Thursday, April 10, 2014

Biofuels and American Energy


This morning I had the pleasure of attending the Biofuels & American Energy Policy Exclusive Panel, presented by The Hill and sponsored by Smarter Fuel Future, down here by the Capitol on behalf of the National Grange. Preceded by a breakfast spread of bagels, assorted shmears, and more pastries than the new Starbucks La Boulange can offer, I was thoroughly impressed by the turnout at the Hyatt Continental Room. The only things more diverse than the breakfast arrangement however, were those in attendance at the conference, ranging from agricultural and environmental policy analysts and advocates to public and private interests. And yet The Hill seemed to bring together a relatively biased panel sans representation from interests within the ethanol industry itself. Paul Bledsoe, President of Bledsoe & Associates and a veteran on key energy and environmental issues moderated the dialogue on the Renewable Fuel Standard (RFS) and US Biofuels Policy. Congressman Peter Welch (D-VT-01), a member of the House Committee on Energy and Commerce, headlined the first portion of the morning and participated in a one-on-one sit-down. Congressman Welch’s diplomatic and relatively apolitical brief of the issue gave way to the roundtable discussion, featuring Dominic Albino- Scholar, New England Complex Systems Institute; Scott Faber- Vice President of Government Relations, Environmental Working Group (EWG); Rob Green- Executive Director, National Council of Chain Restaurants (NCCR); and Michael McAdams- President of Advanced Biofuels Association. Questions and comments were consistently streamed throughout the morning through the live tweets trending on two plasma-screen TVs placed on opposite sides of the room, and can be found on Smarter Fuel Future’s twitter page here: https://twitter.com/SmarterFuels

The Renewable Fuel Standard (RFS):

Before diving into the panel discussion though, here’s a quick refresher on the Renewable Fuel Standard. Passed by Congress in 2005, the RFS authorizes the EPA to mandate that a minimum volume of biofuel be integrated into the nation’s gasoline supply. While most people who associate biofuels with corn would be correct, biofuels also include cellulosic crops and any living matter or biologically raw materials. Ethanol biofuel, for example, is most commonly used as E-10 and constitutes as a first-generation biofuel extracted from arable crops using conventional technology. However, panelist Michael McAdams explained, there are also second-generation biofuels which are high energy and dense, made from lignocellulose biomass such as woody crops and agricultural waste. The RFS is directed at first-generation biofuels and with the ultimate goal of requiring 36 billion gallons of biofuel integrated into the American fuel supply by 2022, the minimum mandate increases ever year.

The Crux:

Now to the meat, or should I say corn, of the argument. The entire discourse of the panel focused around one central theme. Should Congress repeal or reform the RFS mandate? A common consensus pretty much permeated the panel that maintaining the status quo was not a viable option for American Fuel and food prices. Instead, the first “absolute must” is to eliminate the mandate for corn based ethanol, and the second is to reform the law while leaving incentives for cleaner fuel in place. Delving into agricultural and environmental implications of the RFS, the underlying concern for all the panelists seemed to focus on the average consumer. This is probably because they are the most vastly affected population, although farmers and small businesses also deal with the brunt of the RFS economic implications. Rather than go through the perspectives and contributions of each individual on the panel and write a ten -page paper, I will just lay a foundation of the problem and bring up the key arguments that surfaced during the roundtable discussion.

CORN!

The entire problem with corn-based ethanol, and thus the RFS, stems from the fact that the corn supply is not infinite. There are currently 322 million acres of farmland in the US, 12.4% of which alone is needed to meet the RFS. In other words, by the time 2022 rolls around, approximately 27% of US farmland will have to be designated to produce enough biomass to meet the RFS. For every bushel of corn that is going towards biofuel, there is one less bushel of corn going into our stomachs, or the stomachs of the cows that we eat. Basic economic supply and demand theory holds that when there is a fixed supply of a commodity and an increase in demand, prices will rise. Therefore, the use of corn for biofuel drives up food prices at a rate higher than inflation for the average consumer shopping in the grocery store and for restaurants that need to buy food for their businesses. Prices also increase for farmers who need to purchase feed for their animals, further driving up food prices. PricewaterhouseCoopers (PWC) did some research for the NCCR on food and commodity costs, and found that prices increased by a total of $3.2 billion a year as a result of the RFS. This correlates to a 27% increase in corn prices and about an $18,000/year additional cost for individual restaurant locations as well.  Aside from price, here is some food for thought from a different perspective: there is a growing human population nearing 8 billion and millions of people starving that still needs to be fed.

Environmental Issues:

As if the panel’s slam on biofuels wasn’t enough from an agricultural perspective, their attack on environmental implications of ethanol fuel turns the knife a little deeper. Faber cited four, I repeat, four, major environmental mishaps that accompany mass biofuel production. The first deals with air quality problems—increases in corn ethanol to meet RFS standards increase emissions of particulate matter (which can cause asthma, emphysema, and even cancer), VOCs (Volatile Organic Compounds), and other green house gases. Second, he elaborated on the associated wetland and grassland destruction—from 2008 to 2012, over 23 million acres of land were destroyed to cultivate the corn necessary to meet RFS, releasing soil carbon and nitrous oxide (N2O) into the air. Third, this destruction of wetlands and grasslands leads to habitat loss and decimation of wildlife, and Faber used the duck population in the Midwest as an example. Lastly, Faber mentioned higher drinking water costs and threats to water quality. 


The Politics:

The RFS is a matter of both policy and politics where the debate is not partisan-oriented. Rather, the politics are divided along regional and economic lines in which agricultural and energy interests coalign. As Faber put it, “The current mandate is administered in a North Korea style that would even make Kim Jong-un blush.” It will be interesting to see how the prospect of upcoming midterm elections affects RFS reform and repeal.  It also would’ve been nice if Welch stayed for the rest of the panel to attest to some of these questions, especially seeing how the political issues and inefficiencies in congress are pointed at the energy and commerce committee. A response and a dialogue between the Welch and the panelists would have been interesting and perhaps provided more insight to the future of the politics of the issue.


The Punch:

Overall, the panel overwhelmingly decided that the tradeoffs exceed the benefits under the RFS and that the output does not show a return on the inputs, creating an energy deficit. The RFS policy was well-intended, but is outdated. In 2005, or in 2007 when the Energy Independence and Security Act was enacted for that matter, very few could have predicted the technological strides that would be made by 2014. In fact, Obama wasn’t even president yet when the RFS was instated. McAdams pointed out this jaw-dropping commentary: if CAFE standards were increased by 1 mile per gallon (mpg), no mandate-required ethanol would be needed. McAdams also pointed out that even though corn ethanol contributes to rising global green house gases, the biofuel is exempt from federal greenhouse gas requirements. Alternately, second-generation biofuels are cleaner for the air and yet must still reduce greenhouse gas emissions by 50% to 60%. The panelists were all pretty much one-sided and in agreement with each other for the most part, and the consensus favored the prospect of relying more heavily on second-generation biofuels and saving corn, well, as corn.

-Allison Paisner
National Grange Intern 

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