Socio-Economic Sustainability

The number of facilities, their size and ownership may affect the sustainability of the industry, and the socio-economic benefits that could be realized by rural communities.

The Saskatchewan government has suggested that our ethanol industry be export-based. The recommendation is 400 million litres per year of ethanol production with 65% of that production exported to other provinces or the United States. The existence of reliable export markets for Saskatchewan ethanol is highly questionable. Investment in large scale production facilities relying on an export market may affect the sustainability of the industry.

From an economic perspective, a focus on meeting domestic demand would lead to more sustainable development, eliminating the risks associated with overdeveloping in the hope of capturing potentially uncertain export markets. If demand for Saskatchewan ethanol grows substantially, production could be increased accordingly as markets develop. The US industry has proven that it is possible to increase production very quickly through new construction and expansion of existing production capacity. If demand decreases, however, or does not grow beyond domestic consumption levels, underutilized export production capacity could be an extremely expensive and wasted investment. Even domestic demand may decrease or be eliminated over time by factors such as competition from other renewable fuels and energy sources such as hydrogen, solar power, wind power etc., or from changes in transportation, energy efficiency, energy consumption etc.

Focusing on meeting domestic demand for ethanol through local, farmer-owned initiatives may protect the ethanol industry from some of the economic pressures facing other industries:

  • economic leakages caused by imports
  • gasoline imports displaced by ethanol
  • farmer-owned ethanol production plants would guarantee the use of Saskatchewan grain, and eliminate the potential importing of cheaper, subsidized U.S. corn
  • possible trade sanctions such as U.S. opposition to Canadian softwood lumber, beef and pork, the Canadian Wheat Board etc.
  • subsidization competition from other jurisdictions
  • all ethanol production is subsidized to some degree - market share can easily be lost to other more heavily subsidized producers.

In the US, 66% of ethanol production capacity is farmer-owned through membership in New Generation Co-ops. 85% of the new U.S. ethanol production capacity being constructed in 2002 is owned by farmers. In Saskatchewan, the province has entered into an agreement with a US owned real estate / transportation company to establish ethanol production facilities.

In addition to these concerns, there are other factors that may affect the sustainability of a grain-based ethanol industry in Saskatchewan:

  • Cellulosic feedstock may become a more "renewable" resource than grain for ethanol production due to the limited need for inputs, the higher energy content, and the high level of carbon sequestration.
  • There is concern that the recent increase in U.S. agricultural subsidies will make U.S. corn cheaper than Saskatchewan grain. Substitution of Saskatchewan wheat by U.S. corn would essentially negate the benefits of any synergies with Saskatchewan's agricultural sector.