The nail in the coffin of corn-based ethanol might be made of water. The magazine Environmental Science & Technology has published an article that pegs the amount of water needed to make enough corn ethanol to move a vehicle one mile at 50 gallons. That's pretty high.
ES&T calculated the amount of water needed to grow the corn as well as the water that is affected by agriculture. From the article:
As biofuel production increases, a growing need exists to understand and mitigate potential impacts to water resources, primarily those associated with the agricultural stages of the biofuel life cycle (e.g., water shortages and water pollution) herein referred to as the water footprint.
The worst case scenario, ES&T found, would be irrigated sorghum grown in Nebraska and turned into ethanol. This would use up to 115 gallons per mile. Corn grown there would require 50 gallons of water per mile. Say good-bye to "food vs. fuel," say hello to "Drink or drive."

The National Biodiesel Board, naturally, doesn't want to be associated with the study. The NBB issued a statement that read, in part:

As noted by the authors of the study, not all biofuels production characteristics are the same. Biodiesel is produced from recycled greases, animal fats, and vegetable oil that is a co-product of soy protein meal production. Crops are not irrigated or planted solely to produce biodiesel. Conversion of these co-products and byproducts uses very little water -- the entire U.S. biodiesel industry used less processing water in 2008 than it takes to irrigate two Sun Belt golf courses annually.

[Source: Environmental Science & Technology via Environmental Protection, National Biodiesel Board]


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