Thursday, February 01, 2007

Can trade improve environmental quality?

I think so. Check out today's story in the WSJ.

Notice the tariff and the subsidy for US farmers and imagine how much we would import from Brazil without them.

15 comments:

George said...

Interesting article, Brazil is definitely ahead of the game on biofuel production. Ethanol is promising, but the whole idea of "growing your fuel" is not without consequence. To increase ethanol production would require devoting a great deal of our country's arable land to strictly growing corn. Crop production has its share of associated environmental consequences. There is also issue of opportunity costs between devoting arable acreage to food production, livestock feed, and fuel production. This raises a question of land use - Do we have enough croplands to sustain different uses while increasing ethanol production? Check it out(dated but still quite relevant) http://www.reason.com/news/show/33875.html

Hartley said...

I think a global supply of ethanol is the way to go. If we tried to domestically produce all the ethanol that is demanded, we would have to devote more land and resources to the growth of corn and production of ethanol. This will cause the price of other items to go up including possibly the cost of food. Since more farm land will be needed, it may lower the production of other foods therefore driving the price higher. With a global supply, the US can continue to produce at the rate it is and make up the difference with the imports that Brazil makes. So I agree with George that increasing the supply of ethanol is going to be costly, especially in terms of opportunity costs and environmental consequences.

Elisangela said...

An increase in exportation of ethanol will be a good incentive in the accounts of Brazil and it can be a good way to improve Brazilian Northeast economy because this region has good environmental condition for the sugar cane production. This Brazilian region posses a the biggest rates of poverty of country.

Martha said...

Although turning to the cheaper sugar-cane produced ethanol of Brazil rather than the corn-based ethanol of the US could help environmental quality (by relatively lowering the price for firms to switch to biofuels from fossil fuels), we could face other consequences with increased demand for ethanol from abroad. What impact would this have on the Amazon rainforest? Last spring, I studied in the Amazon and a huge problem there is deforestation from non-sustainable farming techniques. If farmed improperly, the rainforest may not be able to grow back over the cultivated area..ever. If a rise in ethanol demand induces increased deforestation for sugar-cane farms, large portions of the Amazon rainforest could be lost... bad news for global climate change b/c the Amazon provides huge services in global carbon sequestration (not to mention other important things like biodiversity, etc.). I wonder which effect would carry more weight--reduced carbon sequestration or reduced carbon emissions..?

Bruce said...

Although the idea of ethanol is promising and a way to help the environment, there are some setbacks and potential problems that result from its use. The EPA has recently forced boat owners to use Ethanol in their tanks which has had detrimental effects. It causes damage to the sealants of fiberglass gas tanks leading to potential leaks and has become a fire hazard. This is bad news for boaters and many fishermen who put thousands of gallons of ethanol in their tanks. At least the boaters have plenty of water to jump into when their boat catches on fire 70 miles offshore.

http://boatingsailing.suite101.
com/article.cfm/ethanol_fuel_
problems_for_boaters

Thomas Gift said...

On the topic of ethanol, AEI resident scholar Mark Falcoff explains the importance of a recent U.S.-Brazilian agreement could "pave the way to an efficient global market in biofuels—and that could change the game." Brazil apparently expects its net exports of sugar-based ethanol to grow to seven billion gallons a year by 2010, an amount that would allow the U.S. to double its ethanol intake in just a few years. The only obstacle preventing the U.S. from taking advantage of this supply, says Falcoff, is a 54 cent per gallon tax on ethanol, "designed to protect an industry [corn-based ethanol]which is in no position to provision its own market (and probably will not be for some years to come, if ever)." Can someboday say, "bad public policy"?

http://www.american.com/archive/2007/january-0107/the-secret-of-viable-ethanol/

Whitney Dickson said...

I think Martha made a very good point about just shifting the costs from emmissions to sequestration. Ethanol seems to be somewhat of a double edged sword in terms of land degradation vs carbon emissions. However, the fact that there is an alternative rolling into motion is promising. Our transition away from fossil fuels may not be a smooth one, but at least its being given serious thought. Speaking of serious thought, it turns out that global warming is "very likely" to be caused by humans!...
who knew.
http://www.foxnews.com/story/0,2933,249659,00.html

Kelly Hishta said...

While I don't think ethanol will solve the problem in the long run, It will surely put us on the right track of looking for alternatives. I think one of the most interesting aspects of ethanol production in the US is how it will affect the current corn subsidies. The following article brings up some good points:
http://www.cfr.org/publication/12526/corn_fuels_controversy.html?breadcrumb=%2F
Maybe food prices will increase, but maybe they'll take out all those hydrogenated corn oils and high fructose corn syrups that have invaded foods. Then leading to changes probably in the sugar industry... hmm Im starting to see why people liked to deny global warming since it is a little easier that way.

Melyse cordeiro said...

Thanks for the concerning about the deforestation in Amazon but I have some useful information of why the sugar can production is really a great deal for Brazil. First, 85% of the sugar cane production is on the South-Center of Brazil and Sao Paulo production is equivalent to 60% of this total. Amazon is on the North of Brazil and although it could be affected by the expansion region on the northeast, this is very unlikely to happen because Sao Paulo is not only closer to the consumers center but it also have a greater yield and the land are favorable for this type of plantation. Even in the areas for expansion in Sao Paulo it doesn’t include forest or protected areas. Some studies of EMBRAPA - The Brazilian Agricultural Research Corporation's show that the area for expansion without conflict with preserved area and the production of food is 90 millions hectares in open pasture and more than 20 million hectares in pastures (cattle conversion of extensive). The actual size of sugar can plantation are 5 million hectares and if the production increase in 50% it would increase only 2.5 millions hectares when there is an availability of 100 millions hectares. EMBRAPA is also developing a lot of research to improve the production on the Northeast region, which is a desert and the poorest area in Brazil, as Elisangela mentioned. Most of this information are on this study http://www.cnpm.embrapa.br/publica/download/cit10_sugaralcool.pdf and this EMBRAPA’s researcher interview. (I’m sorry but they are in Portuguese)

Melyse Cordeiro said...

The only reason why the ethanol industry is viable in US is the subsidies. The sugar cane produce more than three times more ethanol for area than corn. It also spend four times less energy. According to this EMBRAPA research: http://ecen.com/eee59/eee59p/cana_melhor_conversorl.htm, the reduction of the greenhouse gas emission in the combustion and production of sugar cane-based ethanol is of 66%, and the corn based ethanol is of 12%. So, it’s not only good for the Brazilian economy it is a better option for the environment compared with corn-based ethanol. It doesn’t make any sense to compare the dependence of US in Saudi Arabia petroleum with a possible dependence of Brazil, even though we have the lower cost and the larger potential of production, the increasing demand will incentive others countries to produce as well. We’re not talking about an exhaustible resource.

sarah tilbor said...

I wonder what the carbon emissions are from transporting all of the biofuel. Kind of ironic?!

Jordan Anderson said...

The Economist recently ran a story bad mouthing fair trade coffee with the idea that it artificially raises prices on goods that are in an overcrowded market. It stated that in reality, market forces should be allowed to take effect and therefore push these merchants into growing a different crop. In addition to their argument being full of holes, farmers that actually were apparently able to make that switch and enter the thriving market for biofuel now face tarrifs from the US, a huge buyer. What exactly are these farmers supposed to do?

http://www.nytimes.com/2006/12/16/business/16online.html?ex=1323925200&en=f9db09c1f1c20730&ei=5088&partner

Anonymous said...

The US shouldn't be so much worried about their dependence on foreign oil as pointed out in the article - a shift from Saudi Arabia's oil to Brazil's oil. The cost of producing oil locally versus importing it from elsewhere should be critically examined. If it will be more sustainable to produce oil from Brazil than in US then importation will be a good option not only for the US but the entire globe. We should remember that we are solving a global problem and not just the energy needs of the US. Any negative externalities from either local or from foreign production, affects the whole world.

Felix

Jonathan said...

If trade won't improve environmental quality directly, perhaps some trade policy will.

"President Jacques Chirac has demanded that the United States sign both the Kyoto climate protocol and a future agreement that will take effect when the Kyoto accord runs out in 2012.

But he warned that if the United States did not sign the agreements, a carbon tax across Europe on imports from nations that have not signed the Kyoto treaty could be imposed to try to force compliance. The European Union is the largest export market for American goods."

http://www.nytimes.com/2007/02/01/world/europe/
01climate.html?ei=5090&en=718095d16a7c2e7f&ex=1327986000&
partner=rssuserland&emc=rss&pagewanted=print

Kris Brake said...

Trade may help with the problem, but we must remember one thing... every country will naturally look out for their self-interest. Implementing international policy is nearly impossible considering compliance is voluntary.