Ethanol from sugar beet : economic analysis and policy alternatives

Abstract

The possibility of growing sugar beet Beta vulgaris as an energy crop has received a great deal of attention in New Zealand. This paper concentrates on two aspects of a sugar beet industry. The net foreign earnings of growing 10% of New Zealand's petrol demand. Implications of land use change by sugar beet as it substitutes for traditional agricultural products. The implications of land use change is examined in two ways. Firstly possible physical impacts of growing sugar beet. Secondly possible change in commodity prices as sugar beets substitutes for arable production. This study concludes with an examination of present and future policy toward ethanol from biomass in New Zealand with reference to United States policy measures.

A linear programming model was used to evaluate on farm land use changes on cropping and pastoral systems, when sugar beet was grown as a cash crop. The types of land use change were then extrapolated to farm the basis of a national analysis. The aim of this national analysis was to outline the land required and the production that would be lossed to provide data for the net foreign earnings analysis.

Net foreign earnings from growing 10% of New Zealand's petrol demand is some $39 million. The implications of land use change included possible physical damage of land resources as well as increased demand for resources such as water and fertilizer. Possible price changes in agricultural commodities when there is a change in land use, remain uncertain. This is an area that requires study. The magnitude of land use change would indicate some increase in commodity prices as a result of growing sugar beet.

The results of the model show a 1:1.6 substitution rate of sugar beet to cash cropping land.

The utilization of beet residue as stock feed enabled stock numbers to be maintained while growing sugar beet as a cash crop.

Optimism regarding a saving in foreign exchange by growing some of New Zealand's fuel requirements, deserves close appraisal. However, planned sources of transport fuels for New Zealand exclude ethanol from biomass as a supplier for some considerable time to come.