The first biofuel to be widely used in the United States was ethanol, an alcohol derived from corn. It was first because it's easy, rather than especially good. Corn is something American farmers know how to grow, and American truckers and railroads know how to ship, in vast quantities. To turn it into ethanol, the corn is ground up and processed using heat, water, and enzymes to convert the liquefied starch to sugars, which are fermented into ethanol and carbon dioxide. The ethanol is then shipped to refiners, which mix it with their gasoline and sell it to gas stations.

From the U.S. government's standpoint, corn-based ethanol initially looked like a winner, for the reasons we previously covered: It would wean the country from imported oil and put more money into the pockets of farmers and distillers, many of whom live in crucial swing states. And because it comes from a plant, it was thought to be carbon neutral. As a result, the United States began encouraging ethanol production a decade ago by requiring refiners to mix it with their gasoline and by effectively banning competing gasoline additives.

It worked. "Big Corn" is now a power to rival Big Oil in the U.S. Farm Belt, and ethanol plants now operate in every corn-producing region. U.S. ethanol production soared from 1.6 billion gallons in 2000 to 7 billion gallons in 2007. And the amount of corn devoted to ethanol has tripled (see figure below).

Source: Renewable Fuels Association

Unfortunately, to call corn ethanol flawed is, to steal a line from humorist Dave Barry, like calling the sun "warm." Growing corn and turning it into ethanol is highly energy intensive at every step of the process. And because ethanol is a less efficient fuel than gasoline, it provides less power per gallon. The net result is that producing corn ethanol by current methods buys humanity little or nothing in the way of fossil fuel savings or CO₂ reductions.

And that's the good-or less bad-news. As corn is diverted to ethanol, corn prices are rising. Since corn sweeteners and starches are found in most processed foods, and corn is one of the main things growers feed their pigs, cows, and chickens, the higher prices are rippling through the food chain. And because farmland is being converted from other grains to corn (and soy in Europe to make biodiesel), other agricultural commodities, like wheat and soybeans, are way up, too. The soaring price of wheat actually caused Italian consumers to stage a one-day pasta-buying strike in late 2007.

In the end, it was all for naught: When analysts finally got around to running the numbers, it turned out that for corn ethanol to replace a significant part of U.S.  ....read more