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Sugar ethanol in Florida

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Title:
Sugar ethanol in Florida economic, agricultural,and environmental aspects
Physical Description:
Book
Language:
English
Creator:
Berger, Joshua F
Publisher:
University of South Florida
Place of Publication:
Tampa, Fla
Publication Date:

Subjects

Subjects / Keywords:
Biofuels
Sugar ethanol
Oil
Agriculture
Environmental impacts
Dissertations, Academic -- Geography -- Masters -- USF   ( lcsh )
Genre:
non-fiction   ( marcgt )

Notes

Abstract:
ABSTRACT: Ethanol production has been widely perceived as a solution to the global energy crisis, with the added benefit of reinvigorating declining agricultural economies. Moves towards dedicating crop production to ethanol however have raised a number of concerns related to its economic and environmental consequences. Missing from this debate is a consideration of the ways in which sugar can be used as a feedstock for ethanol, an issue that is especially pertinent within the state of Florida. The national commitment and scale of corn ethanol production in the U.S. has largely meant a lack of focus on other feedstocks which could be more effective means of ethanol production. This thesis demonstrates perspectives on sugar ethanol among key stakeholders within the state of Florida. Through semi-structured key informant interviews, it examines the forces that are promoting or thwarting ethanol production within the Florida landscape. In doing so, this research makes four contributions to energy and environmental studies.. First, it addresses the extent to which overdependence on oil in developed and emerging nations can be mitigated by integrating renewable fuel into supply systems. Second, it provides a wider outlook on biofuels, by investigating whether sugar ethanol can become a viable renewable fuel model within the U.S. Third, it adds a place-based study to national and international debates over biofuels, showing both how the issue of biofuels has unique dimensions in Florida and how it connects to broader debates over corn ethanol in the U.S. and sugar ethanol in Brazil. Finally, the turn towards sugar ethanol becomes an especially important issue to study within Florida given the current controversies over offshore drilling as well as the negative environmental impacts on the Everglades ecosystem associated with sugar cultivation in south Florida.
Thesis:
Thesis (M.S.)--University of South Florida, 2009.
Bibliography:
Includes bibliographical references.
System Details:
Mode of access: World Wide Web.
System Details:
System requirements: World Wide Web browser and PDF reader.
Statement of Responsibility:
by Joshua F. Berger.
General Note:
Title from PDF of title page.
General Note:
Document formatted into pages; contains 104 pages.
General Note:
Includes vita.

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University of South Florida Library
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University of South Florida
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All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 002068375
oclc - 606879531
usfldc doi - E14-SFE0003140
usfldc handle - e14.3140
System ID:
SFS0027456:00001


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ABSTRACT: Ethanol production has been widely perceived as a solution to the global energy crisis, with the added benefit of reinvigorating declining agricultural economies. Moves towards dedicating crop production to ethanol however have raised a number of concerns related to its economic and environmental consequences. Missing from this debate is a consideration of the ways in which sugar can be used as a feedstock for ethanol, an issue that is especially pertinent within the state of Florida. The national commitment and scale of corn ethanol production in the U.S. has largely meant a lack of focus on other feedstocks which could be more effective means of ethanol production. This thesis demonstrates perspectives on sugar ethanol among key stakeholders within the state of Florida. Through semi-structured key informant interviews, it examines the forces that are promoting or thwarting ethanol production within the Florida landscape. In doing so, this research makes four contributions to energy and environmental studies.. First, it addresses the extent to which overdependence on oil in developed and emerging nations can be mitigated by integrating renewable fuel into supply systems. Second, it provides a wider outlook on biofuels, by investigating whether sugar ethanol can become a viable renewable fuel model within the U.S. Third, it adds a place-based study to national and international debates over biofuels, showing both how the issue of biofuels has unique dimensions in Florida and how it connects to broader debates over corn ethanol in the U.S. and sugar ethanol in Brazil. Finally, the turn towards sugar ethanol becomes an especially important issue to study within Florida given the current controversies over offshore drilling as well as the negative environmental impacts on the Everglades ecosystem associated with sugar cultivation in south Florida.
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Sugar Ethanol in Florida: Economic, Ag ricultural, and Environmental Aspects by Joshua F. Berger A thesis proposal submitted in partial fulfillment of the requirements for the degree of Master of Science Department of Geography College of Arts and Sciences University of South Florida Major Professor: Pratyusha Basu, Ph.D. Fenda Akiwumi, Ph.D. Daniel Yeh, Ph.D. Date of Approval: October 22, 2009 Keywords: biofuels, sugar ethanol, oil, agriculture, environmental impacts. Copyright 2009, Joshua F. Berger

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ACKNOWLEDGEMENTS I would first like to thank all interview s ubjects who participated in this graduate thesis research. Their trus t and encouragement has proved essential for advancing the field research aspect of the thesis. Als o, I would like to thank my fellow graduate student, Geoffrey Fouad, for assisting w ith the GIS map diagram, which expertly displayed the South Florida sugarcane ag ricultural area, and was the geographic centerpiece of this work. I would like to thank Dr. Fenda Akiwumi and Dr. Daniel Yeh, my two graduate thesis committee professors who provided a great deal of support and criticism during this research process. Moreover, I woul d to specially acknowledge my thesis advisor, Dr. Pratyusha Basu for guidi ng me through the entire process. Lastly, I would like to thank my father Roger Berger, mother Mary Geary, and sister Julie Berger who have provided support throughout my academic career.

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i TABLE OF CONTENTS List of Figures ............................................................................................................... ..... iii Abstract ...................................................................................................................... ........ iv Chapter 1 Introduction ........................................................................................................ .1 1.1 Research Questions ............................................................................................3 1.2 Contributions to Environmental Studies ............................................................6 1.3 Significance of the Study ...................................................................................7 Chapter 2 Literature Review ................................................................................................9 2.1 Government Policies and Biofuels.....................................................................9 2.1.1 Ethanol Policy ................................................................................... ..9 2.1.2 Sugar Policy .................................................................................... ..11 2.2 Debates over Energy Crops .............................................................................12 2.2.1 Oil .............................................................................................. .......12 2.2.2 Food versus Fuel Issue ......................................................................14 2.2.3 Environmental Impacts of Corn Ethanol ..........................................15 2.3 Brazilian Experiences with Sugarcane Ethanol ...............................................17 Chapter 3 Research Methods .............................................................................................19 3.1 Description of Interviews .................................................................................19 3.2 Case Study: Sugar Ethanol in Florida ..............................................................22 Chapter 4 Governmental Policies and Oil Economies .......................................................27 4.1 Sugar Ethanol Development in Florida ............................................................27 4.2 Government Policies ........................................................................................31 4.3 Ethanol Tariff ...................................................................................................36 4.4 Ethanol and Oil in National Energy Markets ...................................................40 4.5 Relationship between Ethanol Production and Oil Exploration ......................47 Chapter 5 Sugar Economies and Environmental Issues ....................................................57 5.1 Approaching the Florida Sugar Farmer ...........................................................57 5.2 Competition between Sugar as Food and Sugar as Fuel ..................................60 5.3 Sugar Subsidies ................................................................................................73 5.4 Comparing Sugar and Corn .............................................................................76 5.5 Environmental Issues .......................................................................................81 Chapter 6 Conclusion .........................................................................................................9 1 References .................................................................................................................... ......94

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ii Appendices .................................................................................................................... ...100 Appendix A: Interview Questionnaire for Stakeholders ......................................101 Appendix B: List of In terview Participants .........................................................103

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iii LIST OF FIGURES Figure 1 South Florida Sugar Cane Agricultural Area .............................................23 Figure 2 Stakeholder Perspectives on Main Factors Shaping Ethanol Development in Florida .........................................................................................28

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iv SUGAR ETHANOL IN FLORIDA: ECONOMIC, AGRICULTURAL, AND ENVIRONMENTAL ASPECTS Joshua F. Berger ABSTRACT Ethanol production has been widely perc eived as a solution to the global energy crisis, with the added benef it of reinvigorating declining agricultural economies. Moves towards dedicating crop production to ethanol however have ra ised a number of concerns related to its economic and environmental cons equences. Missing from this debate is a consideration of the ways in which sugar can be used as a feedstock for ethanol, an issue that is especially pertinent within the state of Florida. The national commitment and scale of corn ethanol production in the U.S. ha s largely meant a lack of focus on other feedstocks which could be more e ffective means of ethanol production. This thesis demonstrates perspectives on sugar ethanol among key stakeholders within the state of Florida. Through semi -structured key informant interviews, it examines the forces that are promoting or thwarting ethanol producti on within the Florida landscape. In doing so, this research ma kes four contributions to energy and environmental studies.. First, it addresses th e extent to which ove rdependence on oil in developed and emerging nations can be mitig ated by integrating renewable fuel into supply systems. Second, it provides a wider outlook on biofuels, by investigating whether sugar ethanol can become a viable renewable fu el model within the U.S. Third, it adds a place-based study to national a nd international debates over biofuels, showing both how the issue of biofuels has unique dimensions in Florida and how it connects to broader

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v debates over corn ethanol in the U.S. and sugar ethanol in Brazil. Finally, the turn towards sugar ethanol becomes an especially important issue to study within Florida given the current controve rsies over offshore drilling as well as the negative environmental impacts on the Everglades ecosystem associated with sugar cultivation in south Florida.

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1 CHAPTER 1 INTRODUCTION While ethanol has been approved as a critical renewable energy component through the federally mandated Renewable Fuels Standard (RFS) in the United States, the actual production and utilizati on of ethanol remains a subjec t of much contestation. These debates have usually centered on corn-based ethanol and its potenti al to reduce foreign oil dependence, increase balance of payments, and revitalize the farming industry in the rural U.S. (Alton and Beach 1996). Yet, the focus on corn ignores the presence of other biofuel feedstocks within the country. This negl ect is especially glaring in the context of Florida, where corn-based ethanol use is not prevalent both due to its distance from Midwestern corn ethanol produc tion and distribution markets, as well as the unsuitability of the climate to corn production. Instead, sugar emerges as the more viable ethanol option in the state. Yet to what extent has Florida moved towa rds considering the production and use of sugar-based ethanol? This study seeks to highlight discussions of sugar biofuels within Florida, and hence speculate on the possibility of a turn to wards sugar-based ethanol within the state. Given that Florida’s consumption of gasoline is the third highest w ithin the U.S. (Krohn 2008), renewable forms of energy become an especially pressing matter in the state. Sugar ethanol has been a proven feedstock for over thirty years and its regional implementation has not occurred due to the foreign ethanol tariff and limited sugarcane cropland suitable for national producti on (Krohn 2008). However, technology is

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2 improving through innovation, which could enable sugar ethanol to become viable for the Florida fuel market. Sugar ethanol also has to be situated in terms of local agricultural and environmental interests in the state, which means that the economic landscape in Florida is also pertinent to explaining a nd predicting how an etha nol production market can be initiated in Florid a over the next few years. Extensive research has been conducted on U.S. corn ethanol production (Alton and Beach 1996, Rask 1998, Kim and Dale 2002, Shapouri et al. 2002, Patzek and Pimentel 2005, Farrell et al. 2006) and Brazili an sugar ethanol (Goldemberg et al. 1985, Rask 1995, Macedo 1996, Calle and Cortez 1998, Borrero et al. 2003, Schaeffer et al. 2005). In contrast, few studies have been conducted on emergence of sugar ethanol in the U.S. (Salassi and Fairbanks 2006) and the pr ospect of cellulosic biomass derived from sugar (Wang et al. 1983, Ingram and Dora n 1993, Service 1993). Empirical research which addresses the economic and environmenta l viability of sugar biofuel production in Florida is thus a timely and significant interven tion in the larger debate over biofuels that is currently raging at the national and international economic scales. U.S. energy policy in recent years ha s begun to contemplate the wide-scale implementation of renewable energy sources. This shift towards new types of clean energy, such as biofuels, is pa rtly being undertaken in order to alleviate U.S. reliance on foreign oil imports, often times from less depe ndable source nations su ch as Saudi Arabia or Venezuela. Factors such as the sporadic fluctuation of gas pri ces and diminishing oil reserves have forced policymakers to fost er solutions that have the potential to supplement and potentially supplant the curr ent emphasis on petroleum-based forms of energy and transportation.

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3 Ethanol was perceived to be the answer partly because it has been a proven alternative fuel technology ove r the last half century, and corn was deemed a viable feedstock for ethanol production in the U.S. because it was an abundant domestic crop which could revitalize farming communities. Ho wever, as time went on, the utilization of corn for ethanol drew many criticisms, due to environmental risks and its supposed effects on food price hikes, so that policym akers and other concer ned stakeholders are faced with the challenge of fostering and im plementing different forms of ethanol which could increase energy efficiency and decrease impacts on the environment. The role of sugar as an alternative to cor n, especially in the southern U. S., thus becomes an important issue to consider. Given the firm support for biomass fuel integration in U.S. energy policy, the chances of ethanol usage becoming obsolete is unlikely in the n ear future. Thus, the Renewable Fuel Standard (RFS) mandates annu al requirements of varying biofuel types to be incorporated into the national pe troleum supply. Accompanying the RFS are a number of subsidies and tax incentives which are intended to stimulat e the growth of the ethanol industry through the pr omotion of innovative technologi es. The issue of biofuels is likely to continue to increase in signifi cance within the realm of energy policy in the U.S. and a focus on Florida would divers ify our understandin g of this issue. 1.1. Research Questions This proposal is organized around four sets of questions related to sugar-based ethanol within Florida and s eeks to address these questi ons through incorporating the viewpoints of a diversity of st akeholders in the state. Th e stakeholders sought to be

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4 incorporated in this research include ethanol and oil busin ess interests, agricultural interests, state officials, and environmental in terests, and university research units within the state of Florida. The br oader research question is: What are the perspectives of stakeholders regarding the feasibility and potential impacts of sugar ethanol production in Florida? Specific themes will be examined thr ough four sub-questions related to the broader question. These sub-questions are: a) How do government policies shape ethanol production and, more specifically, sugarbased ethanol production in Florida? An examination of government policies prov ides insights into th e wider regime of energy regulation within which s ugar ethanol in Florida either flourishes or fails to takeoff. By enabling investment and making laws related to mandatory use of biofuels, governments can play a big role in supporting this new source of renewable energy. But the Florida government is also involved with sugar interest s more directly, especially through regulation of environmental pollution in the Everglades. The extent to which government interactions with the sugar indus try impinge on the promotion of sugar as biofuel will thus also be c onsidered through this study. b) How do biofuel discussions connect to th e larger issue of dependence on oil? Historically, ethanol interest has increased as the price of oil increased. Recently, interest has developed in o ffshore drilling, with the Gulf of Mexico bordering Florida having become the most sought after area for dr illing (Kane 2008). It remains to be seen how significant an impact corn ethanol is having on the U.S. reduction of petroleum consumption. Also, little evidence exists fo r how future ethanol innovations, such as

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5 cellulosic technology, can suppl ement oil reliance. Possibly, lack of significant supplementing of energy sources by ethanol is driving more oil exploitation. This research will uncover the implications of etha nol utilization for oil extraction. It will also investigate the extent to which the commercia l viability of sugar ethanol could dampen interest in offshore drilling. c) How are the economics surrounding sugar -based ethanol affecting agricultural interests in Florida? Sugar agricultural interests in Florida consist of smaller family-owned farms, most of which are represente d within one cooperative, a nd agribusiness sugar refiner corporations. Introducing sugar biofuel in Florida could increase interest in sugar production for both farmers and corporations al ike. Further, sugar biofuel could deter price reduction of the commodit y, which in recent years has faced scrutiny in terms of removing the sugar tariff which has kept U.S. sugar price high, compared to the low prices offered by developing countries. This re search will examine Florida sugar farming interests in ethanol. d) How do concerns over environmental impacts more specifically water, soil, and air quality impacts, emerge within the discussion on biofuels? Traditional forms of fossil fuel energy, such as oil and coal, entail immense resource extraction operations which often require large amounts of energy during the production process. Integrating renewable fuels into the national energy supply was intended to improve the environment. However, ethanol production in the U.S. has been overshadowed by immense environmental issues, such as excessive water consumption, soil degradation, and global warming emissions. This research will examine whether

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6 ethanol derived from sugarcane is better fo r the environment than corn ethanol and petroleum. 1.2. Contributions to Environmental Studies This study draws on and contributes to tw o specific endeavors within the wider field of interdisciplinary environmenta l studies: environmental economics and environmental discourse analysis. Environm ental economics is a branch of economics which seeks to prevent or d ecrease environmental problem s through the use of economic incentives. The discipline emerged with th e environmental movement of the 1960s to shed light on the rapid industrial growth a nd resource consumption which has occurred in Western societies. While a society cannot pr ogress without impacti ng the environment in some ways, and hence degrading environmen tal quality, environmental economists have argued that entities within the economy ha ve the power and resources to enhance environmental protection by implementing st rategies which consider environmental values as part of measures when conducting economic pursuits. Environmental economics takes two main fo rms: the property rights approach and the pricing approach. The property rights appr oach states that environmental problems arise from the absence of well-defined prope rty rights in environmental assets. This implies that actors cannot be trusted to act responsibly, which results in unlimited damage to the environment. Therefore, regulation needs to block actors from unsustainable practices. The pricing approach argues that the environment must have a monetary value attached to it so that ac tors understand the true cost s of exploiting environmental resources. Overall, environmental ec onomics seeks to make markets more

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7 environmentally-sustainable. However, skepti cs have argued that the combination of environmentalism and economies does not halt environmental degrad ation, despite the implementation of more sustainable strategies because measurements are still undertaken in keeping with the wider logic of capitalism. More recently, scholars have begun to be attentive to the ways in which words and images constitute an important means through which collective ideas are formed and strengthened. One significant way in which th e power of language has been understood is through the notion of ‘discourse ’ – a specific series of representations, practices, and performances through which meanings are produced, connected into networks and legitimized. A focus on discourses enables us to understand ‘how what is said fits into a network that has its own history and condi tions of existence’ (Barratt 1992). For example, the discussion of alternative ener gy sources and biofuels can be said to constitute a set of discursive practices that have created the conditions for particular kinds of investments by the government, and public acceptance of such investments. This study thus seeks to understand the ways in which bi ofuels are discussed within and outside the biofuels industry to understand the ways in which discourses around biofuels are currently being constructed. 1.3. Significance of the Study This study is significant for four main reasons. First, the focus on alternative energy sources within this st udy has the potential to be linke d to wider discussions over climate change and the overdependence on oil w ithin First World countries as well as the wider global economy. Even as the extent to wh ich biofuels are more beneficial to the

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8 environment has yet to be firmly establishe d, it is clear that an examination of energy alternatives is key to ensuring the reduc tion of large-scale environmental impacts of energy use. Second, by taking a wider view of alternative energy, through incorporating economic and environmental impacts, this study can provide a more comprehensive outlook on biofuels, one that is attentive to the wider context w ithin which specific biofuel polices are put in place. Third, this study enables insights into the ways in which the biofuels debate varies by location within the U.S. By concentrating on Florida, this study forms the basis for future studies on how the meanings and implications of biofuels are not uniform across the country. Finally, th e turn towards renewable energies becomes an especially important issue to study within Florida given the current controversy over offshore drilling within the U.S. Moreover, the cultivation of sugar around Lake Okeechobee has been linked to pollution and wa ter loss in the Everglades, so that the promotion of sugar ethanol has the potential to directly imp act the environmental quality of southern Florida’s ecosystems. The next chapter outlines the various st udies from which this particular proposal draws its questions. Chapters 3 and 4 outlin e the findings of the interviews conducted with stakeholders: Chapter 3 focuses on govern mental and market-rel ated factors while Chapter 4 considers the role of agricultural and environmental intere sts in the biofuels debate. Overall, this study seeks to delve fu rther into the potential of sugar ethanol in Florida in order to extend existing discu ssions of new sources of renewable energy.

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9 CHAPTER 2 LITERATURE REVIEW Ethanol is commonly promoted by policy makers as a means to increase fuel supply while at the same time boosting the na tional economy. Without current large-scale government subsidies, incentiv es, and tax credits, producti on of ethanol would unlikely not occur domestically (Pimentel 2003). This chapter will first examine these governmental policies as well as U.S. sugar policy to identify how existing regulations could affect the development of sugar ethanol Second, it will delve into the social and environmental factors that surround the issue of biofuels. Existing growth and research into sugar ethanol in Florida will then be reviewed to provide a preliminary understanding. Finally, this chapter will examin e the Brazilian experience of sugarcane ethanol to understand how it could inform current initiatives within Florida. 2.1. Government Policies and Biofuels 2.1.1 Ethanol Policy Subsidies provided for ethanol production are among the most discussed policy implications in the U.S. today. According to Rosenberger et al. (2002) the feasibility of ethanol production in the U.S. emerges thr ough the assistance of tax incentives and government subsidies. Present law provides for tax credits for every gallon of ethanol blended into gasoline. For inst ance, fuel blended with 10 pe rcent ethanol receives a tax credit of 5.1 cents per gallon while E-85, whic h is 85 percent ethanol by volume, receives

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10 42 cents per gallon tax credit. Pe troleum blenders, not farmers, receive this tax incentive (NCGA 2005). This tax exemption approximate ly equalizes the price of ethanol and conventional gasoline, and thus encourages it s use as a gasoline ex tender (Shapouri et al. 2002). Pimentel and Patzek (2007) argue that large farming co rporations are receiving $7 per 25 kg (1 bushel), whereas smaller corn farmers are receiving a maximum of only about 70 cents per 25 kg (1 bushel) for thei r corn (or about $10 0 per acre) in the subsidized corn ethanol production system due to economies of scale. This reasoning is attributed to the fact that large corpor ations usually possess more acreage and can produce crops for ethanol production more efficiently than smaller farms. The Energy Policy Act of 2005 implemen ted the Renewable Fuels Standard (RFS) which mandates that biofuels be integrat ed into the national fu el supply every year (ACE 2008). In fact, RFS directs that each ye ar, a greater amount of fuel ethanol be implemented through 2022. Extending the RFS through 2022, should allow advanced biofuels research to become commercially viable. But policymakers have also mandated caps on conventional corn based ethanol R FS requirements and this could alleviate pressure on world corn prices. The updated R FS will require fuel ethanol to be derived from various types of feedstock sources. As a result, the likeli hood of new types of biofuel blends could increase in the near te rm. Sissine (2007) has stated that 21 billion gallons of cellulosic and other advanced biofuels are required by RFS through 2022. Thus, policy makers at all levels are rushi ng to stimulate rapid e xpansion of biofuels (Groom et al. 2008). My study seeks to examine what factors are driving ethanol allocations in the Florida marketplace. As of 2006, Florida only has one biodiesel f acility and, absent a

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11 manufacturing plant, imports it s ethanol from refineries outs ide of the state (FDEP 2006). However, the 2006 Florida Energy Act prov ided funding under the Florida Renewable Energy Technologies Grants Program for se veral ethanol projects including refinery construction, a project proposing the use of bi omass to co-produce et hanol and electricity, and a project intended to determine the techni cal feasibility of us ing Florida sugarcane waste as a feedstock for ethanol produc tion (ACOE 2007). Since Florida can produce sugar effectively, oil distributers could be more inclined to buy from nearby sugar ethanol producers. The Florida Legislat ure in 2008 mandated th at all gas sold in Florida have at least 10% ethanol by the end of 2010 (Voge l 2008).The link betw een state ethanol policies through the utilization of a sugarcane feedstock needs to be further explored to discover unforeseen implications. 2.1.2 Sugar Policy In his study on sugarcane refining in th e U.S., Nathan (1971) discussed the operation of the U.S. Sugar Act (USSA). The Secretary of Agriculture first determines annual U.S. sugar requirements domesticall y, and then assigns quotas to U.S. sugar producers and also foreign entities who export su gar to the U.S. The effective levels of these quotas are varied from time to time to ensure that the total supply to the U.S. market achieves the price objectives of th e USSA (Blackburn 1984). Further, Blackburn (1984) points out that each time the USSA fore ign sugar quotas are re -negotiated, there is intense competition between foreign producer s who want to be included and those foreign producers who traditionally hold a quota but want to further expand their quota allotment.

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12 The expiration of the Sugar Act has caused immediate repercussions among both U.S. domestic and foreign sugar producer s (Alvarez and Polopolus 2002). These changes include the lifting of import restrictions on refined sugar, direct payments to producers being lifted after 1974, the Secret ary of Agriculture losing the authority to allocate sugar quotas domestically, and sugar production becoming unrestricted (Corley, 1975). Under current U.S. sugar policy, which operates through the Farm Bill of 2002, American farmers do not receive government funding, and instead derive all of their income from market demand (ASA 2005). The USDA regulat es quotas so that profitability is maintained amongst American producers. It is likely that the profitability and hence interest of Florida farmers c ould heighten if ethanol derived from sugar becomes a factor within the state. 2.2. Debates over Energy Crops 2.2.1 Oil Based on the Hubbert peak oil model, seve ral scientific experts have recently predicted that peak world oil production w ill occur near 2010 (Kerr 1998). Even counting Alaska’s prolific North Slope oil fields, domestic reserves are falling. The U.S. now imports more than half of its oil, placing the economy at the added risk from future disruptions of foreign oil supplies (CQ 1998) The reliance on foreign oil has been aggravated by unstable regimes, such as Saudi Arabia, Nigeria, and Venezuela, who often or have the potential to be in conflict with the U.S. Excessi ve consumption of oil in the U.S. has caused the federal government to invest heavily in renewable energy technologies which can alleviate demand on fo reign oil. However, because renewable

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13 energies have not been fully commercialized, some policy makers remain staunch in their support for continued U.S. oil exploitation. More recently, domestic zones, such as th e Gulf of Mexico are being viewed as attractive areas for furthering oil extracti on. The offshore explora tion and production of oil in the Gulf of Mexico ha s been taking place at a high ra te over the past half century (Freudenburg and Gramling 1993). Petroleum expert s estimate that geologic formations underneath the Gulf of Mexico will yield more than 25 billion barrels of oil, more than any other untapped US deposit, including th e controversial Arctic National Wildlife Refuge (Appenzeller 2004). In their study on oil seepag e and hydrocarbon gases, Anderson et al. (1983) indicated that along the northern Gulf of Mexico shelf, large deposits of oil exist untapped. Controversial legislations are curre ntly being proposed within Congress which could allow offshore dr illing in several areas, including the most sought after area of drilling off Florida’s we stern coast in the Gu lf of Mexico (Kane 2008). The recent popularity of offshore drilling in the Gulf of Mexico however could be impacted by the availability of ethanol within Florida. Floridians consumed approximately 208.7 million barrels of motor gasoline in 2007, which equated to a 6.2% share of nationa l demand (EIA 2009). In fiscal year 2006, total petroleum accounted for 373,348 thousand barrels per day which was roughly 4.9% of total US consumption (EIA 2008). Florida ha s no oil refineries a nd relies on petroleum products delivered by tanker and barge to port authority terminals near the state’s major urban areas (EIA 2008). Florida’ s reliance on imported petroleum, in addition to its rising population and annual influx of migrating tourists, undersco res its susceptibility to fluctuations in the market and interrupti ons in fuel production, supply and delivery

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14 (FDEP 2006). As a result, inte nse offshore drilling pressure could arise in Florida from petroleum stakeholders who have a vested interest in untappe d reserves in the Gulf of Mexico. 2.2.2 Food versus Fuel Issue No other issue derived from the ethanol boom is more controversial than its impact on food prices. Factors affecting this global food struggle in clude higher costs of energy used to transport food, ch anges in climate and rainfall patterns, and the increased use of corn as a feed pro duct (Katz 2008). Most commenta tors agree that large scale biofuel generation from corn cannot repl ace petroleum supply without drastically affecting food supplies (Morrow 2008). Howeve r, Urbanchek (2007) found that rising oil prices have impacted food prices more signifi cantly than ethanol and that most of the recent food price increases have occurred in food not affected by corn, such as fish, fruits, and vegetables. According to Cordain (1999), it is wheat that is the world’s most popular food crop. Further, Severinghaus (2008) has stat ed that U.S. corn exports are mostly for livestock feed and that there is no correl ation between U.S. corn exports and the alleviation of world poverty because corn is not a global staple; those would be rice and wheat. Nevertheless, the price of U.S. corn over the last 5 years has risen to $7.60 per bushel (Trade Markets 2008) from $2.18 (Urbanchuk 2007), a thre e and half fold increase before falling again in 2009. Food prices also increase because et hanol has an effect on substitution crops. Ethanol input demand represents a large and ri sing share of corn use and co-products of ethanol production are displacing traditional feeds such as coarse grains and oilseed

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15 meals (Westhoff et al. 2007). If fewer crops are being produced as a result of more ethanol production, prices tend to increase because the supplies of substitute crops are diminished. While consumers do not like to pay higher prices for food, some food industries can potentially make larger profits. According to Hurt and Doering (2005), corn growers, beef producers, and the dairy indust ry should gain more profit from the ethanol boom. On the other hand, hog and poultr y producers, grain elevator operators and grain shippers might be nega tively affected. Soybean and wh eat growers might go either way (Hurt and Doering 2005). Furthermore, U. S. corn production may have an effect on Brazilian soybean production. Because more U.S. corn is produced, less U.S. soybeans are produced. As a result, more land is cleared in Brazil to make way for soy cultivation (MB 2007). 2.2.3 Environmental Impacts of Corn Ethanol U.S. corn production causes more total soil erosion than any other U.S. crop (Pimentel et al. 1995). Further, Pimentel (2003) stated that corn uses more insecticides, herbicides, and nitrogen fer tilizers than any other crop in the U.S. Converting more cropland for ethanol use seems to also ex acerbate agricultural runoff. Potera (2008) reports that excessive nitrogen runoff causes severe algae blooms which consume oxygen in waters resulting in ‘dead zones,’ which inhi bit the growth of marine life. However, the fate of pesticides and other chemicals used in crop growth for ethanol purposes tends to be difficult to quantify because different fe rtilizer products and amounts are used in various growing locations (Landis et al. 2007 ). If fertilizer best practices are employed

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16 appropriately, yield increases could help cu rtail deforestation, wa ter usage, and runoff (Johnston and Holloway 2007). Another contentious environmental issue i nvolved in the ethanol debate is that of air emissions. It has been f ound that different etha nol blends display a varying release of emissions. For example, E10 (90% gasoline, 10% ethanol) causes lower tailpipe CO2 and particulate emissions, but higher acetaldehyde ethanol and NOx emissions (Niven 2004). Jacobson (2007) concluded with confidence that E85 (85% ethanol, 10% gasoline) is unlikely to improve air quality over traditiona l gasoline and that its emissions could have an effect on public health. Furthermore, as more timberland and forests are converted to croplands, emissions are released which contribute to global warming. In his controversial study on land use conversion for ethanol produ ction, Searchinger (2008) found that emissions from corn ethanol nearly double those from gasoline for each km of land converted; and that even if corn ethanol caused no emi ssions except those from landuse, overall emissions would still increase as land is converted to ethanol production. The introduction of numerous ethanol produc tion plants in the U.S. is having dire consequences for the sustainability of fr eshwater bodies. Some 80% of global water supply is used for agricultural cultivation and ethanol production is aggravating this problem (Shiklomanov and Rodda 2003). The pro duction of 1 gallon of corn ethanol for instance, requires 1,700 gallons of freshw ater for both corn growth and for the fermentation/distillation process (Pimentel a nd Patzek 2005). In fact, a 50 million gallon ethanol plant is estimated to consume 150 to 200 million gallons of water per year, or over 400,000 gallons per day (Aden 2007). The acquisition of water resources are of utmost importance to ethanol producing stakeh olders, even in sensitive regions (Santa

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17 Barbara 2007, Economist 2008). However, the effects of ethanol production on groundwater withdrawals will va ry locally and be affected by a number of factors including amount used and aquifer rechar ge capability (Keeney and Muller 2006). 2.3. Brazilian Experiences with Sugarcane Ethanol In Brazil, ethanol for fuel is derived fr om sugarcane and is used pure or blended with gasoline. Similar to ethanol implementa tion in the U.S., Brazil’s ethanol emergence can be attributed to the rise of gas prices during the 1970s, and subsequently paralleled U.S. research and development in ethanol (Papageorgiou 2005). Ethanol production was stimulated through a combination of policie s, including low-inte rest loans for the construction of ethanol distilleries and guara nteed purchase of ethanol by the state-owned oil company at a favorable price for produ cers (Schaeffer et al. 2005). Brazil can fuel most of its automobiles and other vehicles w ith ethanol because they consume only 9% of the U.S. consumption in petroleum (BP 2005) Ethanol from sugarcane in Brazil has remained below the equivalent Rotterdam gasoline price since 1999 (Goldemberg et al. 2004, Sims et al. 2006). In 2007, Brazil became the second largest producer of ethanol behind the US, and now produces 15.1 billion liters per year, whereas the U.S. is producing 18.9 billion liters a year (Calibre 2006). Further, unlike the U.S. which uses most of its produced ethanol, Brazil is a worl d leader in ethanol exports (Moraes 2008). Petrobras is Brazil’s leading pr oducer of ethanol and is aggr essively seeking to deploy their biomass ventures throughout th e international arena (Ewing 2008). Despite how prolific Brazil is in manuf acturing efficient, low cost ethanol, immense social and environmental issues surround its production. Sugarcane ethanol

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18 production by laborers in Brazil is hard and dangerous work (Pimentel and Patzek 2007). The burning of fields associat ed with manual sugar labor cont ributes to air pollution, such as greenhouse gases, ash, and other partic les (Filho et al. 2006). However, as the economy modernizes, more mechanical harvesting tractors are being integrated into the production chain (Moraes 2008). Further, product ion machinery is now being utilized to cut unburned cane and separate leaves mechan ically, which in turn is reducing air pollution and the amount of people needed fo r the dangerous job of hacking sugarcane (Morgan 2005). As for deforestation concerns biofuel production seem s to be centered in the southern regions of Br azil, and not in Amazonia (C oelho 2005). Yet, sugarcane production is most likely affecting the Amazon indirectly as substitute crops consume more land. Searchinger (2008) concluded that tropical grazing land converted to Brazilian sugarcane would pay back the upfront carbon em issions in 4 years, compared to 45 years for rain forest lands which are converted to ethanol land use. Nevertheless, as more scrublands are converted to further etha nol production and global demand increases, more lands in the precious Amazonia ecosystem are likely to be c onverted to crop land. Overall, an understanding of the biof uel debates within Florida requires attentiveness to energy and agricultural policies, the wider national debate over corn ethanol, its impacts on oil consumption and f ood production, as well as comparisons with the well-known case of Brazil. This ch apter has sought to outline some initial considerations in terms of the discussion on biofuels, and these themes will be further followed in the remainder of this thesis.

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19 CHAPTER 3 RESEARCH METHODS This chapter introduces the case study for this research and the methods utilized in order to gather varying pers pectives on sugar ethanol devel opment in Florida. It begins by describing the procedure through which in terview participants were chosen and contacted and introduces the various categories into whic h stakeholders have been classified. The second section focuses more closely on sugar-growing areas in Florida and the policy dimensions of sugar ethanol development in the state. 3.1. Description of Interviews This study is based on data collected through interviews with individuals possessing direct knowledge and experience of s ugar ethanol in Florida. Interviews with stakeholders provide more immediate, potentially less commonly covered, and deliberately diverse insights into the politic al, economic, agricultural, and environmental factors shaping the biofuels debate. Interview participants were mainly solicited from the 2008 Florida Farm to Fuel Summit attendee list (total of 416 attendees), which is freely available on the internet through the Florida Department of Agriculture and Consumer Services website, and care was taken to ensure that the participants represented as wide a range of stakeholder perspectives as was feas ible. Participants were initially contacted by email, and 24 agreed to a longer phone interv iew based on that initial contact. Remaining

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20 research participants were contacted on the basis of sugge stions made by the initial participants which enabled both a more in-d epth pursuing of particular stakeholder perspectives as well as a broadening of interview subjects beyond the Summit. The interviews were conducted over the phone from the premises of the Department of Geography and a semi-str uctured, open-ended questionnaire was administered to the participants. The que stionnaire (Appendix 1) consisted of 20 questions beginning with genera l inquiries into sugar ethanol in Florida, and progressing to more specific questions related to governme nt support, economics of ethanol and oil, conflicts between sugar as food and sugar as fuel, and the role of environmental regulations in the sugar and ethanol industry in Florida. The objective of a semistructured interview is to understand the respondent’s point of view rather than make generalizations about behavior (Socio Org 2008). Semi-structured interviews are intended to be somewhat open-ended so that the respondent can voice an opinion ba sed on experiences and knowledge It is not as rigid a research method as surveys, which forces th e participant to pick an option, without elaborating on why an answer was chosen. This method allows for the emergence of previously undiscovered themes which can sh ed light on the inves tigation at hand (ESDS 2007). The interviewer would usually use a standardized interview schedule with set questions for all respondents. Further, the questions are asked in numerical format to identify similarities and differences amongs t respondents when asked the same questions. Thus, this interview process was spec ifically geared towards providing new insights into sugar ethanol debates. Participan ts were assured that strict confidentiality would be maintained throughout the research pr ocess. They were also given the option of

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21 skipping a question or providing a “best-guess” response in case of lack of familiarity with the issue being addressed. In some cases, participants did chose to skip questions for lacking general knowledge regarding the gi ven question at hand or for the sensitivity of the question being asked. It seemed that a few respondents were unwilling to answer all questions in a straightforward manner fo r fear of asserting a viewpoint which was sensitive to the organization or reputation of the particip ant at hand. However, most participants answered all questions, re sulting in a sound comparative analysis. In all, 49 stakeholders were interviewed as part of this study, including 16 ethanol representatives, 7 o il company representatives, 9 govern ment officials, 9 agricultural stakeholders, 5 environmentalists, and 3 uni versity/research stak eholders. Interviews were conducted between January 9th and February 20th 2009, and the average length of an interview was around 40 minutes. More specif ically, interview times ranged from around ten minutes to seventy minutes, depending on the convenience of the interview subject and the amount of detail that he/she was willing to provide. The discussion of results draws for the most part from the longer interv iews, but the range of views on a particular issue are also incorporated in the process. A portion of the interviews conducted with five agri cultural stakeholders was obtained through a visit to the Lake Okeechobe e area, the principal sugar-growing region in Florida. This visit was undertaken over May 3rd and 4th, 2009 and included a visit to the towns of Clewiston and Belle Glade, whic h are the headquarters of the U.S. Sugar Corporation and Sugar Cane Grow ers Cooperative of Florida resp ectively. As part of this visit, each organization led me on a tour of their compounds or work areas which added a

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22 more direct understanding of sugar producti on processes and possi ble ethanol production plans in the southern Florida. 3.2. Case Study: Sugar Ethanol in Florida Florida is an ideal location for the cultiva tion of sugarcane in the U.S. (Figure 1). It is one of four U.S. states (the others ar e Hawaii, Louisiana, and Texas) which presently participate in the cultivation of sugar. Suga rcane can be grown anywhere in Florida, but the commercial sugarcane industry is isol ated around the southern shores of Lake Okeechobee (Baucum et al. 2006). Most of th e current sugar industry in Florida is vertically integrated, but i ndependent growers and growe r-owned cooperatives produce some of the commodity output (Alvarez and Polopolus 2002). During the harvest year of 2005-2006, Florida harvested 376,000 acres of su garcane from a total of 401,000 acres in cultivation (Shapouri et al. 2006). This harves ted acreage accounted fo r 44 percent of the total sugarcane acreage harvested in the U. S. Overall, the Florida sugar cane annual harvest has remained stable over the past fe w years, with abrupt reductions in output occurring from hurricane and less er tropical climatic storm system activity (Shapouri et al. 2006). The sugar landscape in Florida is domi nated by a farmers’ cooperative and two large sugar refiners. The Sugar Cane Grower s Cooperative of Florida is a consortium comprised of 54 grower-members ranging from large to small sugar farmers (Co-op 2008). The Florida Sugar Cooperative engages in long-term contractual agreements with one of the State’s two large sugar producers – Florida Crystals, which is planning to supply sugar bagasse for cellulosic ethanol pr oduction purposes (Voge l 2008). U.S. Sugar

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23 Corporation, headquartered in Clewist on, Hendry County, is th e country’s largest producer of sugar cane (US Sugar 2008), and it do es have a vested interest in diverting sugar cane byproducts to ethanol production in Florida. In this vein, the Florida Molasses Exchange has seen a surplus in its sugar byproducts and has subse quently entered other industries, such as alcohol and yeast production (FME 2003). Universities in Florida ar e facilitating the advancement of biofuels technology through research and development. Lonnie I ngram, professor of microbiology and cell science at the Universi ty of Florida, has patented a method of producing ethanol from sugar cane waste and is resear ching this potential at a st ate-funded pilot plant in Palm Beach (Vogel 2008). State sugar producer Florid a Crystals will supply Ingram with the Figure 1: South Florida Suga r Cane Agricultural Area.

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24 sugar bagasse necessary for the research, which is already collected and used for refinery electricity generation (FL CRY 2008). Also, Florida Crystals and Florida International University (FIU) have received a $1 milli on grant to develop cellulosic ethanol technology under the Florida Renewable En ergy Technologies Grant Program (FIU 2007). There are many biofuel companies pursu ing transportation fuel production in Florida and throughout the count ry. Highlands Envirofuels, an ethanol venture operating out of Tampa, is seeking to develop a $40 million plant in Highlands County which utilizes sugar cane and sweet sorghu m for fuel production (Konkoly 2008, Krohn 2008). In 2008, Panama City-based Applied Research Associates was awarded $203,130 in state grant funds for research and development in cellulosic materials, including sugarcane bagasse (FDACS 2008). In 2007, the U.S .Dep artment of Energy (DOE) announced that it would award a $33 million grant to Alico fo r developing a cellulosic ethanol plant. Alico subsequently declined funding and decided not to pursue ethanol production because this type of venture deviated fr om their core business model (FCM 2008). A steady supply of sugarcane and bagasse is being supplied by Cajun Sugar Co-op to Verenium for a $60 million demonstration ce llulosic ethanol plant (Bevill 2008). Local farmers have benefited from this project by receiving extra revenue whose value is amplified by the fact that sugar pri ces have fallen recently (Bevill 2008). The byproduct of sugarcane is a fibrous ma terial known as bagasse (Turn et al. 2006). In modern sugarcane ethanol plants, ba gasse is used for production of steam and electricity, even though its use pollutes the air (Salassi and Fairbanks 2006). Over a million tons of sugarcane bagasse are produced every year by the Florida sugar industry

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25 (Philippidis 2008). Sugarcane bagasse could be a good solution for Florida because large amounts are readily available within the stat e. Ho (2006) estimated that the 2005 U.S. sugar harvest yielded 25.8 million tons of sugarc ane, and of that 35% or 9 million tons of bagasse would be generated. The commercializa tion of sugarcane bagasse is significant because it could provide a further incentive for Florida sugar producers to sell their byproducts to ethanol manufactur ers if demand were to increase for advanced biofuel cellulosic products. In 2005, the DOE and the USDA estimated th at the US could potentially convert 1.3 billion dry tons a year of biomass to 227 bi llion liters (60 billion gallons) a year of ethanol (Service 2007). The U.S. would offset at least 30% of its annual petroleum supply if 1 billion tons of biomass were processed for cellulosic ethanol (RFA 2005). Cellulosic ethanol can be derived from a vari ety of the non-food part s (waste) of crops, such as sugarcane bagasse. Processing cellu losic biomass seeks to extract fermentable sugars from complex carbohydrates called poly saccharides which are engrained in the plant biomass material (Greer 2005). Once these complex cellulosic structures are exposed using strong acids or enzymes, sol uble sugar solutions can be produced into ethanol (Ingram and Doran 1993). Researcher s have made significant progress in the commercialization of cellulosic technology in recent years. However, production costs remain high at the present time and that is w hy cellulosic is not c onsidered commercially viable (DOE 2008). According to Oliveira et al. (2005) in terms of energy balance, ethanol production from sugar is a more efficient feedstock than corn in the U.S.While corn requires new planting and harvesting every year, sugarcane is planted every 6 years (Hofstrand 2007).

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26 Further, the sucrose in sugar can be converted into ethanol directly, whereas the starch in corn is first converted to sugar, and then to ethanol (Hofstrand 2007). Sugarcane uses less fertilizer than corn which would reduce c ontaminant and wastewater runoff (Yacobucci and Seelke 2007). In fact, Magdoff (2008) also reports that, unlike corn, sugar cane is actually a net producer of energy when used during ethanol production because its waste products can be used for electricity generati on at the production plant. When compared to gasoline emissions, sugar released up to 86% less greenhouse gas emissions, with corn only providing a 30% reduction (OED 2008). Ostensibly, the most attractive benefit from ethanol derived from sugar is the fact that it can produce more gallons of ethanol pe r bushel of crop when compared to corn. Sugarcane yields 600 to 800 gallons of ethanol an acre which is more than twice as much as corn (Bourne 2007). Since sugar is not a main food staple like corn or wheat, less controversy is attached to it in terms of relationship affect on food prices. Thus, growing a crop that is more efficient can possibly offset impacts on rising food prices. On the other hand, Pimentel and Patzek (2007) argue that using sugarcane for fuel purposes raises sensitive issues regarding food produc tion and food exports, which could otherwise be used for food preparation and consumption. Fu rther research will have to take place to understand whether sugar will have less of an impact on food prices than corn. The next two chapters detail the various perspectives out forward by interview participants. Chapter 4 focuses on perspectiv es related to governm ental regulations and the economies of oil pr oduction and pricing.

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27 CHAPTER 4 GOVERNMENT POLICIES AND OIL ECONOMIES This chapter focuses on how the interplay between state-level regulatory frameworks and the working of energy market s supports or hinders the growth of sugar ethanol production in Florida. It is divided into five sections The first section provides a general overview of factors shap ing ethanol development in Fl orida, and show s the extent to which government policies and oil economie s were viewed by interview subjects as the main factors driving sugar ethanol growt h. The second section delves further into how government policies shape sugar ethanol deve lopment, and the thir d section provides insights into one major policy instrument – th e ethanol tariff – and its role in enabling sugar ethanol growth. The f ourth and fifth section focu s on the relationship between ethanol and oil – on how market prices for oil shape ethanol development and whether the growth of sugar ethanol in Florida has the potential to reduce the demand for offshore oil drilling in the Gulf of Mexico. 4.1. Sugar Ethanol Development in Florida What are the main factors shaping ethanol development in Florida? Each individual interview began with a general question that sought to gauge respondents’ perspectives on whether government al policies, agricultural interests, oil prices, environmental concerns or economic issues were sh aping the discussion of sugar

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28 ethanol in Florida. Each res pondent could choose more than on e factor as part of their answer and could also mention a factor outsi de the list provided to them. Figure 2 below summarizes this factor:

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29 Figure 2: Stakeholder Perspectives on Main Fa ctors Shaping Ethanol Development in Florida

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30 designated as most important by the res pondents in terms of the broad stakeholder categories of this research. As can be seen from Figure 2 for the sixteen ethanol stakeholders interviewed, government policies and oil prices were deemed as the most significant factors shaping ethanol development. For oil industry responde nts, however, agriculture is deemed the most significant factor, and for governmental actor s, it is oil prices that hold the key to ethanol development. Wider economic issues emerge as important for both oil and agricultural stakeholders. Other factors mentioned included energy independence, feedstock availability, land av ailability, infrastructural i ssues, economic development, and availability of capital. Two issues arise from this preliminary analysis. First, there is no consistency across stakeholders in terms of the factor deemed most significant in shaping ethanol development in Florida. This seems to suggest that there is no coherent discourse related to sugar ethanol development in the state, so that sugar ethanol remains a site of potentially conflicting perspectives. The s econd issue however is that each set of stakeholders seems to consistently define th e matter of sugar ethanol as being shaped by factors outside its control, so that government stakeholders point to oil prices and oil industry representative’s point to agricultural interests. Th is again points to potential conflicts related to sugar et hanol in the current Florida landscape. Overall, this preliminary classification builds the case for mo re in-depth understa nding of debates over sugar ethanol in Florida and the next two chap ters are devoted to providing this detailed analysis.

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31 4.2. Government Policies Do you feel that the Flori da state government has been s upportive of ethanol production and more specifically, sugar-based ethanol production? Seven respondents gave a posit ive appraisal of the role played by the Florida state government in promoting ethanol, and s ugar ethanol, development specifically mentioning the Farm to Fuel Summit, state grant programs, ethanol mandates, and the establishment of E85 retail gas stations. The role played by the current Charlie Crist Administration and the activities of the Florida Department of Agriculture and Consumer Services (FDACS) were especially singled ou t as notable in this regard. According to Neil M., an agricultural stakeholder, FDACS ha s played a crucial role in building ethanol industry momentum, stating that ethanol de velopment ‘has been really well managed, well reported, and well presented from the State’s perspective.’ Alan W., also an agricultural stakeholder, menti oned that Governor Charlie Crist was a chief architect of the Florida State Energy Bill which will mandate a 10% E10 gasoline blend at all Florida gas stations in 2010. Adam L., an environm entalist, praised Governor Crist for his steadfast support of renewable energies suppl ying at least 20% of all energy demands by the year 2020. The most cited instance of government support for ethanol development was the Renewable Fuel Standard (RFS) which mandate s by law that 36 billion gallons of various biofuel types be developed commercially and integrated into the annual national petroleum fuel supply. The RFS thus seeks to stimulate the fledgi ng ethanol industry by encouraging new capital, new technologies, a nd eventually new feedstocks which will allow for greater growth in the future (Dineen 2005). As mentioned earlier, in Florida, an

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32 E10 blend will be a statutory fuel mandate fo r vehicles by the end of 2010, as a result of Governor Charlie Crist’s ‘Green Energy’ initiative (DOE A 2008). The annual Florida Farm to Fuel Summit wa s also mentioned as a key event in the promotion of biofuels (which is not surprisi ng since most of the pa rticipants were drawn from the list of attendees for this Summit) Begun in 2006, this Summit aims to ‘promote the production and distribution of renewa ble energy from Florida-grown crops, agricultural wastes and residues, and othe r biomass and to enhance the value of agricultural products or expand agribusiness in the state’ (FDACS 2009). FDACS also offers a $5 million grants program annually, which the agency secured from the Florida Legislature for funding of new renewable bi o-energy technologies within the state. Respondents also noted that the Florida Depa rtment of Environmental Protection (FDEP) offers grant assistance financing which has been valuable to bio-energy ventures. In 2008, the Florida Legislature provided $15 million in grant funding through the FDEP (FDEP 2009). Oil industry respondents provide d especially interesting perspectives on the role of governmental support for et hanol production in Florida. Ac cording to Teresa S., there has been more senior leadership on fosteri ng ethanol production in Florida than in any other state in the nation. This statement is significant because it sugge sts that the actions of Florida are also being noted by the broader U.S. context. Alexander W., owner of an E85 gasoline retail chain, stated that the government has funde d three E85 gas stations in Florida to foster flex fuel pot ential in the state. E85 is a gasoline blend of 85% ethanol and 15% gasoline. But is should also be noted th at E85 can only be inserted into vehicles specifically fabricated for combustion with a fuel that is mostly ethanol. As of 2007,

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33 approximately 307,093 flex-fuel vehicles exist in Florida, second only to Texas (CAP 2007). Grants provided to universities were al so mentioned in the interviews. Anthony O., a university representative indicated that the recent installation of the Florida Energy System Consortium has been critical to promote renewable fuel research within the State. The Florida Energy Systems Consortium is a sub-component of the Florida State Energy Bill signed into law in 2008 by Governor Charlie Crist. It is expected that the consortium will bring together research efforts in the major Florida universities, providing frameworks for market-driven renewable energy technologies a nd fostering a new workforce of graduates with renewable en ergy expertise (Hoover 2008). The University of Florida (UF) is the flagship institution in this consortium, and Mike G., an ethanol representative, mentioned Dr. Lonnie Ingram as one of the principal ethanol researchers in the nation at large. Dr. Lonnie Ingram was awarded $4.5 million for an ethanol training facility on the campus of UF, with anothe r $20 million allocated for a joint bagasse-toethanol plant venture between UF and Florida Crystals on agricultural lands near Lake Okeechobee (Crabbe 2008). A positive view of the role of government has to however be moderated by the views of respondents who argued that the gove rnment has been sele ctive in promoting biofuel development, with some arguing that the government in fact has not done enough. Six participants were of the opinion that sugar (or sucrose) ethanol was not being promoted by the state government in Flor ida, and that the government instead was promoting cellulosic ethanol feed stocks. Alan W., an agricultural stakeholder, stated that sugar is still a very taboo s ubject in Florida, and if anyt hing, the state government’s role

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34 has been counter-productive for ethanol deve lopment with the pending acquisition of US Sugar Corporation lands in order to restore the natural water flow to the Everglades. Edward D., a Florida farmer, echoed this view stating that with the looming US Sugar Corporation acquisition, the state has not been supportiv e for sugar based ethanol production. Mike E., who belonged to a rising cellulo sic ethanol company, made note of the government’s distinction between sugar and cellulosic ethanol: Yes, I think they (state government) have been very supportive of ethanol development. Over the past few years, the Florida government has given out a lot of money in grants to help cellulosi c ethanol companies or next-generation ethanol get up and started. Specifically s ugar, I would say, I don’t think so. And I would classify sugar as the older or last generation of ethanol. The government is very supportive of the new generation. When you look at sugar, it is a food-based feed stock. There seems to be a big driv e to get away from things that would impact food supply and sugar is de finitely one of those things. Cellulosic ethanol is thus perceived by some policy makers as a more favorable renewable fuel source which will not impact food sources the way th at corn has in the past, or that sucrose ethanol could have on domestic food in the future. Nick C., a sugar industry representative (classif ied as an agricultural stakehol der) was of the view that the state government was moving in a supportive direction with cellulosic, but that there has not been enough research mone y available to support fledgl ing ethanol ventures within the state, especially during tough economic times. Seven participants emphasized that the government has not done enough to

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35 support the growth of ethanol production in Florida. Ni colas S., aspiring ethanol developer, said that there have been so me grants which support alternative fuel development, including sugar-based ethanol, bu t there should be a lot more support to further the potential of the industry. Moreover, state congre ssional representative Todd M. admitted that these are tough economic times and, as a result, the state budget has really dampened the state’s ability to improve the ethanol grants program. Similarly, four participants noted that more government grant funding is needed to launch bio-energy production projects within the state, since these projects demand large capital investment over time. Unfo rtunately, government grant funding is only awarded to a few select entities, leaving othe rs energy ventures at a disadvantage. Drew K., an ethanol production plant en trepreneur in Florida, stated that access to capital for bio-energy ventures to expand commercially is an issue, especially during an economic downswing. Currently, in this economic environment and the credit crunch, getting access to equity investment, is very challenging. And getting access to credit financing, the credit markets have not loosened up yet, especially with American lenders. Even with the US government bailout, the lende rs are not loosening up and providing financing, which is hard to believe. Access to capital is hampering the development of ethanol production in Florida. This viewpoint is crucial fo r understanding the complexity involved with government influence in the financing of renewabl e energy projects. Even though the state government has provided grant money for ventur e financing, these funds appear meager for successful plant operations to scale-up commercially over time. In this regard,

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36 respondents mentioned the role of lobbying groups in ensuring that the state government’s attention did not waver fr om ethanol. One such advocacy program mentioned during interviews was the 25 x 25 initiative which seeks to have 25% of national energy demand derived from renewable energy sources by 2025. 4.3. Ethanol Tariff Should the ethanol tariff be re moved and how does the ethanol ta riff affect sugar-based ethanol specifically? The aim of the ethanol tariff is to s timulate the establishm ent and growth of domestic production by levying a tax on foreign, notably Brazilian, et hanol sought to be imported unrestricted into the U.S. market. Al l ethanol imports are subjected to a 2.5% ad valorem tax and a 54 cent per gallon tariff is additionally assessed on all US ethanol imports from non-Caribbean Basin countries. The tariff is intended to offset the blender’s credit, which provides 51 cents a gallon to petroleum companies fo r integrating ethanol into their gasoline supplies. In theory, it is hoped that this will lead oil companies to mixing more U.S. ethanol and hence supporting the domestic production market. A number of interview participants ho wever were not supportive of the ethanol tariff since it went against their support of free trade. Thirteen particip ants stated that the ethanol tariff should be elimin ated. One of the most common responses dealt with the notion that subsidies/tariffs increase protec tionism and thereby hinder the free market economy. Matt R., a trade specialist, while accepting that tariffs on foreign goods promote domestic production was of the opinion that: Generally, they [ethanol tariffs] should be minimized or eliminated. My reasoning

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37 has little to do with ethanol – general feelings are that free trade has a tremendous beneficial impact on the US and world. For example, in the 1930s the entire world went to a highly protective tariff system which minimized world trade. It had a significant impact on the dete rioration of foreign rela tions throughout the world, with the culmination being World War II. Since then, the entire world has been pushing hard for free trade. I support rem oving tariffs. Thus, I would generally be in favor of removing the ethanol tariff. It is worth noting in this context that trade -related conflicts are brewing between the U.S. and Brazil, Thus, President Lula of Brazil ha s recently criticized the U.S. corn ethanol production industry and the ethanol tariff, arguing that Brazil ian sugar ethanol is a more efficient fuel resource for America than corn ethanol. According to Eric P., cellulosic research er, Brazil should have the right to export its fuel unhindered to U.S. markets. In his words, Yes, the tariff should be eliminated. It is the only way to for biofuel or ethanol to become global commodities. Protectionist m easures will not suffice in this realm. The tariff harms the consumers because of the limits on Brazilian ethanol importations. It behooves the U.S. to open up its markets freely until we are in a position to develop large amounts of etha nol from sources other than corn. Eric P. believes that the et hanol tariff actually hurts the av erage U.S. consumer because it hinders low cost sugar ethanol originating in Brazil from entering the U.S. market. As stated earlier, the threat to the U.S. cons umer comes in the form of the government disregard for cost-effective allocation of taxpayer’s monies. By appropriating taxes which are currently providi ng grants and incentives to the U.S.’s fledging ethanol

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38 industry, the cost of living for the domestic population is unnecessarily increased. Sam S., an agricultural stakeholder, a dopted the same position, stating that: I am not a proponent of subsidies except if you have a need to push development of a new technology and a need to get the market started, as long as not permanent. Cash-based market controls are not sustainable. Yes, it should be eliminated. [There is] not enough production worldwide to impact. Without the subsidy to blenders, there would be no ethanol market in the U.S. In fact, if the tariff is removed, the U. S. domestic ethanol industry presumably would not be affected because ethanol pr oducing countries, led by Brazil, do not have large additional amounts of market-ready ethanol for importation to U.S. markets presently. Thus, the export of large additiona l amounts of ethanol from Brazil would take time to implement. In this vein, Bill C., an oil industry respondent felt that sugar-based ethanol potential is impacted not by ethanol tariffs, but by U.S. price supports for sugar, which make it more profitable to maintain suga r as food rather than as a source of fuel. Another oil respondent, Teresa S. was also of the opinion that domestic sugar policy affects U.S. sugar production and therefore impacts sugar et hanol more than the ethanol tariff. In contrast to the above views, a numb er of respondents were in favor of the ethanol tariff, with twelve participants arguing that the ethano l tariff should not be eliminated, and another nine pa rticipants supportive of the ta riff in the short term, but in favor of phasing out or elimination in the long term. It should be pointed out that of these supporters of ethanol, four were agricultural stakeholders with dire ct ties to ethanol production, and seven were represen tatives of etha nol interests.

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39 Alan W., an agricultural stakeholder in fa vor of the tariff, contended that the tariff does restrict Brazilian ethanol, and if removed, the U.S. would switch its energy dependence from the Middle East to Latin Am erica. Moreover, this could result in upheavals in domestic ethanol production since demand woul d grow rapidly for foreign ethanol. Kevin N., a government official, added that buying foreign products causes domestic vulnerability, so pr otecting ethanol producers by wa y of tariffs is necessary. Thus, removing the tariff would crush any hope of domestic sugar ethanol production to occur, notably due to lower costs of sugar-to-ethanol pr oduction in Brazil. Rick B., ethanol lobbyist, acknowledged th at the tariff is a pr otectionist measure, but justified it on the basis of unequal market protection guidelines between Brazil and the U.S. –lack of environmental regulation c onstraints, cheap labor, lower worker safety guidelines, and subsides that allow for cheaper ethanol production in Brazil. But Rick B. also argued that large amounts of Brazilian ethanol are being imported despite the tariffs. This was further explicated by ethanol producer Mike E. in terms of a loophole in ethanol import regulations which allow Brazil to expo rt dehydrated ethanol to Caribbean nations such as Jamaica and El Salvador, which is th en subsequently shippe d duty free to the U.S.. Under the previous Caribbean Basin Initiative (CBI), and now the Central American Free Trade Agreement (CAFTA), specified amounts of ethanol can be imported to the U.S. without tariff sancti ons. The intention of CBI/CAFTA, are to promote the economies of developing nations in Latin America by encouraging free trade with the U.S. While Brazil does not qualif y for free trade under CBI/CAFTA, it provides incentives to CBI/CAFTA countries, and hen ce gains access to U.S. ethanol markets through them.

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40 4.4. Ethanol and Oil in National Energy Markets To what extent will ethanol substitu te for oil/gas demand over time? Eight participants were of the view that over time ethanol can potentially substitute for more than 25% of oil demand within the U.S. According to Richard C., a renewable fuels producer: [Ethanol] will substitute as much as 1/3 of our liquid use because we currently use 150 billion gallons of gasoline a year, plus or minus, and another 60 billion gallons of diesel. We are currently producing 11 billion gallons, but are approaching 14 billion gallons of ethanol, and maybe 18 billion gallons will be the ceiling for sugar/corn feed stocks. Th en you look at cellulosic ethanol and that will get us up to about 50 billion gallons … 50 billion gallons is pretty aggressive and will only be 1/3 of our oil deman d. But our fuel consumption should come down with the introduction of more efficient vehicles. Drew K., an ethanol proponent, was of the opinion that the ‘blending wall’ could be increased through government policy over time, and as a result ethanol would substantially replace gasoline demand. In his words, It’s going to take several decades. But if you believe what Vinod Khosla says, by 2050, we can potentially repl ace all of our gasoline with biofuels, which is predominantly ethanol. Currently, the 36 billion gallons RFS mandate will replace about 25% of our gasoline supply. If you assu me that the country uses 140 billion gallons of gasoline a year, and there’s not a lot of growth in gasoline demand in the next ten years, then 36 billion gallons of fuel will be about 25% of our motor

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41 fuel supply. However, part of President Obama’s energy policy is to expand to 60 billion gallons by 2030. 60 billion gallons of fuel represents 46% of our gasoline supply. Vinod Khosla is a renowned Silicon Valley base d venture capitalist, who has a reputation for investing aggressively in clean energy te chnologies. Reaching the target of 60 billion gallons will also depend greatly on the efficiency surrounding the production and commercialization of technology. But Drew K. al so emphasized that if the right types of funding and loan guarantees become available, such as a $150 billion renewable energy fund currently supported by the Obama administ ration, then the U.S. can turn away from substantial dependence on gasoline. Several comparisons to Brazil were made by participants in answer to this interview question. Eric S., an agricultural st akeholder, contended that in time 80% of U.S. demand for gasoline could be substituted by ethanol, especially if various feed stocks were combined. The creation of comp rehensive ethanol programs in Brazil were impelled in part by similar energy security th reats as being currently faced by the U.S. Friedman in a discussion of energy security in the U.S. quotes Gal Luft, Director of the Institute for the Analysis of Global Securi ty, as saying that, “B ringing hydrocarbons and carbohydrates to live happily together in th e same fuel tank has not only made Brazil closer to energy independence, but has also insulated the Brazilian economy from the harming impact of the current spike in oil prices.” (Friedman 2005). However, it should also be kept in mind that the population and au tomobile sector in Br azil is a fraction of the U.S. As opposed to support for the substitution of gasoline by ethanol, fifteen

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42 participants indicated that ethanol will play a limited role or only supplement less that 25% of the national gasoline demands over ti me. Sean D., a renewable energy producer, was of the opinion that ethanol will decr ease demand for oil, but will do so only marginally because it will also compete with other sources of renewable energy. Similarly, Neil M., an agricultural stakeholder, was of the opinion that ethanol usage was likely to function as a transitional fuel, w ith a market window of about 25 years and a market capture of 30% of gasoline consumption. According to him, other renewable technologies, such as hydrogen, are more efficien t, and will thus be more available to the consumer through the automobile industry in the long term. But, the RFS would have to be reconfigured to support new auto fuel tec hnologies. Presently, the target is to integrate 36 billion gallons of biofuel into the national fuel supply by 2022. According to Joseph M., a large petrol eum corporation manager, production of ethanol will be hindered by feed stock availability. Globally, ethanol can make a contribu tion to the supply/demand balance. However, it will not make a big dent ag ainst fossil fuels. The second generation could make a small number bigger, but still not big enough. The only real alternatives to oil are coal and nuclear – they are the only technologies that have the scale to compete effectively with oil. Other technologies are limited by supply. A different argument was made by three participants who argued that ethanol does not compete with gasoline. In fact, Greg C., an ethanol stakeholder, viewed ethanol as a complement to gasoline because it provides a high octane component which improves the efficiency of gasoline. Mike G., a cellulosic ethanol company

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43 representative, contended that the primary benefit of etha nol is an octane boost for gasoline, so ethanol will only s upplement 10-20% gasoline demand. A number of participants sought to make a link between gas prices and the attractiveness of ethanol. Kirk R., a farmer noted the complexity associated with fluctuating commodity prices: The factors are obviously the price of oil and cost to produce ethanol. One of the concerns with corn ethanol is that th e price of oil goes up creating a demand for ethanol and also increasing the price of inputs, such as fe rtilizer. It is also more expensive to produce ethanol as the price of oil goes up. It’s a hard question. It’s the reason why a lot of ethanol is not pr oduced in this country, is because the price of oil is so low recently. So the pr ice of oil fluctuates greatly … thus, some of the ethanol producers are quickly going out of business, because they can’t stand $40 oil prices. If the price of oil stays over $100 a barrel, then I think you will see substitution. It seems therefore that one viable price solution for ethanol producers could be the introduction of a subsidy which floats according to the price of oil (Barrionuevo 2006). However it is also too simplistic to assume that a rise in gasoline prices will automatically stimulate ethanol production. Gi ven that ethanol is now a publicly traded commodity which is subjected to the uncerta inties of speculation and supply/demand, the production and price of ethanol may fluc tuate without regard to oil prices. What implications could sugar-based ethanol in Florida have for the national energy market?

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44 To begin with, it is useful to consider the substantial annual gasoline consumption that currently characterizes the U.S. In 2008, the US consumed nearly 137.80 billion gallons of gasoline and ethanol replaced an estimated 7.2 billion gallons of gasoline (DOE 2008). The value of potential sugar et hanol production becomes magnified given such consumption levels. The Department of Energy has estimated that gasoline prices would be 20 to 35 cents higher if ethanol were not blended into the nation’s gasoline (Anton 2008), which suggests that ethanol is curr ently beneficial in its blended form with gasoline. Twelve participants were of the opini on that sugar-based ethanol production in Florida could have a substantial affect on the national fuel market. According to Juan C., a representative of cellulosic ethanol, Flor ida has the potential to become the largest ethanol producer in the nation for two reasons – its weather and the potential availability of land for growing biofuels. Mike E., also a cellulosic ethanol representative, added that Florida’s ethanol advantage lie s in the availability of la rge tracts of land, and farmers who own that land. Large tracts of land provide security for long term business investments because they are easier to pa rlay, while fewer parties allow for simpler negotiations and financial tran sactions betw een parties. Herman K., another ethanol stakeholde r, suggested that all renewable energy produced in the state will have major eff ects on energy independence and environmental protection. Rick K., an environmentalist, t ook this one step further by asserting that Florida could provide more than just fuel to the national energy supply. Anytime we can diversify a state energy use, you can impact the rest of the country. You relieve some of the pressure for fossil fuels elsewhere. In Florida,

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45 we have the opportunity to grow our own fuel. Florid a is a bellwet her state, a politically powerful state, and when we show progress in Florida, we can do it in the rest of the nation. Rick K.’s assumption makes sense when consider ing that Florida is the third largest state in terms of gasoline consumpti on in the U.S., and thus can provide inspiration for other stakeholders and policymakers in the country who seek innovations within their statutory frameworks. It seems that if Florida make s a transition within its renewable fuel framework, others will notice and attempt the same within their ow n states, because the industry is still immature. An immature indus try, one that is not competitive, provides room for the bold to be noticed. While Flor ida will not become the Brazil of North America in terms of production of sugar etha nol, when combined with other fuels, sugarbased ethanol could potentially provide for th e Southeast region or at least the Florida consumer market. Drew K, an ethanol producer, supported the view that sugar-based ethanol in Florida will have tremendous implications for the national market because of the underlying statutory fram ework. In his words, The implications are huge. Sugar-based ethanol would contribute to the Renewable Fuels Standard (RFS) by qualifyi ng as an Advanced Biofuel, which is different than the corn starch process. Ethanol made from sugar qualifies as undifferentiated advanced biofuel. The RFS requires 21 billion gallons from noncorn feed stocks by 2022. If you break dow n the RFS requirements further, sugar could be applied to the 15 billion gall on cellulosic and/or 6 billion gallons of undifferentiated advanced biofuel requirements.

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46 The RFS is unique because it provides a st atutory mandate that ethanol must be integrated into the nationa l gasoline supply annually. Thus the mandate provides an incentive for producers to initiate ethanol pr oduction because it ensure s that a market will be in place, unless enough foreign comp etitors enter the marketplace or RFS requirements are not met. Considering that most advanced biofuels and cellulosic products are not commercially viable yet, ther e is much room to gr ow for new entrants. In contrast, some participants felt that sugar-based ethanol in Florida would not have much of an impact on the national ener gy market. Edward D., an agriculturalist, was of the opinion that sugar-based ethanol in Florida would have minimal impacts because other renewable fuel products, such as biodies el, are more attractive since they will not corrode existing vehicular combustion engines (as ethanol would in higher blends). Neil M., another agricultural stakeholder provide d a response similar to Edward D. His position was that sugar-based ethanol will most likely be a transitional fuel to other innovative technologies, such as hydrogen fueled cars, mainly because it will take a very long time to establish a large etha nol infrastructure in the U.S. A more detailed perspective on the link between Florida’s sugar ethanol and the national energy market was provided by Sam S. an aspiring agronomist. In his words, I did an analysis essentially for [a uni versity research group] on the amount of land that would be suitable climate-wi se for sugar production. [In Florida,] we basically have 6 million acres that is in some crop, including citrus, improved/unimproved pastures, etc. At a production rate of 400 gallons of ethanol per acre, that amount would be less than 10% of the Florida demand. At a E10 level, Florida would not even put a dent at the national market, if we planted

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47 every square inch that was available in the state … Overall, the Florida ethanol market will grow over time. It may play a larger role in electricity production by doing cogeneration from wood waste and thi ngs like that. But distance becomes a big issue. What wild lands are still out th ere are going to play an important role in what you can harvest and how often. It [e thanol] is going to be a component of the overall energy spectrum. [But] I don’ t see ethanol becoming 50% of our energy use. 4.5. Relationship between Ethanol Production and Oil Exploration Is lack of an adequate fuel s upplementation for gasoline driv ing more oil exploration in the U.S.? At the beginning of the rise in attentiveness to ethanol in 2003, it seemed that in due time the amount of ethanol produced would fulfill a significant amount of the annual petroleum demand for transportation fuel. Mo re recently, however, a shift has occurred partly driven by research, l obbying groups, and the media, whic h has led to a criticism of ethanol’s potential, based partly on the fact that the ethanol to gasoline fuel supplementation has been reported to only provide a 1-2% fulfillment ratio. This interview question addresses whether a failed ethanol suppl ementation for gasoline is driving more oil exploration to fill the voi d that ethanol could have otherwise met. Thirty two participants felt that any real or perceived lack of ethanol for gasoline would not interact with pro cesses of further o il exploration led by U.S. petroleum corporations. Bobby H., an oil i ndustry representative, was also of the view that there was no relationship between lack of ethanol fuel supplementatio n and oil exploration because

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48 the large petroleum companies have little or no investment in ethanol production. Terrance F., another stakeholder connected with oil interests, argued that the low levels of ethanol use within the U.S. makes it difficu lt to compare ethanol with gasoline. Matt R., an official from Tampa, stated that: No, I do not think lack of ethanol is driv ing more oil exploration. The oil industry is doing what they are supposed to do, which is to find, refine, and bring the product to the marketplace. Just as th e sugar and corn industries do what is appropriate for their interests. I don’t be lieve oil people see ethanol as a true competitor. In general, I thi nk they view it as an irritant which is hard to solve. This mention of ethanol as an ‘irritant’ for oil companies is worth noting. Petroleum corporations are now mandated through the RFS to integrat e ethanol into gas supplies leading to higher infrastruc tural and distribution costs. For instance, to prevent corrosiveness, storage tanks must be upgraded with expensive epoxy coatings to contain ethanol properly. Supply-chain logistics for transporting corn to destination plan ts or to coastal markets have been stifled due to lack of an adequate transportation infrastructure. The primary challenges associated with transporti ng ethanol through a pi peline are twofold; challenges resulting from the corrosive na ture of ethanol, and challenges resulting because of how ethanol reacts with other pr oducts and substances within the existing pipelines (Voegele 2009). Therefore, ethanol must be sent by highway or rail tanker, instead of through petroleum pipelines, where the potential of contamination is high (Wald 2005). Ethanol’s solvent characteristics at tract dirt, water, a nd other residues that are a byproduct of petroleum products. Water is also an issue, especially with denatured

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49 ethanol. For instance, if etha nol-gasoline blends and water comingle, the water actually causes ethanol to be released from the blend (Voegele 2009). As a result, it makes sense for Florida to develop feed stocks for ethanol production locally to reduce the impact of transportation costs from Midwes tern production facilities. Forces outside of the domestic market were also mentioned as providing an overbearing driver for more oil exploration. Gl obally, the need for oil is more critical than ethanol, and oil companies have a larg er market to service. The rising economic strength of emerging economies and depleti ng oil reserves globally is putting further pressure on oil companies to extract resour ces faster. Adam L., an environmentalist, argued that oil exploration has always been a global demand issue, which indicates that domestic demand in the US cannot be limite d to ethanol suppleme ntation. Drew K. elaborated this viewpoint further: I don’t believe that is a fair statement [t he relationship between lack of ethanol supplementation and oil exploration]. So fa r, there has not been a shortage of ethanol, but a surplus of et hanol. I do not believe that oil companies should be using lack of adequate ethanol supply fo r more exploitation. The real reason they are doing more is that global oil supply is peaking and in declin e – that’s the real reason. Plus, you have the global dema nd for oil, through such developing countries as China and India. Oil comp anies know that the supplies are peaking and drive the exploitation to capture remaining reserves. The surplus of ethanol mentioned above can be partly traced to flaws in the continental pipeline transportation infrastr ucture which has thwarted effective distribution to coastal markets. However, there also is an overabunda nce of ethanol due to an overestimation of

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50 how much product the oil companies would be willing to purchase. As for global oil demand, the economic decline has hindere d demand for oil across the world. Eight participants however were of th e view that a lack of ethanol fuel supplementation for oil is a factor which is driving further oil exploration. Nicolas S., aspiring ethanol producer, felt that if more ethanol were availa ble, it will definitely drive down the need for oil exploration to an ex tent. Another ethanol producer, Herman K., added: I think lack of an adequate ethanol suppl ementation does have an effect on further oil exploration. So far, we have only repl aced 2-3% of automobile fuel demand in the form of ethanol or biodi esel. It is one of the driv ing forces behind further oil exploration. It should also be noted that th e amount of ethanol integrated into fuel supplies differs and will continue to differ by state. In time, a nd as cellulosic fuels become efficient, the ethanol fuel supplementation for oil cons umption demand is expected to increase dramatically, but the extent will most likely remain uncertain in the near future. A state official, Anthony O., agreed that limited etha nol supplies do affect more oil exploration, but only when combined with other factors: Certainly, it is a driver for more oil e xploration in the US. But, there are other drivers as well. The price of oil was used last summer to promote oil exploration. Energy independence is another significant driver, to the extent that we can rely on our own reserves down the road. Al so, greenhouse gas emissions are another driver, maybe in the reverse sense. The que stion, as stated, most likely yes, it is a driver. But, I don’t think it is a significant driver. P ublic perception is a tough

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51 thing though. Any critic to ethanol could also bring up other technologies, such as plug-in hybrids or electric vehicles to fulfill our petroleum needs. This brings up another significant elemen t in the link between oil exploration and ethanol: public perceptio n. While the interviewed stakeh olders took two diametrically opposed positions, with a large number arguing that oil and ethanol are two separate entities and some arguing that lack of ethanol is driving oil exploration, the extent to which public opinion can be swayed towards one position or another wi ll be a significant determinant of the extent of support pr ovided to increasing ethanol production. In Florida, drilling for oil in the Gulf has b ecome a public concern, so that arguments in favor of sugar ethanol are also structured by public perceptions of the fragility of the Gulf’s environment as well as the viability of ethanol supplementation. This issue is addressed more directly in the next question. Can ethanol production substitute for offshore drilling in the Florida mar ket place and/or do you see a correlation between the two? Eleven participants stated that ethano l production can substitute for offshore drilling or that increased et hanol production could reduce th e need for offshore drilling. Nicolas S., aspiring ethanol producer, agreed that there was an inverse relationship between ethanol production and a need for offsho re drilling in Florida. Presumably, even a small amount of ethanol integration into the national fuel supply will alleviate further demand for gasoline. Rita B., a state official was also of the same opinion. The need to develop cellulosic ethanol feedstocks wa s emphasized by Nick C., an agricultural stakeholder. In his words,

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52 Yes, cellulosic ethanol has the potentia l to substitute. According to a USDA study, Florida can produce between five and eight billion gallons of transportation fuel a year. We can be self-sufficient w ith cellulosic ethanol but the technology is not ready yet. We in Florida consume 8 billion gallons of gasoline annually. All biomass products, when combined, can equate to five and eight billion gallons of fuel. Depends on the ability to commercialize the technology. Alexander W., an E85 gasoline st ation owner, pointed to the ethanol mandate in the U.S. and argued that this reduces th e need for drilling in the Gu lf. However, Richard B., an ethanol representative, pointed out that the oil reserves in the Gulf of Mexico would serve the national fuel market, especially since no gaso line refineries exist currently in Florida. It seems that the ethanol industry in Florida can potentially offset the need for offshore fuel demand solely in State. In contrast to the above viewpoints, fifteen participan ts were of the opinion that no substitution can be derived between etha nol production in Florida and offshore oil drilling. Victor M., an oil industry repres entative, stated th is most clearly: No; offshore drilling in Florida is very broad and there is no way it can substitute. Everything offshore is the ocean and 30% of our oil is domestically produced in the Gulf of Mexico. Now m oving eastwards, it’s difficult to say how much oil we could produce in the eastern Gulf of Mexico as we get closer to Florida. The reality is, and the likelihood is, we are going to need all types of fuel that we can produce domestically to create a positive mix. Offshore energy is a proven technology and it’s very friendly from an environmental standpoint using the best technologies that are out th ere now. I obviously see that as a very important part

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53 of the mix. But I do think the production of biofuels, particularly biofuels in Florida, are part of the mix too. So, I don’t think it is one or the other. No, you cannot pick one energy type and es pecially not in the near term. Diversification was also mentioned by Tere sa S., an oil company representative, We do not see a direct replacement for oil. A diversification is needed that will further the growth of the transportation fuel industry through new growth which will be led by biofuels. The demand fo r energy is going up, but if we can use advanced biofuel technologi es to capture growth, th at will provide lower carbon solutions to meeting that demand. According to Joseph S., petroleum company representative, while a correlation is unlikely, biofuels could poten tially compete commercially somehow with offshore drilling, if a carbon tax regulation evolves ove r time. He thus places the oil-ethanol debate in terms of its evoluti on within a larger time frame. Of the remaining respondents, some ar gued that ethanol pr oduction and offshore drilling are completely separate issues, consis ting of their own realit ies. Rick B., ethanol advocate, stated his viewpoint as follows: No, because the number of people in Flor ida, the growth associated, the energy demand, the growth of energy without subs tantial energy efficiency measures. So no, I don’t think ethanol will ever supplement – with the exception of partially in E10 framework which can potentially capture up to 10% of the market. So, we are going to need diversity. Politically, I don’t know if offshore drilling will ever occur off of Florida. They are tw o separate issues in my mind. This statement is interesting because it dr aws on the political complexities associated

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54 with comparing ethanol production and o ffshore drilling. Behind each position are many interests groups: companies, farmers, citizens, and political actors, and it is difficult for a medium to be reached which can satisfy all. Another interesting viewpoint which c ontradicts the substi tution/correlation argument is that the waters off the coast of Florida contain natural gas reserves, and not petroleum deposits. According to Paul D., a government agency-related stakeholder: No correlation/substitution can be as sumed. The Florida offshore market possesses natural gas. Actuall y, natural gas is the main fossil fuel resource off of Florida. It does not hold very good potentia l in Florida and the Southeast [region] within the fuel and power supply industries. Natural gas brings its own environmental and energy security implications because, like oil, it is a fossil fuel and non renewable. The more controversial aspect concerns environmental threats associated with offshore drilling in the Gulf of Mexico near the Florida coast and stakeholder perspectives wavered on this issue. Eric S., an agricultural stakeholder and avid fisherman, believed that offshore drilling can cause problems with the aquatic ecosystem in Florida. Rick K. of the Environmenta l Defense Fund argued that the environmental concern was also an economic concern b ecause of Florida’s tourism industry which draws millions of visitors every year. Thus, Rick K. believes that the discussion in Florida must be on renewable energy tec hnologies which do not threaten Florida’s tourism industry. The question that arises therefore is about the effectiveness of current oil drilling technology in enabling environment-friendly extraction. Some participants pointed out that et hanol production and offshore drilling are

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55 linked to very different market demands, br inging the discussion back to the economics of oil and ethanol. For instance, the ethanol market is primarily coupled with the transportation fuel market. However, oil has demands related to the commodity in various buyer industry groups. Neil M., an agricultural stakeholder, contended that there will always be a market for oil separate from fuel because 60% of oil is used for plastics and other products. This point is echoed by Maur ice L., who is associated with a prominent ethanol publication: There is not too much connection between the two industries. Offshore drilling produces a crude oil which is refined in to a lot of different products. Oil is fractioned into polymers and other fu el products. Ethanol only drops into passenger vehicles for a 10% supplement. However, diversifying away from mainstream petroleum products will not arise easily. Shifting to the global stage another crucial factor in th e demand for petroleum products is the economic rise of prev iously developing economies, such as China, India, and Brazil. These economies require greater amount s of petroleum to fuel their economy, as more people gain a higher standard of living, and are therefore able to purchase high end goods, such as automobiles. As a result, a diversification of energy products, on the global scale is needed. The conflicting opinions expressed on th e economic viability of Florida’s sugar ethanol provide an insight into the complex ity associated with Florida ethanol fuel predictions at the national level. Since the suga r ethanol industry is still young in terms of cellulosic technology and the econo mics for sucrose ethanol are not attractive at present, projections cannot be made with any degree of certainty. The argument here is that like

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56 any other technology, such as the personal com puter or automobile, ethanol fuel is a technology that will improve over time. Th e technology will continue to improve resulting in enhancement of production poten tial and minimization of environmental impacts. To quote Bob Dineen, President of the Renewable Fuels Association, “While developing new oil reserves is proving more difficult and expensive, the American ethanol industry is rapidly developing new cost-effective technologies that will greatly reduce our nation’s reliance on imported o il” (Dineen 2008). Governmental support for the fledging infrastructure and promising tec hnology is likely to be an important part of the processes through which it becomes comp etitive both in nationa l and international terms.

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57 CHAPTER 5 SUGAR ECONOMIES AND EN VIRONMENTAL ISSUES This chapter focuses on the economic and environmental impacts of sugarcane cultivation in order to delve further into the specific consequences of using sugarcane as a fuel crop. The chapter begins by outlining st akeholder perspectives on whether sugar ethanol is likely to add to the profits of Florida’s farmers a nd the role of sugar subsidies in the competition between utilizing sugar as food versus fuel. It also provides a comparison between corn and sugarcane as biofuel feedstocks. The chapter concludes by considering the impacts of sugarcane cultiv ation on the Everglades More broadly, this chapter addresses whether economic or envi ronmental factors are driving the use of sugarcane as a bi ofuel feedstock. 5.1. Approaching the Florida Sugar Farmer What is the current economic condi tion of Florida’s sugar farmers? Eight participants were of the opinion that the current economic condition of Florida’s sugar farmers is either good or st able. An important issue in this regard, however, is to make the distinction between sugar growers and sugar mill processors. Alexander W., an oil-related st akeholder, asserted that fa rmers are highly dependent on the few large sugar mills that are able to process sugarcane stalks into refined sugar. According to Mike G., who is associated with cellulosic ethanol production, sugar

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58 farmers are doing relatively well currently because they have a market for their product at one of the large sugar mills, and with the looming state acquisition of U.S. Sugar Corporation, demand could increase even further. In contrast, thirteen participants fe lt that the current economic condition of Florida’s sugar farmers is in decline or unsta ble. The biggest issue, according to Florida farmer Kirk R., is that sugar is a whol esale product, and only escalating demand will produce a continued growth in profits. Also, to offset the impact of rising cost of farming inputs, the farmer is pressured to produ ce higher yields thro ugh better agricultural techniques. Drew K. pointed out that the price of sugarcan e has been driven down by the large sugar mills making it difficult for sma ll farmers to maximize profitability for the sugar crop. Sam S., an agricultural stakeholde r, also affirmed the profit limitations associated with sugar production: The economic condition of Florida sugar farm ers is the same as farmers elsewhere in the US. The margins have always been slim. Generally, prices have remained largely flat over the last 30 years with the exception of a few crops. What I paid for fertilizer three years ago was a bout $150/ton and now the same type of fertilizer costs $1000/ton. The fuel situation last year literally put us in a panic. Ethanol lobbyist, Sean D., was of the opinion that the U.S. sugar economy is struggling, which is evident in the deci sion to sell the U.S. Sugar Corporation. Maurice L., who is associated with an ethanol trade magazine, explained the difficulty facing sugar farmers in Florida: The price of sugar is not very good. Labor a nd land prices have been rising faster in Florida. The US has mo re expensive land than Mexi co for example and more

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59 expensive labor. This creates a problem for the economic sustainability of the sugar market. Fourteen participants were unsure about the current economic condition of Florida’s sugar farmers. Matt R., a specialist on international trade issues, assumed that sugar farmers were doing well and based hi s assumption on sugar quota price supports. Neil M., an agricultural stakeholder added a geographic element to the discussion of the current economic condition of Florida’s suga r farmers, contending that the economic condition depended on where sugar farming occurs. In his words, The farmer gets the dollar figure per ton of cane grown on his land. On muck land, he’s getting $42 per ton per acre; on sand, he is getting $36 per ton per acre which equates to a price range between $360-460 per acre for sugarcane. The question becomes how do we then get a gr eater return on the same land? We look at the biogasification process or the enzy matic process. You would leave the cane trash and harvest it resulting in 4-6 ac res of dried cane trash per acre and you would get about $100 for that lot. So, you are increasing that value of what the farmer gets back. The farmers are hip on this because if you only do vegetables, the land is useless for 6 months of the y ear, and could take as long as 15 years to be productive, as is the case with citrus. Alan W., an official with an agricultural ag ency, estimated that if smaller farmers were receiving $50/acre for sugar, their economic condition would be favorable. Profitability thus emerges as the biggest concern for Florida’s sugar farmers, so that sugar ethanol is crucially shaped by the economics of suga r cultivation. Most respondents, irrespective of the content of their response regarding the condition of

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60 Florida’s farmers, were certain that profitabl e alternatives would be welcomed, especially if farmers could gain dual value from sugar crops as both food and fuel. A more direct question regarding possible support for sugar et hanol by farmers will be addressed next. 5.2. Competition between Sugar as Food and Sugar as Fuel To what extent are farmers supportive of sugar-based ethanol? Twenty four participants stated that farmers would embrace sugar-based ethanol, but a number of them also argued that this support would be conditional on the economics of sugar ethanol versus sugar. C ongressional representative Rita S. asserted that every farmer is a business person and will try to maximize retu rn through ethanol or vegetable crops, whichever is financia lly attractive. Another Congressional representative, Todd M., said that while Fl orida’s farmers are interested in ethanol production, they are also con cerned about whether ethanol production could effectively compete with the price of gasoline. Ethanol producer, Nicolas S., added another element to this discussion, stating that farmers woul d be supportive of sugar-b ased ethanol as long as they can get a price that is profitable a nd one that does not conflict with the current sugar-for-food price supports. Thus, for s ugar farmers to embrace sugar-based ethanol, market potential was viewed as being the main drivers. Another point brought up was that sugar farmers would embrace ethanol production if long-term contractual agreements could be built. As Teresa S., an oil industry representative, explained, The prospect of having a long-term contra ct is maybe something that is quite appealing to farmers. They can use this as collateral for justification for their

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61 agricultural production in a constrained cr edit market could be valuable to a farmer. Ethanol producer, Juan C., felt that the onl y way to ensure farmer support for ethanol production would be through long-term contr acts which would guarantee that farmers have a market for their sugar product year af ter year. Thus, market fluctuations in the price of sugarcane, ethanol, a nd especially oil become impo rtant for Florida farmers who have an interest in ethanol production, and farmers would require guaranteed profitability if their crops were to be a llocated for sugar-based ethanol production instead of sugar food production. The shift from sucrose ethanol to sugar bagasse ethanol is likely to be another important factor in building farmer support for a shift to biofuels. Richard C. and Eric P., who are involved in cellulosic ethanol produc tion and research resp ectively, were of the opinion that the agricultural sector is very interested in bagasse/biomass ethanol because it will provide income, increase the value of agriculture in Florida, and minimize ethanol’s impact on food prices. Since bagasse which is the fibrous by-product of sugar food production, will be processed for fuel, a nd because cane juice can continue to be utilized for food production, the farmers woul d have two markets for their sugar crop. Juan C., a cellulosic company representative affirmed that Sugarcane growers in Florida would be very supportive of ethanol production. Currently, farmers can only sell their produc t to two or three sugar mill producers. The only way to make ethanol will be w ith the efforts of the current industry players; Florida Crystals, U.S. Sugar Co rporation, and the Florida Sugar Growers Cooperative. As a result, the current pr oducer of sucrose sugarcane will now be

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62 exposed to two commod ities, instead of one. Another issue that needs to be kept in mind however is that profits from sugar ethanol may not percolate down to farmers, as has been alleged in the case of corn. In 2005, NCGA (National Corn Growers Association) pr esident, Leon Corzine, was of the opinion that, “Those (farmers) who sell corn to an etha nol plant gain an addi tional dime or more per bushel, while those that own the ethanol plant gain a much greater opportunity for return” (DiGiuseppe 2005). The extent to whic h sugar farmers move into actual control of ethanol processing plants c ould thus also determine the extent to which all farmers benefit from sugar ethanol. Not surprisingly, seven out of eight agri cultural participants expressed a keen interest in ethanol producti on, stating that farmers are al ways looking for alternative markets to increase profitability. Similarly, ei ght out of ten ethanol participants agreed that there is interest in et hanol production amongst farmers. The extent to which farmer and ethanol interest s come together will depend on whether land can be devoted to sugarcane cultivation, and the next section delves further into this issue. What factors have to be in place for more sugarcane acre age to be used for ethanol production in Florida? The recurring theme in discussions of devoting more sugarcane acreage towards ethanol production was that sugar-based ethanol was unattr active in terms of economic returns compared to sugar as food. As Ann. M ., an agricultural stakeh older put it, if the price of sugar per pound were pennies, the cost of production for sugar-based ethanol

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63 would be lower, and sugar ethanol would become attractive for farmers. In a similar vein, Bill C., an oil-related stakeholder argued that what was required was the removal of price supports for sugar, which would then ma ke allocating sugar to ethanol more economically feasible. Land availability was another important factor that was widely mentioned. Devon E., specialist in trade issues, was of the opinion that the mo st significant challenge facing ethanol production was competition from urban sprawl, which could make land values too high to justify continued sugarcane cultiv ation. Researcher Lance Y. also mentioned this issue: as some farmers are finding it attractive to sell off existing farm land to development for quick profits, devoting land to sugarcane cultivation becomes a less favored option. Farmer Edward D. explained a possible solution to this threat from escalating land values, New tax incentives for folks to preserve their land for agricultural production should be created. You have to make it easier for folks. If farmland is being utilized, it has to be asse ssed as farmland, and not assessed as development land, because that increases taxes. For example, some type of government incentive for converting citrus farms into sugar farms should be invented because otherwise, land conversion from citrus to sugar w ould be expensive. However, government involvement is never a good thing. Eric P. added to the land use discus sion emphasizing that marginalized or underutilized land could be purs ued before any acre of food land is touched for ethanol production, even as existing sugarcane acreage co uld also be more intensively cultivated. However, Eric S., an agricultural stakeholder, took a different positi on arguing that more

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64 land, beyond current sugar acreage, would have to become convert ed from citrus or cattle production into sugar production fo r ethanol to become a feas ible option. However, it should also be noted that for farmers to devote more acreage to ethanol production, market demand would have to increase subs tantially and continuously, thereby increasing profits associated with such commitments. The role of governmental policies in encouraging sugarcan e acreage was also emphasized. According to Dave M., an oil-relate d stakeholder, a crucial factor for ethanol production on current sugar acreage would be the political will associated with such utilization of sugar. Sugar growers in Fl orida and associated advocacy groups would most likely have to undertake extensive l obbying efforts to persuade lawmakers to support sugar ethanol, as has been the case with Midwestern corn growers. Archer Daniels Midland spent nearly three decades pus hing relentlessly for the use of ethanol in gasoline, lobbying Congress and the White House, while arousing farmer interest (Barrionevo 2006). Evidently, th e government has to similarly support sugar ethanol initiatives for them to succeed. Ethanol producer, Cameron S. was of the opinion that ethanol must be subsidized to the point where it is financially feasible to plant additional sugarcane. However, as Ted M. pointed out, planting additional sugar cane would probably be more expensive because this would take place on sandy soil which requires more inputs. Nicolas S., ethanol producer, also supported governmen t incentives for sugar ethanol production, especially for farmers to take the risk in th e initial years. Florida farmer, Kirk R., also supported the need for government support: I think the main [factor for increasing sugar cane acreage] is government policy.

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65 The Brazil government is the model fo r any type of ethanol production from agricultural products. Th e public should be aware that it is better to grow crops for fuel domestically than importing it. The Farm Bill is the ideal place to encourage more ethanol from farm products. To elaborate, every few years the Farm Bill is amended with new provisions for permanent law which could authorize the promo tion and further requirement of ethanol in the U.S. Thus the 2008 proposed Farm Bill extension encouraged the government to buy surplus sugar and sell it to ethanol producers fo r use in a mixture with corn, and also cut a per-gallon ethanol tax credit for refiners from $0.51 to $0.45 (Bevill 2008). However, with the potential in troduction of imported sugar for ethanol production through the Farm Bill, sugar farmers in Florida might be more inclined to continue sugar food operations. A final factor that was mentioned as important by a number of respondents was the environmental implications of increasi ng sugarcane acreage. Environmentalist Rick B. argued for a serious discussion regardi ng land use planning, because it impacts wildlife habitat, water use, and restoration. Many species are endangered in Florida, such as the gopher tortoise, which could stymie et hanol development. Farmers will have to navigate and comply with the Endangered Sp ecies Act (ESA) if more acreage in Florida is allocated for ethanol produc tion, or risk heavy fines (Chin 2008). For example, some corn ethanol producers in the Midwest have f aced resistance in th e extension of their agricultural lands due to the presence of the sensitive Seneca White Tail Deer. Moreover, ethanol production in the Ev erglades Agricultur al Area (EAA) could be counter-productive to the state’s current goals, especially given the proposed acquisition of U.S. Sugar Cor poration mentioned earlier. Rich ard C., a biofuels producer,

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66 was of the opinion that environmentalists wi ll most likely become involved and make things more difficult for ethanol produc tion on sugarcane acreage. Supporting this previous position, state energy official Ant hony O., pointed out th at potential ethanol production on current sugarcane acreage mu st demonstrate sustainability without impacting other natural resources. Overall, economic factors such as price supports for sugar and competing land uses require a re gulatory environment within which sugar ethanol is supported by state policymakers and not opposed by environmentalists. How would sugar-based ethanol affect the commodity pr ice of sugar potentially? To begin with, twenty-seven participants expressed uncertainty regarding whether sugar-based ethanol would affect the commodity price of sugar. While researcher Lance Y. and ethanol producer Cameron S. argued that a turn towards sugar ethanol would decrease sugar prices since sugar supply is li kely to increase in those circumstances, it is difficult to verify if this is the actual rela tionship that would unfold between ethanol and sugar. Moreover, sugar commodity prices wi ll also be shaped by whether sugarcane is subjected to sucrose or cellulosic processes. Daniel B., agricultural economist, depicted the confusion associated with estimati ng how ethanol production might affect the commodity price of sugar: It depends if it is margin al production or bites into existing sugar economy I don’t track sugar markets. If it encroach es on other uses, the price will go up. With corn, we saw the price go up by incr easing speculative activity. Prices went up for beef, etc, when ethanol took off. Any time a reduction of an available resource occurs by creating an alterna tive market, you are going to drive up the

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67 price. How much of that is sugar or is there a surplus of sugar? Surplus kept corn prices relatively flat. The markets were supply driven and sugar will probably entail the same outcome. The determining factor here might also be whether sucrose or the bagasse waste by-product is utilized for sugar ethanol pr oduction. Thus, if sucrose is utilized for ethanol, the price of sugar would increase. After admitting that domestic price estimation is difficult, bio-energy researcher, Bob G., st ated that when Brazil started mass-producing ethanol from sucrose, the world price of sugar increased. Initially, Brazil provided subsidies to its sugar growers for ethanol, but currently does not because the production pipeline has become extremely effective. According to ethanol producer, Nicholas S., comparing the current market parameters betw een the U.S. and Brazil is often misleading because: As long as we have subsidies for sugar, it would be very difficult for ethanol from sugarcane to take off. I think it wouldn’t even move. Now, everyone likes to talk about Brazil, that they don’ t have any subsidies and it’s a market driven process. And so, all their mills are set up to grow sugarcane … if the ethanol market is better, they make more ethanol and if th e sugar market is better they make more sugar. I think right now with the subsidies in place, that is a big detriment for sugar ethanol production. However, while Brazilian sugar growers we re heavily subsidized by the government initially, over time the incentives were removed, especially when oil prices plummeted in the late 1980s. Currently, no government subsid ies are extended to sugar growers from the Brazilian government. To increase sugar ethanol production, the U.S. could therefore

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68 borrow from procedures for coordinating s upply and demand as pr acticed in Brazil. However, the number of people and vehicles in Brazil are significantly less than in the U.S., making replication difficult. If sucrose ethanol production can occur in the U.S., importations of sugar might be the only feasible solution to activate this industry. At the very least, th e USDA would likely have to adjust current prices and th e amount allocations of sugar used for food versus fuel. Since the USDA controls the pri ce of U.S. sugar, it would be difficult to predict what could happen if more ethanol production from sugarcane were to occur. According to Nick C., an agricultural stakeholder, Sugar is the only commodity that hasn’t spiked amongst commodities over the past two years. It has been relatively stable at $0.18/lb. If you use sugar for ethanol, [the price] probabl y will increase. There shoul d not be an effect for bagasse/cellulosic biomass. Cellulosic non-food parts of sugarcane, such as bagasse, do not affect the price of sugar because sugar waste materials are not publical ly traded commodities, and some of the byproduct is currently used for plant electricity generation. Congressi onal representative Todd M. also pointed out that the state of Fl orida has a lot of sugarcane byproduct, which is currently not being used for ethanol. Furt hermore, environmentalist Rick K. was of the opinion that the price of sugar should not be affected because only the waste products of sugar will be processed. Thus, to avoid pr ice and food-related controversy, bagasse waste by-products should be utilized to the fullest ex tent possible for ethanol production before sucrose is widely promoted. Eight participants stated unequivocally that sugar-based ethanol production would

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69 affect the price of the sugar commodity. If sucrose ethanol producti on ensued in Florida, the price of U.S. sugar would most likely increase. Over time, more s ugar producers would potentially switch to ethanol production from sugar food producti on because of the hi gh profitability of ethanol compared to food. As more etha nol producers enter the marketplace, the price of ethanol should gra dually drop. The price of s ugar would be dictated by how much sugar is available for etha nol production relative to the amount of ethanol utilized in the production process. If the overall amount of sugar did not increase in the U.S., then the price of the commodity would increase, and vice versa. There is also the threat of speculation, mainly conducted by major Wall Street banks, hedge funds, and private individuals who buy and sell futures contracts on commodities for no other reason than to make substant ial financial gain (Rogers 2004). Also, the media could have an effect on commodity pr ices through the highlighting of particular issues. For instance, farmer Edward D. said that if the media denot ed citrus as a cancerfighting agent, then citrus would become more valuable. Biofuel prices can also be impacted by natural disasters, such as hurricanes or floods. In 2008, excessive precipitation brought about record flooding in the Midwestern Corn Belt. As a result, the price of etha nol spiked 19% in one month (Mouawad 2008). Partial crop failures reduce suppl y, thereby also increasing pr ices, at least temporarily. For agricultural products, s upplies might stabilize until the next harvest cycle, which could take up to a year, depending on cr op affected. Hurricanes in 2004 disrupted oil production in the Gulf of Mexico. In compar ison, biofuel production could be suspended

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70 not only at the production facili ties, but also on agricultural fi elds. But distributed fuel production from ethanol facilities dispersed across the U.S. could mitigate economic price impacts (Bryan 2008). Three participants stated that no price effect will occur on sugar due to ethanol production. Teresa S., an oil representative, stated that sucrose ethanol will not be produced on a large level, since any sugar-bas ed ethanol development will be devoted to cellulosic processes which are more advant ageous. Further, Neil M., an agricultural stakeholder, asserted that sugar beets and imports would fill the void before the commodity price of sugar fluctuates. Specificall y, the sugar beet industry in the Northern U.S. would increase production or Mexico w ould provide imports to fill the gap (Neil M.). Finally, cellulosic etha nol representative Mike G. explained why the commodity price of sugar would not be affect ed from sucrose ethanol production: I don’t see sugar-based (sucrose) ethanol production in this country occurring. The sugarcane we make in this country is not economical for sugar producers to pursue [ethanol production]. Brazil is a huge player in the sugar ethanol market. I do not see Florida using our sugar to make ethanol. And I do not see an impact of current sugar farmers taking any of their sugarcane out of food production, to put a dedicated energy crop in. If you took current sugar and made ethanol, that would upset demand by the sugar mills [for food production]. How would the demand for sugar be affected if more ethanol companies are established in Florida? Eighteen participants stated that, to so me extent, the demand of sugar would be

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71 affected if more sugar-base d ethanol production companies we re activated in Florida. Transportation official, Oliver W., anticipated that the price of sugar would go up through increased demand for sugar-based ethanol a nd food. Oil-related re spondent, Terence F., was also of the opinion that if demand incr eased for sugar, prices would probably follow the increase in demand, as long as the producti on dynamics of sugar-based ethanol were economically viable. The need for ethanol feedstocks however would be affected by the current large sugar refineries which utilize most of the sugar in Florida for food production. According to Sam S., an agricultural st akeholder, aspiring sugar et hanol companies in Florida therefore might have to acquire their feed stock elsewhere. In his words, It would depend on access to offshore sugar. Sugar in Florida is feeding refineries. U.S. Sugar Corporation and Flor ida Crystals are the refineries. It would increase demand, but I don’t see where ne w companies would survive you just cannot make ethanol with $0.22/lb sugar. The gasoline price has to be steady at the pump. Sugar would have to be a whole lot lower than $0.22/lb. Establishing a sucrose et hanol production infrastructu re in Florida would be challenging given the significance of the f ood versus fuel debate. When all sugar produced in the U.S. is allocated for f ood, obtaining sucrose feed stock for ethanol production would be difficult, if not impossi ble. Drew K. outlined this challenge associated with competition for access to sugarcane: The key is if you built sugar-based ethanol in Florida, that feed stock must not be linked to food use. I don’t think you w ill find anyone building sugarcane to ethanol production facilities on a large-scale in Florid a. I think companies would

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72 focus on delinking ethanol products from f ood use. Any intelligent sugar ethanol producer would have a business not linked to food use and no affect on the price of sugar. That’s the objective. If you ar e linked to food use, the commodity price fluctuates, and you’re no different than corn ethanol. Fifteen participants argued that the de mand for sugar would not be affected if more sugar-based ethanol companies were esta blished in Florida. USDA official Edward M. stated that it would take a really long time for ethanol producti on to affect the demand for sugar, because the industry remains imma ture. Ethanol producer Herman K. felt that the price of sugar would not be affected because it is determined by subsidies. Interestingly, biofuels producer Richard C. contended that no impact would occur because ethanol companies in general will not commit to production operations without having a pre-established long-term feed stock supply in place, and this inventory aspect of ethanol production would be planned months in advance. Devon E., a trade specialist, asserted that if all other factors remain stable, there should not be an effect on the price of suga r because pricing is driven by a number of factors. Further, tariffs could have an effect on price in the future. Maurice L., associated with an ethanol publication, mentioned the co mplexity associated with sugar commodity price movements; thus, it would be difficult fo r ethanol companies to have an effect on the sugar price. In Maurice L’s words, I don’t think there would be a change in th e price of sugar. However, there would be an opportunity for a price change in ethanol. That would create a spread between the generally historic low price of sugar and perhaps a higher price of fuel. I think there is a profit incentive fo r sugar growers to make money off of

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73 ethanol production. So, you might see the spread increase, but I do not expect a change in the price of sugar, that’s driven by larger international factors, especially since NAFTA quotas have been eliminated. 5.3. Sugar Subsidies At what level could sugar-based ethanol pr oduction reduce the need for sugar subsidies? Do you believe that a sugar s ubsidy should be in place? Only five participants were of the op inion that sugar-based ethanol production would reduce the need for sugar subsides. Edwa rd D., a Florida farmer, stated that since sugar ethanol production could increase prof itability, this would reduce the need for subsidies or price supports. In his words, “It could potentially e liminate the need for subsidies because the pur pose of subsidies is to offset the losses that the farmer incurs every year for growing food.” Only one participant stated that price supports/subsidies would continue to be required despite sugar ethanol production. Eric P., an ethanol researcher, mentioned that any reduction in need for subsidies due to gr owth of sugar-based ethanol in Florida was highly unlikely. First of all, there is no Florida market. The market for sugar is global. You can look at it on a nation-wide basis, but ther e is no local market in the sense that anything that differs from what’s happening in neighbori ng states or in another state in the country. It is a very complic ated issue. There is the Farm Bill that addresses issues related to the production and pricing of a whole range of agricultural products. It is si mply an issue that is too complicated to address, to

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74 isolate the sugar component, and be ab le to address it in this discussion. Ethanol producer, Drew K. explained wh at parameters could be necessary for subsidy reductions to occur: I think you are going to need to see long-term, high-sust ained ethanol prices, in order for sugar-based ethanol and mainly su garcane to ethanol prices to stimulate development of sugarcane ethanol by the sugar mills. Once that happens, and if that happens, then you could see a phase of sugar milling and sugar production or elimination of the sugar subsidies, becau se now those sugar mills can be highly profitable making ethanol … Now those s ugar companies can be profitable, but low ethanol prices aroun d $1.60/gallon are not good The Florida price of ethanol is now $0.25 over the Chicago Board of Trad e price, due to transportation. The market price of ethanol is about $1.85 right now. That’s way too low for any sugar mill to convert their sugar proce ss over to ethanol. They will make way more money making sugar. The price of ethanol has to be much higher, I am talking north of $3.00/gallon on a guaranteed sustained level for the sugar mills to get into ethanol, and that could help elim inate the subsides. Alternatively, if the sugar mills could be successful converting their bagasse into ethanol, that creates a new revenue stream which becomes much more profitable. And that profit level, could allow for sugar subsidies to be phased out. Steven O., ethanol lobbyist, acknowledged that he was not aware at what price point sugar subsidies would be no longer necessary, bu t added that subsidies can be critical in some cases, such as for minimizing the pr ice of food. Mike G ., cellulosic ethanol producer, stated that he does not anticipate that the big sugar companies will become

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75 large sugar ethanol production actors resulting in no price reduction. In response to whether a sugar subsidy s hould be in place, si x participants, most of whom hailed from the agricu ltural sector, stated that no su bsidy is currently in place which benefits the grower. Besides price s upports set by the USDA, which keep the price per pound of sugar higher relative to internat ional prices, only low-interest loans are offered to sugar mills annually so that farmers can be paid. Once all the sugar is milled, and profits are gathered, the large sugar mills pay back the federal government. Ann M., who is an agricultural corporat ion stakeholder, noted that, There is no subsidy. We borrow money from the community credit organization at $0.18/lb plus interest. We put up sugar as collateral and then use that revenue for sugar production throughout the growing season to repay loans once we make the sugar. Then there is a balancing m echanism in the market where you have a projected consumption of 10 million tons pe r year of sugar. Also, 2.5 million tons are imported. That keeps prices flat. Pri ces have not really been raised since 1980. There is no need for the s ubsidy and we don’t want one. Evidently, the sugar industry is vital to the interests of U.S. food production, because all domestic sugar suppl y is utilized for food producti on. Nick C., an agricultural stakeholder, mentioned that the U.S. is th e only sugar producing country in the world which imports sugar. Removing the price s upports, would thus open U.S. sugar to competition from lower world prices, and effectively put U.S. sugar farmers out of business. In a similar vein, Neil M., also an agricultural stakeholder stated that if price supports are eliminated and U.S. sugar prices are allowed to float on the world market, then the U.S. sugar farmer will be driven out.

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76 However, when asked about their opinions on subsidies, whether in general, or specifically in terms of sugar, ten participants indicated that subsidies should be removed. For instance, biodiesel producer Gina M. stat ed that sugar subsidies are nothing more than a boondoggle for the sugar industry. Oil re spondent Bill C. cont ended that all price protections and tariffs surr ounding sugar in the U.S. should be removed which would result in more competition globally. It should be noted though that if sugar were to lose U.S. price protections, the result would not only destroy the sugar i ndustry in the US, but also decrease the glob al supply of sugar. 5.4. Comparing Sugar and Corn According to you, what are the most striki ng differences between sugar-based ethanol and corn-based ethanol? Do you feel that one is more advantageous than the other? Is sugar the more worthy feed stock in term s of water, soil, and air quality impacts than other general feed stocks available? Thirty-eight participants stated that s ugar was more advantageous than corn as a biofuel feedstock. State energy official Ant hony O. preferred sugar because it is more energy efficient due to being able to be c onverted directly into ethanol; whereas corn must first convert starch into sugar before fermentation can occur, which is an extra processing step. As a result, the cost of pr oduction for corn ethanol is higher than for sucrose ethanol. Further, corn requires natura l gas to be made available for electricity production. In contrast, Neil M ., an agricultural stakeholde r, pointed out that sugar ethanol uses its own bagasse for boiler elect ricity generation, whic h saves on additional fuel inputs for production. According to cellulo sic ethanol representative, Juan C., sugar

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77 ethanol is eight times more efficient than corn, so that for every BTU inputted through the sugar ethanol process, 8 BTUs of energy are produced, while Sam S., another agricultural stakeholder, noted that corn only provides 1.3 BTUs of energy output for every BTU that is inputted. Differences in water use between corn a nd sugar ethanol were also pointed out. Drew C. compared the water usage of the two crops in his response: Corn requires a lot of water; very intens ive. Each gallon of corn ethanol produced uses about 3 gallons of water. However, new corn ethanol plants are becoming more efficient where only 1.5 gallons of water are required. Sugar-based ethanol is a net water producer. Those plants do not require drilling wells and water. Water is in the form of juice in stalks, and can be extracted and purified and then sent back to the fi elds for irrigation. The impact of ethanol production on food prices is also significant and, as portrayed in the media, the most controve rsial issue associated with corn ethanol production in recent years. Congr essional representative Todd M. sees the food versus fuel issue to be of utmost importance and thinks that ethanol from sugar-cellulosic processes is advantageous because it util izes an existing byproduct of sugar cane production. Farmer Edward D. added that pe ople are starving throughout the world and corn should not be utilized for fuel consump tion purposes. Also, Herman K. asserted that corn is not attractive because its use for etha nol affects animal feed prices, which is the largest usage of corn in the U.S. market. Si nce corn is more of a staple food crop than sugar, conflict has been associated with its usage. In contrast, sugar is perceived less threatening because it is a sweetener and flavoring component for food (Kevin N.;

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78 government official). Thirteen participants stated reasons why corn is also an advantageous feedstock for ethanol production in the U.S., mostly becau se corn is suitable for U.S. agricultural cultivation on a broader scale given its ad justment to cooler Northern climates. According to Joseph M., corn is advantageous because it can be grown on more acreage nationwide, which equates to more commercial value. Environmentalist Rick B. stated that he anticipates that the waste material from corn will become a viable feed stock for cellulosic ethanol in the near future, whic h is another reason why the commercialization of cellulosic technologies will become cr ucial for national energy security. While corn ethanol has been chastised for its distribution limitations to coastal markets relating to pipeline distribution obs tacles, the product does have advantages because of its scale. According to ethanol producer, Nicholas S., corn is better for trading, shipping, and processing year round, comp ared to the fact th at sugar is only processed for 4-6 months of the year. Ethanol is shipped from the Midwest to coastal markets, via railroads and commercial shippi ng. In contrast, it does not make sense to produce sugar ethanol in Florida and ship to Midwest markets (Maurice L., associated with an ethanol publication). It was also mentioned that there is simply not enough sugarcane ethanol potential to compete with co rn ethanol, outside of the cellulosic variety potentially. Bill C., an oil-related respondent, also pointed out that the US government is protecting corn ethanol constituents. Eleven participants stated that both corn and sugar are advantageous feed stocks generally. The most interesting explanation was provided by Daniel B., an agricultural economist at a large U.S. fertil izer corporation, who discussed the differences in fertilizer

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79 application rates betw een corn and sugar: Here is the breakdown on Brazilian applic ation rates as provided to me by ANDA [Brazil’s government sta tistics agency]. These rate s take into account new hectares of sugarcane. In the first year of planting sugar, they typically load the soil with P, K, and some S as the soils tend to be deficient in these nutrients. Brazilian sugarcane: 74 Kg/Ha nitr ogen, 26 Kg/Ha phosphate, and 103 Kg/Ha potash. Brazilian corn: 58 Kg/Ha n itrogen, 46 Kg/Ha phosphate, and 57 Kg/Ha potash. In the U.S., for sugarcane you are looking at 68 Kg/Ha nitrogen, 8-15 Kg/Ha phosphate, and 56-94 Kg/Ha potash. If you compare that to corn in the US, you’re looking at 149 Kg/Ha nitrogen, 40 Kg/Ha phosphate, and about 53 Kg/Ha potash. You’re looking at roughly equivale nt for nitrogen and phosphates, and for potash is significantly lower. So, fer tilizer rates between corn and sugar are roughly equivalent, with the exception of potash. According to Daniel B., theref ore, it would seem that sugarcane in the U.S. is the less fertilizer intensive crop compared to corn, but when sugarcane cultivation in the U.S. is compared to its counterpart in Brazil, the diffe rence is in terms of lower applications of fertilizers in the U.S. Viewed from the pe rspective of variations in soil types and applications of chemicals, corn and suga rcane thus show dive rgent results when compared to one another and when compared to their counterparts in Brazil, so that a simple analysis of which kind of cultivati on is more environment-friendly cannot be quickly made. Sixteen participants were of the opini on that sugar was not a worthy feedstock. Many respondents in this category felt that ot her growing feed stocks, such as grasses,

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80 hold more potential for biofuel production. B ob G., an ethanol rese archer, pointed out that the original ecosystem in Florida wa s actually saw grass which held enormous benefits regarding flooding and drought. Thus producing ethanol from local feed stocks known to an area will not disrup t the natural enviro nment, such as non-native, invasive species would tend to do. Mike E., a cellulo sic ethanol company representative, held the same view: Feed stocks such as energy cane, gra sses, and high biomass forage crops are much better because they are drought resistant and use less fertilizer/inputs. The dedicated en ergy crops are much better for the environment than corn. Grasses and sugar cane derivatives, such as energy cane or sweet sorghum, thus possess many benefits: they do not compete with food, are not publicly traded, and require fewer inputs than current etha nol production processes. Sweet sorghum was praised by four particip ants as a more attractive ethanol feed stock than sucrose from sugarcane. Sweet sorghum has a sugar content similar to sugarcane, and was traditionally used as a sweetener for food. Steven O., ethanol lobbyist, viewed sweet sorghum as a great alternative over su garcane because it requires fewer inputs and the yields are generally highe r than most ethanol feed stocks. Ethanol producer, Nicolas S., also considered sweet sorg hum as the more efficient feed stock than sugar because it uses less water and can grow in poor soils lacking nutrients, so that fertilizer costs drop significantly for the sweet sorghum producer. Opinions thus ranged from support for s ugarcane as feedstock (due to problems with corn-based ethanol), support for both sugarcane and corn, and support for

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81 alternatives to both sugarcane a nd corn. It thus seems that a ll forms of ethanol feedstocks potentially have costs and bene fits associated with them. In the process, the notion that sugarcane, since it is not a staple food cr op, is more advantageous does not emerge from the respondents. 5.5. Environmental Issues What is the most threatening environment impact for Florida potentially, from sugarbased ethanol production? Nutrient runoff refers to excess levels of fertilizer components; nitrogen, phosphorus, and carbon dioxide which drain off farms into local waterways. Once there, excess nutrient levels build up, and could cause such environmental threats as algae blooms, which consume large amounts of oxyge n in water, and as a result, kill local aquatic life. Paul D., an environmental offici al, stated that fertilizer runoff stemming from ethanol production and running into canals and aquifers is a key concern. Ethanol producer, Ted H. spoke about nutrient runoff from fertilizers: I would say [environmental impact would o ccur] in the form of more intensive agriculture to grow crops, to produce th e sugar-based feed stocks; particularly sugarcane. Down in the EAA, fertili zers have had an adverse affect on the ecosystem, which are probably the biggest negative impact. However, environmentalist Adam L. conte nded that the level of phosphate fertilizer required for sugar ethanol pr oduction is less than what is needed for sugar food production. Further, ethanol produc er Richard C. added that energy cane, a derivative of sugar cane, would use less ferti lizer than traditional sugarcane. Drew K. emphasized that

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82 any ethanol producer operati ng near the EAA would operate in an environmentally responsible manner: If you’re going to produce ethanol from suga r in the EAA, then clearly the issues associated with pesticide/fertilizer runo ff could worsen, if the producer does not design a zero-waste effluent so that th ey are not discharging ethanol into the environment. These facilities need not release effluent. Another environmental threat mentione d by participants was the release of vinasse or silage which is a sugarcane byproduct, cons isting of high levels of organic matter, potassium, calcium, and moderate amounts of nitrogen and phosphorus (Rodriguez 2000). As a result nutrient runo ff occurs, which again has been proven detrimental to aquatic ecosystems. Sam S., an agricultural stakehol der, noted the risks associated with vinasse: The silage is what is left over after fe rmentation. The Florida water tables are too high and the soil is not deep enough. In Brazi l and Australia, vinasse is used as a fertilizer. There is too much material produced and biological oxygen demand is too high to support. Unlike Brazil, Florida must abide by strict federal water quality standards which prevent the release of vinasse into the environment. According to Ted M., representative of a biofuel plant company, vinasse increases the production price of su crose ethanol because waste water must be cleaned up by law. It is worth noting that vinasse is only a threat to the environment in the traditional method of sucrose ethanol production. Neil M., an agricultural company representative, pointed out that through the biogasification method of cellulosic ethanol production, no

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83 additional amounts of vinasse will be discharged into the local environment. Only in the sugar mill process will vinasse become an issue. Also, bio-energy researcher, Bob G., added that promising technologies, such as anaerobic digestion exists, which will drastically reduce the amount of vinasse. As for land-use effects, participants not ed a variety of potential environmental impacts on surrounding areas. Academic Lance Y. noted the conversion of land to more farming zones presents an environmental thre at, especially if increasing farm land around the EAA conflicts with the State’s Compre hensive Everglades Restoration Project (CERP) objectives of restoring the natural flow of water to the Everglades from Lake Okeechobee. Paul L., an environmental official argued that the displacement of land from one crop to another could cause soil erosion issues. Erosi on has been a looming problem in the EAA for years and results from oxidati on, which has steadily decreased the levels of soil in the region over time. Also, Herm an K. stated that sugar mono-cropping, the process of growing the same crop year af ter year, could become an environmental burden. Air quality issues are also often asso ciated with sugar cane cultivation. Oil representative, Joseph M., mentioned that the burning of sugar cane fields during the preharvest period to facilitate cutting of stalks by manual la borers produces hazardous air quality issues in Brazil. Intentional burns are moderately undertaken by Florida’s sugar mills before harvesting. Manual laborers how ever are not employed, and stalk separation is conducted automatically by large tractor-lik e mechanical harvesters. As a result, air contaminants do not affect human laborers di rectly. Trade specialist Matt R. indicated that possible air quality issues, in the form of greenhouse gas emissions, could arise due

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84 to rising ethanol production in Florida. However, air quality compliance measures are of utmost importance, and strict regulations exist which ethanol producers must abide by. In 2002, the EPA implemented air quality rest rictions against et hanol producers in Minnesota which other producers across the co untry noted. To demonstrate compliance, ethanol producers are usually required to conduct emissions testing, monitor production or emission rates, maintain records and submit reports to the permitting agency at hand (McIntyre 2008). Invasive species in a foreign ecosystem present an environmental threat if energy plant species outside of Florid a are grown within the state. Environmentalist Adam L. said that some non-native species could ha ve dangerous ecosystem implications. For instance, farmer Edward D. stated that th ere were some concerns by environmentalists that jatropha, used for biodiesel production, is non-native and invasive, and thus may impact the environment detrimentally. There is also the threat of genetically modified crops, which can present an environmental contamination issue if safeguards are not initiated when utilizing foreign genes fo r crop production. With genetic engineering, scientists can introdu ce a foreign vector through transf ection which would accelerate crop production, leading to higher crop yields per acre. The enhanced yields available from the current generation of genetically modified (G M) crops such as corn can help farmers meet the growing feedstock demand for bi ofuels while still producing sufficient quantities of food and animal feed (Evans 2008). Proven GM techniques are applied to cellulosic feed stocks to enhance ethanol processes and can be used for furthering sugarcane output in Florida. But such technologies are often opposed by environmentalists due to inadequate knowledge of their consequences.

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85 Four participants stated that sugar et hanol production would not present any type of environmental threat in Fl orida, because they felt that the technology had progressed to a point where no impacts were created. Eric P., an academic, noted the high levels of environmental consciousness associated w ith biofuels technology in this way: All technologies have to be done in an environmental way. We can learn from Brazil. We are practicing high-rates of r ecycling of water, we don’t let gases into the atmosphere, and we are producing bi ogas from our waste streams which is preventing methane from impacting the e nvironment by turning it into additional renewable fuel. I believe that ethanol is a great environmentally friendly process. The previous statement is crucial for unde rstanding the social responsibility which farmers and ethanol producers espouse wh en conducting daily operations. Abiding by federal and state environmental statutes is required by law, and violation represents a direct blow to the economic well-being of agricultural and ethanol producing entities. Sanctions would come in the form of mone tary fees required by courts, or through revenue declines which could be substantial, as the public tends to avoid entities who participate in threatening environmental activities. Evidently, the environmental efficiency of ethanol productio n processes have been evolving. According to biofuels speci alist, Teresa S., there are a lot of environmental benefits surrounding 2nd generation ethanol crops, su ch as lower fertilizer inputs. Further, congressional representative Todd M. was under the impression that there are no environmental threats because sugar cellulosic ethanol production will incorporate the waste product of sugar food production. Cellu losic ethanol producer Mike E. provides a unique perspective on the environmen tal benefits of ethanol production:

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86 I am not even sure there is even one e nvironmental threat. If I look at where the ethanol industry can go in this state, we could convert a lot of underutilized pasture land to crop production. We have great regulations on the amount of phosphates you can add to the land. As you build out these massive farms, we have put in all kinds of storm water control. In the area of Lake Okeechobee, as these areas get built out, we are adding retention ponds, help ing to modify … I think we are actually helping the environment. How would increasing sugar acreage affect the Everglades ecosystem? Fifteen participants indicated that if s ugar acreage were to increase, the effects on the Everglades ecosystem would be negativ e. The most commonly cited detrimental effect dealt with water flow th reats, such as runoff. Matt R ., a trade specialist, contended that overall the Everglades ecosystem woul d decline because of runoff, unless better water control was initiated, but this would probably make s ugar production less efficient. Richard C., a biofuels producer, stated that any kind of cultivation in the Okeechobee area will have some effect on the Everglad es, and sugarcane runoff has actually been proven to leach down into the Everglades. Paul D., a government official, noted the environmental difficulties asso ciated with sugar farming: Through surface water and fertilizer runoff, because it is a very fragile ecosystem. Diversion of water can cause problems w ith the ecosystem, additional irrigation water for sugarcane, and land conversion fr om whatever land use is present near the Everglades can affect recharge rates. According to Alexander W., an ethanol-gaso line wholesaler, the th reat of increasing

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87 sugarcane acreage is the biggest problem, and if it were in fact expanded, the watershed will be compromised. Further, agricultural official, Edward D., emphasized that if farming intensity and spread is increased in South Florida, the Everglades will definitely be affected. Florida farmer, Edward, D., pr ovided a wider perspective on sugar farming and its environmental impacts: Sugar has been produced for decades along the Everglades. I am assuming that they [the government] found out that s ugar was having a negative effect on the Everglades. The federal government is now shaking their fingers at the farmers, but the government started this issue to begin with. Increasing sugar acreage probably would have a negative impact on the Everglades, but the whole purpose of the drainage initially was to s timulate farming for troops overseas. This respondent is referring to drainage disruptions along the Kissimmee River leading south to Lake Okeechobee which was initiate d by a government request to the Army Corp of Engineers. The impacts from the initial diversion reconfigured the natural flow of water to Lake Okeechobee, leading to substantial runoff issues from farms because the drainage ditches led to a nd from the Kissimmee River. Four participants took an opposite positi on from the above, maintaining that any increase in sugar production would hold posit ive impacts for the Everglades ecosystem. Sugar acreage does not necessarily have to increase near the Everglades, so it seems that the environmental impact would be unknown until newly developed farmland is established. For instance, Ni colas S. acknowledged that sugarcane production can be installed on sandy soil lands outside the EAA, which might not impact the Everglades ecosystem. Also, as cellulosic ethanol responde nt Mike G. noted, strict environmental

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88 regulations exist for farming currently, so the quality of the Everglad es might actually be improving. According to farmer, Kirk R., sugarcane is the only crop in South Florida which has no detrimental effect on the Everglades because it requires almost no fertilizer, releases little runoff, and requires little to no drainage. Further, Kirk R. asserted that vegetable crops in the area contribute 90% or more of harm to the Everglades ecosystem than sugarcane. Neil M., an agricultural stak eholder, most prominently took this position. Sugarcane would create a positive impact for the Everglades, because it is the cleanest crop available through less fertiliz er requirements. The water is actually cleaned by the sugar fields before ente ring Everglades. The problem with the Everglades is all the pollution coming out of Central Florida. The measuring stick is phosphorus. In Lake Okeechobee, phosphorus levels are 200 parts per billion and 400-600 parts per billion in the Ki ssimmee River. The goal is 10 parts per billion for the Everglades. When we ge t the water for irrigation, it is usually 150200 parts per billion. The sugarcane is actually absorbing the phosphorus. Ten participants took the position that mo re sugar farming would be unlikely to occur, and/or would not be lik ely to impact the Everglades ecosystem. These respondents generally felt that more sugarcane farming in South Florida, especially within the EAA, is an improbable idea. For example, Alan W. and Sam S., both associated with agricultural organizations, stated that furthe r sugar production will not occur in watershed lands that would impact the Everglades, alt hough sugarcane is the le ast intensive crop in the ecosystem. Ethanol lobbyist Rick B. affirm ed that sugar acreage in South Florida is most likely at peak; only a decrease will probably occur because of the environmental

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89 awareness surrounding sugar production. With the pending State of Florida acquisition of U.S. Sugar Corporation lands to restore the natural flow of water from Lake Okeechobee to the Everglades, it seems highly unlikely th at new permitting would be allowed even if sugarcane land was available. Drew S. stat ed that increasing sugar acreage near the Everglades would be counter-productive to th e restoration of the ecosystem because it effectively offsets what the state is trying to accomplish. Fifteen participants expressed uncertain ty with regards to how increasing sugar acreage would affect the Everglades ecosyst em. Congressional representative Rita B. stated that effects would depend on where new sugarcane acreage will be developed. Environmentalist Adam L. further explaine d the difficulty with assessing the impacts properly: It really depends on where more sugar ac reage is grown and what impact there will be on the water flow from the Kissimmee Valley to the EAA. Currently, there is a push to purchase U.S. Sugar Corporat ion lands by the state to repair water flow. Part of that drive is to get that land out of production. Other lands are not as impactful on the water flow regime. Those lands could be used for agriculture, sugar ethanol use, and not impact the Ever glades. That is the goal we are after. The verdict is out if the State can repair the natural land st ill under negotiation. It seems therefore that any legitimate pus h for further sugar acreage would have to move north, away from the EAA, but clim ate limitations would come into effect so that this expansion probably could no t occur beyond the Orlando region (Eric S., agricultural stakeholder). Moreover, lands out side the EAA consist of sandy soils which are not as attractive as the muck soils for sugarcane farming. While farming is possible

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90 on sandy soils, and it does occur, it would inevitably be more expensive due to higher fertilizer application rates and water require ments. It is possible therefore that the discussion could shift away from sugarcan e and other crops such as sweet sorghum would become more attractive (Ted M., ethanol stakeholder) Given that the economic viability of devoting sugarcane to food production, as opposed to ethanol production, is higher, the main obstacle in increasing ethanol acreage seems to be the price supports offered to s ugar and the continuing utilization of sugar for food. Within interview respondents, environmen tal factors are not deemed as important in stymieing the growth of sugar ethanol. Th e popularization of suga r ethanol thus turns out to have more to do with sugar itself than with the pol itics and economics of oil or environment.

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91 CHAPTER 6 CONCLUSION This thesis has drawn on a diversity of stakeholders to understand how issues of oil dependence, crop-fuel deba tes, and environmental impacts are shaping the trajectory of sugar ethanol in Florida. Ov erall, four findings become es pecially pertinent within the various, often conflicting, positions taken by participants in the interview, and these relate to the four main sub-questions of the thesis: role of government policies, relationship between oil and ethanol, agricultu ral issues related to sugar cultivation, and environmental impacts of oil and ethanol production on Florida coasts and wetlands. First, even as a wide range of factors, from energy security the availability of viable feedstocks, are driving the sugar ethanol landscape, an especial ly significant aspect is the role of government policies. Such policies includ e state-level mandates which encourage domestic production as well as small gran ts, conferences, and support for research activities which form a foundation for co mmercialization of renewable energy technologies. Another important feature of the ro le of the state is the ethanol tariff. While respondents provided reasons to support as well as be critical of the tariff, it seems clear that the removal of the ethanol tariff would encourage overseas ethanol production destined for the U.S. market which would th wart domestic initiatives in the long-run. Second, the relationship between ethanol and oil production, while often projected as a key element of the economics of etha nol production, is not viewed as such by

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92 research participants. Thus, oil has more uses beyond being used as transportation fuel, so that a rise in ethanol produc tion may not always lead to a drop in oil production. Then, the feedstocks associated with ethanol, for in stance, corn and sugar, are publicly traded commodities and hence subject to specula tion. Oil prices alone therefore do not determine the viability of ethanol. Alongside, the infrastructure for ethanol transport has not yet been out in place, whic h especially hampers the tran sport of sugar ethanol from Florida. However, if domestic ethanol pr oduction succeeds through cellulosic processes, which are not yet commercially viable, then the role of ethanol on the national scene could increase exponentially. It seems worth noting though that the am ount of petroleum fuel consumed in the U.S. is enormous, and while ethanol will not substitute fully, it can play a significant role in pr omoting renewable options a nd enhancing energy security. In terms of the economies of sugar itself, it seems clear that the sugar producing community in Florida is interested in et hanol production, but f actors such as land availability, and, more signifi cantly, sugar price supports, favo r the commercialization of sugar food over sugar fuel. Currently, all domes tic sugar is allocated for food production in the US, with another 15-20% imported a nnually. The price supports directed by the USDA artificially increase the price of the US sugar commodity price to the point where it is more attractive to produce and sell sugar for food. However, farmers are generally interested in any new revenue production solution for th eir agricultural products, and sugar farmers are no different. The successful development of cellulosic ethanol process technologies will present an opportunity for Florida’s sugar growers to collect more revenue, assuming that processing facilities are created by the large sugar mills. Participants also pointed out that since the state government was in the process of

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93 acquiring U.S. Sugar Corporati on, it was likely that the disc ussion of sugar ethanol was moot. An especially interesting finding was the low value given to environmental impacts in shaping the production of sugar etha nol. A number of in terview participants viewed sugarcane as a crop with minimal envi ronmental impacts, especially in terms of run-off, and argued that the Everglades were less likely to be impacted is sugar cultivation continued. Moreover, many intervie w participants argued that oil exploration has no connection with amount of ethanol pr oduction, so that the oil industry would continue with its activities based on the ec onomics of oil rather than the economics of ethanol. Ultimately, the shift to sugar ethanol in Fl orida will be connected to political will, investment in new technologies and infrastructure, and the eco nomic strength of the sugar industry and its need for alternatives. Given that other biofuels, including alternative crops and grasses as well as cellulosic feedstoc ks are being considere d, it is possible that the diversion of sugar in Florida towards etha nol will not take off to the same degree as either corn in the Midwest or sugar in Braz il. But to the extent that a large group of stakeholders associated with both ethanol and sugar continue to be prominent in Florida, the issue is likely to be at the center of energy debates for a number of years.

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94 REFERENCES Aden, A. 2007. Water Usage for Current and Future Ethanol Production. http://www.wepapers.com/Papers/50093/Wa ter_Usage_for_Current_and_Future_ _Ethanol_Production. Last accessed Nov 4 2009. Alston, J. and Beach, E.D. 1996. Market distorti ons and the benefits from research into new uses for agricultural commodities: Ethanol from corn. Resource and Energy Economics, 18: 1-29. Alvarez, J. and Polopolus, L. 2002. The History of U.S. Sugar Protection. Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Scien ces, University of Florida. American Coalition for Ethanol, 2007. St atus: 2007 State-byState Ethanol Handbook. http://www.ethanol.org/index.php?id =15. Last accessed Nov 4 2009. American Sugar Alliance. 2005. How U.S. Sugar Policy Works. http://www.sugaralliance.org/desktopde fault.aspx?page_id=89. Last accessed Nov 4 2009. Anderson, R.K., Scalan, R.S., Parker, P.L. and Behrens, E.W. 1983. Seep Oil and Gas in Gulf of Mexico Slope Sediment. Science, 222: 619-621. Appenzeller, T. 2004. End of Cheap Oil. http://www.globaloilwatch.com/reports/C heap%20Oil.pdf. Last accessed Nov 4 2009. Barratt, M. 1992. The politics of truth: From Marx to Foucalt. Stanford, CA: Stanford University Press. Bevill, K. 2008. Big Things Happening in the Bayou. Ethanol Producer Magazine. http://www.ethanolproducer.com/article.j sp?article_id=4744. La st accessed Nov 4 2009. Blackburn, F. 1984. Sugar-cane. Longman. Bourne, J. 2007. Biofuels: Boon or Boondoogle? National Geographic, 212: 38-59. BP. 2009. BP Statistical Review of World Energy.http://www.bp.com/productlanding.do? categoryId=6929&contentId=7044622. Last accessed Nov 4 2009. Calibre. 2006. DJ Brazilian Sugar Millers Fi x Prices as Futures Jump. http://caliber.mworld.com/m/m.w?l p=GetStory&id=190618291. Last accessed Nov 4 2009.

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95 Coelho, S. 2005. Brazilian Sugarcane Ethanol: Lessons Learned. Brazilian Reference Center on Biomass. Cordain, L. 1999. Cereal Grains: Humanity’s Double-Edged Sword. http://www.directms.org/pdf/EvolutionPaleolithic/Cereal %20Sword.pdf. Last accessed Nov 4 2009. Corley, J.R. 1975. Effects of the sugar act’s expiration. Foreign Trade Newsletter, U.S. Department of Agriculture Extension Service, Washington, D.C. CQ Researcher. 1998. Oil Production in the 21st Century: When will it all run out? CQ Researcher, 8: 673-696. Department of Energy. 2008. National Biofuels Action Plan. Biomass Research and Development Board. http://www1.eere. energy.gov/biomass/pdfs/nbap.pdf. Last accessed Nov 4 2009. Economist. 2008. Ethanol and Water Don’t Mix. http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=107668 82. Last accessed Nov 4 2009. ESDS Qualidata. 2007. ESDS Qualidata Teaching Re source: Exploring Diverse Interview Types. http://www.esds.ac.uk/qualida ta/support/interv iews/semi.asp. Last accessed Nov 4 2009. Emden, C. and Smith, C. 2003. Non-Intrusiv e Research: Ideas and Guidelines for Expedient Thesis Completion. Australian Journal of Advanced Nursing, 22, 3743. Energy Information Administration. 2009. State Energy Profiles: Florida. http://tonto.eia.doe.gov/state/state_ener gy_profiles.cfm?sid=FL. Last accessed Nov 4 2009. Ewing, E. 2008. Pipeline Projects On Hold. Ethanol Producer Magazine. http://www.ethanolproducer.com/article-p rint.jsp?article_id=4298. Last accessed Nov 4 2009. Florida Citrus Mutual, 2008. Alico won’t build Southwes t Florida ethanol plant. http://www.flcitrusmutual.com/new s/naplesnews_alico_060308.aspx. Last accessed Nov 4 2009. Florida Crystals. 2008. Renewable Energy. http://www.floridacrystals.com/cont ent/112/renewable_energy.aspx. Last accessed Nov 4 2009. Florida Department of Agricultu re and Consumer Services. 2008. Hydrothermal Saccharification for Cellulosic Ethanol. http://www.doacs.state.fl.us/pre ss/2008/01222008/hydrothermal.html. Last accessed Nov 4 2009. Florida Department of E nvironmental Protection. 2006. Florida Energy Plan. http://www.dep.state.fl.us/energy/en ergyact/files/2006_Energy_Plan.pdf. Last accessed Nov 4 2009.

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100 APPENDICES

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101 Appendix A: Interview Questionnaire for Stakeholders General Questions 1. According to you, what are the main factors shaping ethanol development in Florida? (government policies, oil prices, agricultura l interests, environm ental concerns, wider economic issues, other factors) 2. Is sugar-based ethanol being promoted in Florida, and what factors are driving its potential usage? 3. What barriers exist which will hinder the growth of sugar ethanol in Florida? 4. Do you think that the Florida state gove rnment has been supportive of ethanol development, and more specifically sugar-based ethanol development? 5. In what ways are universities and other res earch institutions in Florida contributing to better understanding of sugar ethanol? Ethanol and Oil Economies 6. To what extent will ethanol substitute for oil demand over time? 7. Is lack of adequate ethanol fuel supplemen tation for oil driving more oil exploration in the U.S.? 8. Can ethanol production substitute for offshor e drilling in the Florida marketplace? Can a correlation be made between etha nol production and offshore drilling? 9. What implications could sugar ethanol in Florida have for the national energy market? 10. Should the ethanol tariff be eliminated? How does the ethanol tariff affect sugarbased ethanol?

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102 Appendix A: (Continued) Sugar Economies 11. What is the current economic condition of Fl orida’s sugar farmers? To what extent are farmers supportive of sugar ethanol? 12. What factors have to be in place for mo re sugar acreage to be used for ethanol production in Florida? 13. How would sugar-based ethanol affect th e commodity price of sugar potentially? 14. How would the demand of sugar be affected if more sugar ethanol companies are established in Florida? 15. At what level could sugar-based ethanol reduce the need for sugar subsidies in Florida? Do you think a sugar subsidy should be in place? Environmental Issues 16. Is sugar the more worthy feedstock in terms of water, soil, and air quality issues when compared to other potential ethanol feed stocks? 17. According to you, what are the most striki ng differences between sugar ethanol and corn ethanol? Do you think one is mo re advantageous than the other? 18. What is the most threatening environmen tal impact for Florida from sugar-based ethanol production? 19. How would increasing sugar acreage a ffect the Everglades ecosystem? Concluding Question 20. Are there any other issues that have not been raised so far that you would like me to consider?

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103 Appendix B: List of In terview Participants Stakeholder Category Pseudonym Date of Interview Length of Interview Academic Eric P. 1/20/2009 39 minutes Lance Y. 2/3/2009 41 minutes Bob G. 2/12/2009 42 minutes Agriculture Nick C. 1/23/2009 43 minutes Edward D. 1/28/2009 41 minutes Neil M. 1/29/2009 45 minutes Daniel R. 1/30/2009 69 minutes Edward D. 2/10/2009 39 minutes Kirk R. 2/13/2009 57 minutes Eric S. 5/3/2009 34 minutes Sam S. 5/4/2009 59 minutes Ann M. 1/28/2009 47 minutes Environmental Paul D. 2/9/2009 43 minutes Conrad M. 2/9/2009 11 minutes Adam L. 2/11/2009 36 minutes Ethanol Maurice L. 1/9/ 2009 40 minutes Steven O. 1/12/2009 37 minutes Nicolas S. 1/29/2009 41 minutes Richard C. 1/29/2009 51 minutes Juan 1/29/2009 35 minutes Rick B. 1/29/2009 48 minutes Drew K. 1/30/2009 60 minutes Gina M. 1/30/2009 22 minutes Cameron S. 2/3/2009 33 minutes Mike G. 2/3/2009 32 minutes Mike E. 2/3/2009 55 minutes Ted H. 2/5/2009 28 minutes Herman K. 2/9/2009 24 minutes Sean D. 2/10/2009 28 minutes Ted M. 2/12/2009 45 minutes Greg C. 2/20/2009 56 minutes Government Anthony O. 1/9/2009 74 minutes Devon E. 1/23/2009 25 minutes Matt R. 1/28/2009 58 minutes Kevin N. 1/30/2009 25 minutes Rita B. 2/4/2009 32 minutes Oliver W. 2/6/2009 29 minutes

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104 Appendix B: (Continued) Government Alan W. 2/11/2009 32 minutes Thomas C. 2/13/2009 48 minutes Todd M. 2/13/2009 34 minutes Lance L. 2/5/2009 33 minutes Rick K. 2/10/2009 33 minutes Oil Victor M. 1/13/2009 46 minutes Joseph M. 1/28/2009 42 minutes Bill C. 2/3/2009 17 minutes Bobby H. 2/4/2009 31 minutes Terence F. 2/6/2009 33 minutes Alexander W. 2/15/2009 32 minutes Teresa S. 2/20/2009 31 minutes

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ABOUT THE AUTHOR Joshua F. Berger received a Bachelor’s Degree in Geography from the University of Florida in 2006. Since then he has enrolled for two graduate degrees at the University of South Florida, an M.S. in Environmental Sc ience and Policy in the College of Arts and Sciences, and an M.S. in Entrepreneurship in Applied Technology in the College of Business. From 1999 to 2003, Joshua served honorably in the United States Navy as an Intelligence Collection Specialist, where he se rved at duty station locations worldwide.