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Sustainability Claims Questioned

08/21/2019

Sustainability has emerged as a significant determinant of corporate responsibility extending to brands and product categories.  Most large food companies issue regular reports on their programs emphasizing savings in energy and reduced emission of greenhouse gases.  These efforts are commendable although investment may detract from short-term earnings. Enhanced sustainability may create a favorable image among consumers by demonstrating social responsibility and even contribute to EPS over the long term.

 

Sustainability can be “encouraged” by grants and tax concessions that distort the principle of a free economy. A specific example of misplaced government intervention is the use of wood pellets to power electric generation.  The Drax Power Plant in the U.K. receives $2.2 million per day in subsidies to burn wood pellets in place of coal.  Burning wood is considered to be carbon- neutral but the math does not support this widely held contention.  It is now evident that burning wood and biomass, liberating carbon dioxide, is not necessarily offset by regrowth of forests that are harvested for timber.

Reestablishing mature trees to a level that can absorb the carbon dioxide released from combustion may take 40 to 100 years depending on location.  This is especially the case for deforestation in the Southeast to produce wood pellets exported to the U.K. and other EU nations.  If in fact the wood pellets were derived from timber unsuitable for construction and from waste material, there could be some justification for the practice.  Selling mature trees, whether derived from clear cutting or under a managed forestry program, will increase carbon dioxide released over an extended period during which forest regrowth cannot compensate by photosynthesis.

 

 It is possible that a recent study published in Switzerland is valid. The authors claimed that 1.2 trillion additional trees would cancel a decade of carbon emissions. Unfortunately the time required to exert a beneficial effect is inconsistent with the urgent need to reduce carbon dioxide emission.  Although the fallacy of sustainability through burning wood chips is now recognized as a scientific reality, the industry has gained its own momentum with numerous plants operating in southern U.S. states including a proposed plant in Lucedale, MS which has generated concerted opposition.

 

Similar fallacious claims relating to sustainability are used to justify corn-based ethanol production.  The legislation that set in motion the conversion of food to fuel was based on  concern that the U.S. imported energy in the form of oil from potentially hostile nations.  Subsequently with the introduction of fracking, the U.S. has become independent with respect to hydrocarbons.  The ethanol industry continues to make unjustified claims for sustainability.  If all the energy required to grow corn and convert it to ethanol is taken into account, carbon emissions exceed those of refining oil and using gasoline as a fuel.  Manufacturers and owners of electric-powered vehicles claim zero emissions. This is true of true if only the tail pipe is considered. The “green” claim conveniently ignores the carbon emission associated with generating power used to charge the vehicles batteries and even the fabrication of electric motors and batteries.  Depending on the source of electric power a diesel powered small sedan in Germany is probably more sustainable than an equivalent electric vehicle given the dependency on “beautiful clean coal” for power generation in that nation.  The situation would however be different in Norway where most electric power is derived from hydroelectric plants.

 

Claims relating to sustainability should be viewed through a wide-field lens.  By cherry-picking aspects of any system it is possible to generate claims that influence consumer attitudes towards industries, companies and products.  The situation becomes even more complicated when politics clouds issues with unsubstantiated claims for job generation and environmental enhancement that invariably require mandates or subsidies. The RFS is a classic example of a good intention at a point in time degenerating into an indirect tax on all who drive and eat benefitting corn growers and ethanol refiners.