Post image for Environmental Regulations Threaten Refining Sector Jobs

I had the privilege of meeting with Charlie Drevna, President of American Fuel and Petrochemical Manufacturers this week. He had some extremely interesting things to say about the way mounting environmental regulations are threatening jobs in the refining sector that he represents.

A particularly compelling insight he provided was that many of the Obama administration’s environmental regulations actually contradict each other. For instance, CAFE regulations require higher fuel efficiency from automobiles. Yet the Renewable Fuel Standard, which mandates the use of less efficient ethanol, reduces fuel efficiency. Meanwhile, the Tier III rules from EPA contradict the rulemaking on greenhouse gas emissions: refineries need to do more processing to reduce sulfur in gasoline, which increases emissions at a refinery by up to 2.3 percent, while at the same time they are required to reduce greenhouse gas emissions.

Two more examples: to reduce ozone in the atmosphere under the National Ambient Air Quality Standards (NAAQS) requires more energy. More energy requires more greenhouse gas emissions, so there is another clear contradiction. Finally, state sulfur regulations contradict federal greenhouse gas regulations — if you use energy to reduce the sulfur in heating oil, you will increase your greenhouse gas emissions.

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The New York Times reports that ethanol and biofuel mandates in the U.S. and Europe are fueling rising hunger in Guatemala, which now has the fourth-highest rate of child malnutrition in the world — higher than in many less developed countries in Africa:

With its corn-based diet and proximity to the United States, Central America has long been vulnerable to economic riptides related to the United States’ corn policy. Now that the United States is using 40 percent of its crop to make biofuel, it is not surprising that tortilla prices have doubled in Guatemala, which imports nearly half of its corn.

In a country where most families must spend about two thirds of their income on food, ‘the average Guatemalan is now hungrier because of biofuel development.’. . .Roughly 50 percent of the nation’s children are chronically malnourished, the fourth-highest rate in the world, according to the United Nations.

The American renewable fuel standard mandates that an increasing volume of biofuel be blended into the nation’s vehicle fuel supply each year to reduce carbon dioxide emissions from fossil fuels and to bolster the nation’s energy security. Similarly, by 2020, transportation fuels in Europe will have to contain 10 percent biofuel.

Biofuel mandates have shrunk the amount of land used for producing food in countries like Guatemala:

Recent laws in the United States and Europe that mandate the increasing use of biofuel in cars have had far-flung ripple effects, economists say, as land once devoted to growing food for humans is now sometimes more profitably used for churning out vehicle fuel.  In a globalized world, the expansion of the biofuels industry has contributed to spikes in food prices and a shortage of land for food-based agriculture in poor corners of Asia, Africa and Latin America because the raw material is grown wherever it is cheapest.

Many small farmers in Guatemala have effectively been displaced, leaving their children hungry and physically stunted:

in rural areas, subsistence farmers struggle to find a place to sow their seeds. On a recent morning, José Antonio Alvarado was harvesting his corn crop on the narrow median of Highway 2 as trucks zoomed by.  “We’re farming here because there is no other land, and I have to feed my family,” said Mr. Alvarado, pointing to his sons Alejandro and José, who are 4 and 6 but appear to be much younger, a sign of chronic malnutrition.

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Have a listen here.

Severe drought in the Midwest has driven corn prices to record levels. Policy Analyst Brian McGraw argues that ending the federal government’s ethanol mandate could help families who are struggling to pay their heightened grocery bills. Under the mandate, nearly 40 percent of this year’s corn crop will be used for fuel instead of food.

Have a listen here.

Senior Fellow Marlo Lewis takes apart a study claiming that ethanol lowers gas prices by more than a dollar per gallon in some regions. Unrealistic assumptions and dodgy methodology make the results less than trustworthy. Ethanol, Lewis argues, is widely used only because the federal government requires it to be. If it had to compete on a level playing field like most other products, it would be a flop.

Post image for Public Interest Groups Challenge Misleading Government Information Used to Justify Ethanol Mandates and Subsidies

Recently, ActionAid USA and CEI filed a correction request under the Data Quality Act targeting misleading claims made by the EPA regarding the effects of ethanol mandates and subsidies, claims that have obscured how government policies have contributed to world hunger, malnutrition, disease, and death. This legal request, which was filed shortly before World Food Day, can be found here.

According to one recent study, ethanol diversion to fuel has caused nearly 200,000 excess deaths annually. Marie Brill, Senior Policy Analyst at ActionAid USA, stated: “High and volatile prices are already causing misery. The real price of a typical global food basket is up nearly 50% over the last year. With poor people in developing countries spending between 50-80% of their income on food, it is no surprise that 44 million people fell into extreme poverty from June 2010-February 2011 because of high food prices. The big surprise is that the EPA still fails to acknowledge the human impact of the Renewable Fuel Standard and still refuses to cite the plethora of reports that reveal the significant role of biofuels in global food price volatility.” According to Sam Kazman, CEI general counsel: “EPA’s refusal to address this issue has gone on long enough, and there isn’t a more appropriate time for the agency to change its approach than in the wake of World Food Day.”

In 2011, food prices soared all over the world, fueled by the fact “that more than a third of the corn produced in the U.S is now used to make ethanol.” As a result of such “bio-fuels” subsidies, one of the world’s largest food producers predicted a “global food crisis.”

Unfortunately, the Obama administration has long pushed ethanol subsidies, even though such subsidies have a history of  spawning famines and food riots overseas. The administration is now forcing up the ethanol content of gasoline through EPA regulations, even though ethanol production results in deforestation, soil erosion, and water pollution.

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Post image for Biofuels Policy — Death and Disease Follow

The inestimable Indur Goklany has an important new report on biofuels and developing countries. “Could Biofuel Policies Increase Death and Disease in Developing Countries?” appears in the Spring 2011 issue of the Journal of American Physicians and Surgeons. In his analysis, Goklany concludes that biofuels production “may have led to at least 192,000 additional deaths and 6.7 million additional lost DALYS [Disability Adjusted Life Years] in 2010.” He points out that those estimates may be low:

These estimates are conservative.

First, they exclude consideration of a number of health risks that are, in fact, directly related to poverty (e.g., indoor smoke from burning coal, wood and dung indoors; and iron deficiency). Second, the analysis only considered the poverty effects of biofuel production over and above the 2004 level; therefore, it does not provide a full estimate of the effect of all biofuel production. Despite the underestimations, these estimates exceed the WHO’s estimates of the toll of death and disease for global warming. Thus, policies to stimulate biofuel production, in part to reduce the alleged impacts of global warming on public health, particularly in developing countries, may actually have increased death and disease globally.

CEI has long warned of the human, land, and environmental problems with ethanol mandates, incentives and other subsidies for biofuel production.  See here and here and here (which includes discussions relating to the politics of ethanol).

Post image for Pro-Ethanol Legislation Introduced in the Senate

Sens. Amy Klobuchar (D-Minn.) and Tim Johnson (D-S.D.) introduced legislation last week to provide more support to the biofuel industry. This would counter a number of bills introduced recently intending curb biofuel incentives (here, here). Fortunately, support for this kind of bill does not seem to be in the pipeline, so it must mostly be for show.

The “Securing America’s Future with Energy and Sustainable Technologies Act” (SAFEST) is bold. Rather than picking one or two things the ethanol industry was interested in, it throws them everything they’ve ever dreamed of.

Let’s look at a few provisions:

It amends the definition of “advanced biofuel” to include corn starch-derived ethanol.

This would allow the corn ethanol industry access to a much larger share of the Renewable Fuel Standard, which is scheduled to increase from 9 billion gallons to 32 billion gallons by 2022. This would be one of the more damaging aspects of the legislation.

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Via The Hill’s Energy blog:

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy. The $6 billion we waste every year on corporate welfare should instead stay in taxpayers’ pockets where it can be used to spur innovation, stimulate growth and create jobs,” Coburn said in a statement Wednesday.

The bill would repeal the VEETC. As before, a broad coalition emerged in support of the legislation.

CEI’s Marlo Lewis commented on the idea that ethanol is an infant fuel that needs protection:

Henry Ford built his first car, the Quadricycle, to run on pure ethanol. That was in 1896. In 1908, Ford built the first flexible fuel vehicle capable of running on either gasoline or ethanol. Today, more than a hundred years later, the perennial infant known as the corn-ethanol industry still can’t ‘compete’ without government coddling. We commend Senators Cardin and Coburn for challenging Congress to stop throwing good money after bad.

Post image for WSJ Revisits Ethanol

The Wall Street Journal interviewed Secretary of Agriculture Tom Vilsack who suggested the ethanol industry might be able to wean itself off of federal subsidies. Not too quickly, obviously.

The WSJ took this as a positive sign:

Still, Mr. Vilsack may be the first Agriculture Secretary in generations to concede that ethanol subsidies are not immutable. That’s progress.

I do not share their view that this is progress. As they admit, there’s a chance the industry will receive new forms of support without ditching the old. Obama will still have a potentially tough re-election in 2012. Virtually all of the potential Republican candidates have praised the industry, and Obama will certainly acquiesce and do the same.

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Post image for Bill Clinton Enters the Food vs. Fuel Debate Regarding Corn Ethanol

Another convert to the food vs. fuel debate on corn ethanol — former President Bill Clinton. In his speech on Thursday before the U.S. Department of Agriculture’s annual Agricultural Outlook Forum, Clinton said that farmers shouldn’t be putting so much of their corn crop into ethanol production rather than food. He cautioned that the diversion of the food and feed crop could increase food prices and lead to food riots in developing countries and urged farmers to look to the needs of the poor countries of the world.

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