Bias Against Biofuels

July 25, 2009 01:50 PM
 


Not much gets corn grower Bob Dickey riled up, but the theory of indirect land use change makes his blood boil.

The theory predicts that using bio-fuels made from U.S. corn and soybeans causes a farmer halfway around the world to make a land use decision to plow virgin land to replace feed. It also suggests that any carbon emissions resulting from this land use change should be ascribed to biofuels.

"The idea that global land use changes are tied to a specific industry, like ethanol, is ridiculous,” says Dickey, who farms near Laurel, Neb., and is current president of the National Corn Growers Association.

Environmental groups, such as the Environmental Defense Fund and the Natural Resources Defense Council, don't think the concept of indirect land use is ridiculous. While there are ongoing debates about the modeling behind indirect land use change, these groups believe the science and economic analysis to date suggests that significant indirect emissions are associated with biofuels.

If the theory was just environmental rhetoric, it wouldn't be such a big deal, Dickey says. But it's not rhetoric anymore; it's the basis for new policy.

This spring, in an effort to reduce greenhouse gas emissions, California enacted a first-of-its kind law to lower the carbon content of transportation fuels. The regulation is referred to as the California Low Carbon Fuel Standard, and it assigns a penalty to biofuels based on carbon emissions believed to be created by indirect land use.

The Environmental Protection Agency (EPA) also wants to include the indirect land use change theory in its proposed rule for implementing the Renewable Fuels Standard-2 (RFS-2), creating a nationwide carbon penalty for biofuels compared with gasoline. "U.S. biofuels are being penalized for market behaviors and land use decisions around the globe, over which we have no control,” explains Bob Dinneen, president and CEO of the Renewable Fuels Association.

Flawed theory? The biggest problem with the indirect land use change theory right now is that there is no scientific consensus on its validity. Research on the effects of biofuels on greenhouse gas emissions is relatively young, with most studies appearing just in the past two or three years.

The reality is that land use decisions are enormously complicated and involve many factors that have nothing to do with renewable fuels, including changes in currency, monetary policy, export needs, productivity gains and weather, says Tom Buis, CEO of Growth Energy, an organization made up of ethanol producers.

"Meanwhile, EPA has failed to examine the indirect effects of petroleum and gives gasoline an unfair advantage,” Buis adds.

Jeff Broin, CEO of Poet, says he finds fault with the very concept of indirect land use change because it stems from a lack of understanding of ethanol and agriculture.

"Due to increasing efficiencies in our production facilities and the increased corn yields from the fields surrounding them, we don't need new land [to grow more corn] to meet the Renewable Fuels Standard,” Broin says.

It's true that the land use debate rarely takes into account growth in corn yields expected to occur over time, says Joe Glauber, USDA chief economist. USDA estimates U.S. corn yields will grow at 2 bu. per acre annually.

Assuming global corn yields increase at the same rate, by 2015 the average corn yield in the rest of the world would be about 10% higher than used in most land use change studies, Glauber says.

Early studies on indirect land use effects of ethanol also neglect to factor in the replacement value of distillers' grains, Glauber adds.


Impact to industry.
Docking biofuels for indirect land use change creates an unfair advantage for petroleum at a time when the biofuels industry faces severe economic hardship.

"Volatility in commodity markets, reduced demand and inability to compete in the European marketplace are making it difficult for producers to sell fuel,” says Manning Feraci, National Biodiesel Board vice president of
federal affairs. "Uncertainty relating to federal policy that is vital to the industry's survival is sending inconsistent signals to the marketplace and undermining investor confidence.”

Ethanol investors have already backed off. About 2 billion gallons of ethanol production has been idled since 2008.

"The ethanol industry is facing single-digit returns at best, and the proposed rules would stifle plant expansions and kill plans for new plants, no matter the feedstock,” says Nick Bowdish, general manager of Platinum Ethanol, a 110-million-gallon-per-year facility in Arthur, Iowa.

Growth Energy's Buis says members of his organization are not opposed to a low carbon fuel standard, so long as it is developed correctly. He says such a standard should apply to all transportation fuels, should be based on universally accepted science and economic modeling and should exclude indirect land use change considerations.

To date, however, EPA has under-evaluated the science it is using to develop the next stage of biofuels policy, says RFA's Dinneen. "As a consequence, [EPA] has threatened the continued development and evolution of the biofuels industry,” he says.

Stalled for now. The inclusion of the indirect land use change theory in new biofuels laws may be banned if Congress and President Barack Obama approve the American Clean Energy and Security Act of 2009, which narrowly passed the House of Representatives in late June.

This legislation includes a provision that prohibits EPA from imposing a penalty on biofuels until there is widespread scientific agreement linking biofuels to indirect land use change. EPA would be prevented from imposing an indirect land use change penalty on biofuels for at least five years. At the end of this period, EPA, Department of Energy and USDA must agree a link exists between biofuels and deforestation. Then, Congress would have one year to review the issue before EPA could move on penalties.

This House action is the best farmers can hope for right now because it shows politicians are listening, Buis says. However, if Congress does not act before January to fully eliminate the indirect land use change provision from EPA, "it will threaten the overall production of ethanol, biodiesel and how we farm today,” he says.

 


You can e-mail Jeanne Bernick at jbernick@farmjournal.com.

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