In today’s ClimateWire (subscription required), reporter Jessica Leber describes a biofuel industry still totally dependent on government handouts and still pleading for more special favors.
First a bit of background.
In December 2007, Congress passed and President Bush signed the Energy Independence and Security Act (EISA). Among other things, EISA boosted the existing (2005 Energy Policy Act) Renewable Fuel Standard (RFS) from 7.5 billion gallons a year by 2012 to 36 billion gallons a year by 2022. Of those 36 billion gallons, 21 billion gallons must come from “advanced biofuels.”
The RFS is essentially a Soviet-style production quota. Congress, prodded by campaign contributions from the corn lobby, and by presidential candidates jockeying for support in the Iowa Caucuses, decided that central planning of the nation’s motor fuel markets was an idea whose time had come.
To qualify as “advanced” under EISA, a biofuel must (1) be made from plant matter other than corn kernels and (2) achieve a 50% reduction in greenhouse gas (GHG) emissions compared to gasoline, based on a “life-cycle” (wells-to-wheels) analysis. EISA also allows 15 billion gallons a year by 2022 to come from plain old corn ethanol, although to qualify as a “renewable fuel,” corn ethanol from newer plants must achieve a 20% reduction in GHG emissions relative to gasoline — again, based on life-cycle analysis.
EISA mandates the sale of 100 million gallons of advanced biofuel in 2009 and 200 million gallons in 2010 (see p. 6 of this presentation). For years, biofuel lobbyists have been telling us that advanced biofuels are “just around the corner.” But, Matt Carr of the Biotechnology Industry Organization estimated last month that in 2010 volumes will, optimistically, reach only 12 million gallons, Leber reports.
In a sop to the corn lobby, the Waxman-Markey cap-and-trade bill would suspend for five years the EISA requirement for life-cycle analysis to determine whether biofuels qualify as “advanced” or even as “renewable.” Several life-cycle analyses indicate that corn ethanol produces more greenhouse gases than the gasoline it replaces, once emissions from land use changes are taken into account (for a summary, see pp. 4-6 of this report).
The Kerry-Boxer cap-and-trade bill does not contain the five-year hold on life-cycle analysis, and the uncertainty as to which biofuels will qualify under future EPA implementing rules “chills the investment community,” Carr complains. I’d put the point differently: Strong evidence that corn ethanol is not “climate friendly” jeopardizes the political rents that corn growers and ethanol distillers hoped to extract from climate hysteria.
Leber also notes that, “the industry is also concerned about ambiguous language in both the Senate and House versions of the bill that does not clearly exempt the biofuels component of blended petroleum fuels, such as E10 and E85, from an economy-wide carbon cap.”
Did you get that? The corn-ethanol lobby invoked climate doom to sell biofuel mandates to Congress and the public. But now they say the centerpiece of regulatory climate policy — the cap in “cap and trade” — should not apply to biofuels, even though biofuels emit CO2, and even though several life-cycle analyses indicate that corn-ethanol is more carbon-intensive than gasoline. One law for me, another for thee!
Producers of “advanced” ethanol also complain that they must compete for climate-tech loan guarantees against companies developing solar, wind, and compressed natural gas technologies. The outrage! Why should ethanol producers have to share the greenhouse gravy train with anybody else?
This just in: Sens. Barbara Boxer (D-CA) and Susan Collins (R-ME) today released Biofuels: Potential Effects and Challenges of Required Increases in Production and Use, an August 2009 study by the Government Accountability Office (GAO). One of GAO’s conclusions is that the 45-cent/gallon tax credit that refiners receive for blending ethanol into motor gasoline “may no longer be needed to stimulate conventional corn-ethanol production because the domestic industry has matured, its processing is well understood, and its use capacity is already near the effective RFS limit of 15 billion gallons a year of conventional ethanol.”
The Renewable Fuels Association “panned” the GAO study, Leber reports. Well, what else did you expect? Without the blenders’ credit, a national market for ethanol would not exist. In their PR (if not in their own minds), corn ethanol will always be an infant industry in need of special tax breaks to compete with the big bad oil companies.
What happens if, as seems likely, the industry falls farther and farther behind the EISA “advanced” biofuel requirements? Here’s my prediction: The Renewable Fuels Association will not lobby to scale back the overall 36-billion RFS; rather, they’ll lobby to raise up the 15 billion gallon ceiling on corn ethanol.