For years, governments have promoted ethanol-blended petrol as a cleaner alternative to conventional fuel. But long before biofuels became a global policy priority, billionaire Warren Buffett’s close aide legendary investor Charlie Munger dismissed the idea in unusually blunt terms, arguing that producing ethanol consumed more fossil fuel than the energy it delivered.
Speaking at the 2006 Berkshire Hathaway Annual Shareholders Meeting, he argued that producing ethanol consumed more fossil fuel than the energy the biofuel ultimately delivered.
“I have just enough glimmers of thermodynamics left in me to suspect that it takes more fossil fuel energy to create ethanol than you can get out of the ethanol you’ve created. If so, that’s a very stupid way to try and solve an energy problem.”
Munger’s criticism was directed primarily at first-generation corn ethanol, which was rapidly expanding in the United States at the time through government mandates and subsidies. He maintained this view for years, later describing corn ethanol as “monstrously stupid” and “one of the dumbest ideas in the history of the world,” arguing that it wasted food crops and distorted agricultural markets.
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Nearly two decades later, his criticism continues to fuel debate — not just over the science of ethanol’s energy balance, but also over its economic viability, food security implications and role in the transition to cleaner energy.
What was Munger referring to?
At the heart of the debate is Net Energy Balance (NEB), also known as Energy Returned on Energy Invested (EROEI or EROI).
The concept asks a simple question: How much usable energy do you get from a fuel compared with the energy required to produce it?
If producing one unit of fuel requires more than one unit of fossil energy, the fuel offers little or no energy advantage.
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Why critics argued ethanol was inefficient
When Munger made his remarks in 2006, several studies suggested that corn ethanol had a poor—or even negative — energy balance.
Major energy inputs included:
- Manufacturing nitrogen fertilisers using natural gas
- Diesel consumed by tractors and farm equipment
- Irrigation and agricultural operations
- Transporting corn to refineries
- Energy-intensive fermentation and distillation, often powered by coal or natural gas
Some early analyses concluded that producing corn ethanol required more fossil energy than the ethanol itself contained, supporting Munger’s criticism.
What does more recent research say?
The picture has changed over the past two decades.
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Improved crop yields, more efficient fertiliser use, advances in ethanol plants, and greater reliance on natural gas and renewable electricity have significantly improved the industry’s energy performance.
Recent lifecycle assessments — including studies by the US Department of Agriculture (USDA)—generally conclude that modern corn ethanol now produces roughly 1.5 to 2.3 units of energy for every unit of fossil energy invested, indicating a positive net energy balance.
That means Munger’s statement is less accurate for today’s US corn ethanol industry than it was when first-generation production was relatively inefficient.
However, researchers continue to debate the exact figures because results depend on assumptions about farming practices, land-use changes and processing methods.
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Why the criticism hasn’t disappeared
Even if ethanol now delivers a positive energy return, critics argue several structural problems remain.
- Food versus fuel: Corn used for ethanol is corn that cannot be used directly for food or animal feed. Critics argue that large-scale biofuel production can tighten food supplies and contribute to higher global food prices, particularly during poor harvests.
- Heavy dependence on government support: Corn ethanol expanded largely because of blending mandates, subsidies and tax incentives. Opponents argue that without government support, the industry would be far less competitive with conventional fuels.
- Continued fossil fuel dependence: Although ethanol is renewable, producing it still relies heavily on fossil fuels through fertiliser production, farm machinery, transportation and industrial processing. As a result, critics question whether it represents a truly clean energy solution.
Corn ethanol vs second-generation biofuels
Not all ethanol is the same. First-generation ethanol is produced from food crops such as corn or sugarcane. Second-generation (cellulosic) ethanol is made from agricultural waste, crop residues, grasses or wood biomass.
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Cellulosic ethanol has the potential for a much higher energy return while avoiding direct competition with food production. However, technological complexity and high production costs have prevented it from achieving widespread commercial adoption.
How does this relate to India?
India’s ethanol programme differs significantly from the US model that Munger criticised.
Rather than relying primarily on corn, India sources ethanol largely from sugarcane molasses, sugarcane juice and, increasingly, damaged food grains and surplus rice. The government promotes ethanol blending to reduce crude oil imports, support farmers and lower vehicle emissions.
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Supporters argue these objectives extend beyond energy efficiency alone. Critics, however, continue to raise concerns about water-intensive sugarcane cultivation, land use, food security and the long-term sustainability of expanding ethanol production.
