Small ethanol plants key to efficiency: Canada

OTTAWA (Reuters) - Building more and smaller ethanol plants could help overcome concerns that production of the biofuel consumes more in energy than it provides, Canadian Agriculture Minister Gerry Ritz said on Friday.

One of the reasons so much energy is used to make ethanol is that trucks travel long distances carrying corn, chaff or other plant material to ethanol plants.

"Smaller and locally owned I think are the right way to go," Ritz said as he kicked off debate in the House of Commons on the final stage of a bill that would ensure that gasoline contains 5 percent ethanol by 2010.

Dennis Bevington of the opposition New Democratic Party said one study showed that ethanol made from Canadian corn would lead to a net reduction of only 21 percent in greenhouse gases compared with the use of gasoline.

If the corn actually had to be imported from the United States to make ethanol, it would actually lead to a net increase in emissions of the greenhouse gases blamed for climate change.

The Conservative government is proceeding with plans to mandate more ethanol use despite questions that have been raised both about ethanol's efficiency and about whether it would contribute to rising food costs.

The opposition Liberals and Bloc Quebecois both voted in favor of the government legislation at an intermediate stage on Thursday, leaving the smaller New Democratic Party as the only opponent.

Ritz said farmers were able to increase food production at the same time as boosting ethanol output.

"Due to the innovation and industriousness of Canadian agriculture and Canadian forestry, we have the capacity to do this and in no way affect our food lines," he said.

"A lot of people say we cannot do both. They say we cannot grow food for energy and for consumption. Nothing could be further from the truth. Anyone who has analyzed food production in this country knows that we are growing more, that it is better quality, and that it is safer."

He also said there were many factors behind higher food prices unrelated to the production of biofuels. Among them is the increased meat consumption by emerging middle classes in India and China, Ritz said.

The government's biofuel bill faces one more vote in the House. It will then move to the Senate, dominated by the Liberal Party, which has lent its support to the measure.

In addition to ethanol in gasoline, the bill will also provide for diesel to contain 2 percent renewable fuels by 2012.

(Editing by Rob Wilson)