

The rich countries (USA, Europe, Japan) currently over-produce the food grain and dump it on the third world markets. They are spending massive subsidies over this – which they do not want to revoke.

If Ethanol gets to be the winner (stepping aside the other pros and cons), the third world farmlands will have more scope of trade with the rich countries in terms of lesser import tariffs. This will ultimately benifit the growth rate of India.

By: Guru Gulab Khatri

Guru Gulab Khatri — Sun, 13 Aug 2006 20:30:09 +0000

Here are some interesting facts.
Most of US corn production is for
animal feed (not ethanol).

Ethanol from corn is currently net energy negative. ie more energy goes into cultivating corn and converting it to ethanol than what energy comes out of ethanol when its burned in Internal combustion engine.
Ethanol from other sources may be more
efficient(nothing is known so far)
eg cellulosic ethanol(or ethanol
generated using algeas working from
photosynthesis)but none of this is exactly
known yet.

In US lobbyist have got subsidy to put ethanol…ie by market forces alone nothing has happened yet

US and many other countries have shale
oil which can be drilled when oil prices
are high

Regarding Hybrid battries are not as energy efficient as many would have you beleive.
Even an laptop battery is not that efficient….some say that a microturbine
will be more efficient.

So where does this fit wrt india…

Indians have to be cognizant of the fact that there are externalities associated with each option and political games are being played worldwide.

Saavdhaan

By: Sridhar Sankranti

Sridhar Sankranti — Sun, 13 Aug 2006 15:39:11 +0000

Ethanol can not simply be an alternative. If fossil fuels are finite so are the bio-fuels with a logical limit on their production by available land for cultivation and the proportion of production that can be routed to non-food uses. Even if the logisitics work for the U.S. (being the largest producer of corn in the world) in short-term, it will be irrelevant for the rest of the countries. It will be a mistake to formulate such energy policies with out global relevance. The hybrid technology incorportation in modern cars is a step in right direction. These fuel efficient technologies need to be encouraged regardless of the initial hurdles related to manufacturing. Use of biofuels should be employed in limited scale.

By: Shreyas

Shreyas — Sat, 12 Aug 2006 18:28:33 +0000

I am afraid I have little knowledge about fuels and their substitues. So, this comment might seem out-of-context.

But, your primer on Economics-I and the succeeding application of its principles on a real-life case was wonderfully written. Enough to get me interested in reading that debate and downloading the presentation.

By: Sharad

Sharad — Thu, 10 Aug 2006 13:34:44 +0000

Dear Atanu,

It would be interesting to know how many market categories are free from tax/subsidy and externalities and hence reflect true average cost of production.

You have not mentioned the money power the larger players can wield in policy formulation through lobbying.

Sharad

By: gaddeswarup

gaddeswarup — Thu, 10 Aug 2006 06:04:52 +0000

Here is another puzzling fact:
I posted this in ‘Marginal revolution’ in a thread which stated that Mexican farmers could not compete with the US farmers in their own country. From:
http://www.newscientist.com/channel/health/mg19125601.600-time-to-turn-the-tables-on-big-food.html;jsessionid=HGGJKABINLKJ
”
“In The Omnivore’s Dilemma, the ecology of the food
system comes into focus. Michael Pollan highlights the
“fundamental tension between the logic of nature and
the logic of industry”, using the overproduction of
corn as an illustration. The US pumps out 10 billion
bushels of industrial corn each year, with each bushel
requiring about a litre of oil to grow it.
“Ecologically this is a fabulously expensive way to
produce food,” writes Pollan, adding that ecological
considerations don’t enter into the equation. This
corn has to go somewhere. “Sooner or later clever
marketers will figure out a way to induce the human
omnivore to consume the surfeit of cheap calories,” he
writes. In fact they already have, and we are eating
it directly or indirectly, to the tune of about a
tonne a year each, though most of it is hidden from
view. Fast food, for example, is basically corn in
disguise. Soda is little else but high-fructose corn
syrup and water. Most meat is really just the corn
consumed by feedlot livestock. US citizens are not
only eating this overproduction and paying for it at
the till, but are also subsidising it through taxes.
“Very simply, we subsidise high-fructose corn syrup in
this country, but not carrots,” writes Pollan.”

By: massachusetts republican

massachusetts republican — Thu, 10 Aug 2006 02:51:18 +0000

Hum Ho Gaye Aap Ke
Why does America need India?
After all itâ€™s on the other side of the world and is such a large complex nation.
Well my brother cowboys we need India the way a drowning man needs a life boat. In this world nations must act in their self-interest. Yet one nations vital course chosen from self-interest is anthers threat. And as we look around the world our self-interest merges well with that of Indiaâ€™s.
As long as China continues to pursue a slow hegemonic surge in search of Asian dominance we need India. She is a bulwark of democracy inâ€¦

Interested in the rest? Find it at
http://amassachusettsrepublican.blogspot.com/

By: William Dittl

William Dittl — Wed, 09 Aug 2006 19:35:09 +0000

There is a way to produce cellulosic ethanol on a mass scale. Sunopta Inc. (STKL) has a patented process that is now endorsed by Celunol (Khosla Ventures) and is under contract. I’m the founder of the GATO Group. GATO currently holds the 6th largest position of Sunopta in the world.

By: little Ram

little Ram — Wed, 09 Aug 2006 11:56:13 +0000

100% with you when you say that the right way of formulating public olicy is through informed debate and enquiry. We need more of it in India.

The arguments I have heard apart from the ones stated in your post are as under-

1. Petroleum is a non-renewable fuel and so we are stuck with the stock that mother nature has blessed us with at this point in time. Ethanol/ bio-fuel can be “produced” not “mined” and so this is a big plus in its favour.

2. There is an opportunity cost in land use for generation of bio-fuel. Land that could be used elsewise for agriculture, industry or residential/ commercial purposes, etc. Costing of ethanol might have to consider this too and this might not get reflected in the price that consumers are willing to pay?..or am I missing something here?

3. The point about EROI- According to a study that I read authored by some profs in the US (sorry I lost the reference), the net energy generated from Ehtanol is negative given the energy consumed in running the tractors, other farm equipment, etc. in getting ehtanol to the market. Now, would this result in greater economic value is another issue.

Leaving aside the viewpoint of an economist that I am not, at a purely philosophical plane, is it relevant that as mankind progresses we determine a path that optimizes energy utilization? What really would be the consequences of our choices?

As a student of science and engineering I am fully aware that we are barely scratching the surface in terms of realizing the vast amounts of energy (present) in matter so this last question is really only philosophical with no practical implications for us!

By: Diogenes

Diogenes — Wed, 09 Aug 2006 08:23:19 +0000

Rapier’s key point is that,while Khosla is free to put his money where his mouth is, it is not fiar on his part to try and influence policy makers to spend the tax payers’ money on ideas that have not been proved conclusively right.I went through Khosla’s presentation where as Rapier pointed out , Khosla is comparing petroleum and ethanol ( an input and an output) and is claiming that Ethanol is a winner on many counts. I’m sure Khosla is smart enough to know the flaw in the arguments.He thinks the US legislators are probably not smart enough to find the loopholes in his arguments.

By: shiv

shiv — Wed, 09 Aug 2006 08:06:17 +0000

Nice.Ethanol is hardly the answer to anything other than my daily sundowner. Will be a crime to burn all that potential booze. WRT food vs fuel, i too agree that Khosla is right. However use of cereals in fuel production will aggravate this ‘inability to pay’ however it is sliced…
So even more people will be unable to pay for food given the fact that there is a higher value application for the same raw material.

By: Soumen Chakrabarti

Soumen Chakrabarti — Wed, 09 Aug 2006 06:54:08 +0000

You say: “the cost of the greenhouse gas emissions associated with the burning of a gallon of gas … is not at all a trivial exercise to arrive at that number. Yet, strictly, that cost has to be added if we are to claim that we are pricing gas at full cost.” The task of monetizing droughts and cyclones and floods on future generations is not difficult, it is impossible. That should give economists some humility that the physical world cannot be understood or governed by the rules of the “market”. I don’t see enough of this humility in mainstream economists to take them seriously.