THE BLOG
05/27/2010 02:44 pm ET Updated May 25, 2011

Are Bio-Fuels Still Relevant?

The short answer to that question is a simple yes. Around the globe, many nations have already set bio-fuel targets; here in the U.S., the Energy Security and Independence Act requires that 36 billion gallons of renewable fuels be blended into gasoline by 2022. The European Union is working toward a goal of 10 percent of vehicle fuel to be derived from renewable sources by 2020. There is a clear desire to increase the use of renewable fuels to decrease dependence on foreign oil. Yet the issue of bio-fuels on a global scale is a complex one.

Renewable energy sources raise opportunities and risks related to CO2 emissions, economic development, environmental impacts, land use, trade considerations, costs and trade offs. Each of those issues deserves measured and informed debate.

I recently attended a bio-technology conference and was impressed by the sheer number of promising technologies that could develop bio materials to be used to fuel vehicles, develop new medicines or feed the world.

In the area of bio-fuels, the level of investment is staggering. Cellulosic ethanol has received a great deal of attention as has the concept of using solar energy to grow an organism and then convert it to a cost-competitive energy source for vehicles.

Opponents of bio-fuels claim billions of dollars have been wasted researching advanced bio-fuels, and that they will never be competitive with gasoline or diesel. But we've spent hundreds of trillions of dollars over the past century exploring new sources of petroleum, importing crude oil, improving refining and installing the infrastructure to make gasoline and diesel highly competitive transportation energy sources. By this comparison, bio-fuels are still in their infancy.

One of the advantages of bio-fuels is the material to create them they can be grown globally in more than 100 countries. By contrast, more than 80 percent of global oil reserves are contained within just 10 nations. In 2009, the U.S. consumed as much domestically produced ethanol as gasoline made from the oil imported from Saudi Arabia. At $60 dollars per barrel, that's more than $21 billion that wasn't sent to the mid-east to buy oil. In fact, U.S. ethanol production increased last year despite some of the toughest economic conditions in generations.

Ford continues to make a significant commitment to bio-fuels through our production of flexible fuel vehicles - vehicles that can operate on up to 85 percent ethanol. We have more than four million on the roads globally and remain committed to making half our vehicles flexible fuel capable by 2012 if the necessary infrastructure and incentives are in place. We believe bio-fuels do have a role to play in our transportation future in regions where they will make the most sense. Our long range product strategy plan includes the production and use of bio-fueled vehicles.

Ethanol could provide a competitive alternative to fossil fuels, but it must make economic sense for consumers. In the United States today, E-85 ethanol is cheaper than gasoline on a per gallon basis, but on an energy basis it typically is not cheaper, making the economic case for drivers less compelling.

Currently the vast majority of ethanol production is used to replace gasoline and burned in your vehicle as E-10 or 10 percent ethanol. The Environmental Protection Agency (EPA) is currently considering a waiver allowing for the use of higher blends, up to E-15. While the ethanol industry supports an immediate introduction of E-15, the oil industry, small engine manufacturers (like lawn mower and boat engine manufacturers) as well as some of our competitors opposed the introduction of E-15 until more testing can be done as to its effect on existing engines.

While both sides have valid concerns, Ford doesn't believe this is an either-or situation. We would like to see stakeholders engage on approaches to overcome the challenges with introducing higher ethanol blends. For example, a pilot program allowing for the use of E-15 in the Midwest (where much of the ethanol is produced) might be one possible approach. This kind of program could help minimize potential risks while collecting real-world data about the use of E-15 in older, legacy vehicles.

From the longer term, broader policy perspective, we need all automakers to introduce vehicles that can operate on higher blends of ethanol like E85. We need to expand infrastructure to prepare the way for advanced bio-fuels. And, we need fuel pricing that can ultimately provide value to consumers.

The alternative is one few would like to see, continued reliance on imported oil.