Climate Wire

“Advanced” biofuels lag behind mandate

by Marlo Lewis on October 5, 2009

in Ethanol, Features, Global Warming, Zeitgeist

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.

Will Climate Thuggery Capture the SEC?

by Marlo Lewis on July 13, 2009 · 1 comment

in Features, Global Warming, Insurance, Zeitgeist

The Securities and Exchange Commission (SEC) may require corporations to assess and disclose the impacts of global warming and climate change policy on their bottom lines, today’s Climate Wire (subscription required) reports. The story indicates that Commissioner Elisse Walter is the key proponent inside the SEC. The big outside push–no surprise–comes from Ceres, the eco-sustainability investment network. Wisconsin insurance regulator Sean Dilweg and Maryland Treasurer Nancy Kopp are also cited as leading advocates of SEC-mandated “climate risk disclosure.”

Climate Wire rightly notes that, “The move would drive the government deeper into the climate debate, potentially reshaping management decisions at companies across the country.”

The prospect of SEC-required disclosure of climate risk scares the bejesus out of fossil energy producers and energy-intensive manufacturers, Climate Wire indicates:

Big emitters like oil and gas companies, for example, might have to formally reveal the output of their greenhouse gases and the disadvantages they face from federal efforts to charge polluters for every ton of carbon that’s released.

Even more, the revelations could spark financial fallout. Institutional investment groups with trillions of dollars in assets could use the disclosures as the basis for withdrawing money from companies they consider unprepared for rising risk related to regulation and climatic convulsions.

In reality, there is little risk to company bottom lines from climate change per se. Even if one makes the questionable assumption, for example, that global warming will measurably intensify tropical storms over the next few decades, climate risk will always exceed climate change risk by a wide margin. For instance, due to completely natural climatic factors, a company in Florida has a much greater vulnerability to hurricane strikes and damages than a company in Ohio, regardless of how climate changes. Yet this does not stop people and businesses from moving to Florida, enjoying good weather most of the time, and building a prosperous society.

No, the really serious climate risks are policy-related. For example, the application of Clean Air Act permitting rules to stationary sources of carbon dioxide (CO2) emissions–the inescapable consequence of EPA establishing greenhouse gas (GHG) emission standards for new motor vehicles in response to the Supreme Court’s April 2007 Massachusetts v. EPA decision–would potentially expose 1.2 million previously unregulated firms to new controls, paperwork, penalties, and litigation.

Moreover, the endangerment finding prerequisite to EPA adoption of GHG controls for motor vehicles could also compel the agency to promulgate National Ambient Air Quality Standards (NAAQS) for GHG-related “air pollution.” Logically, NAAQS for GHGs would have to be set below current atmospheric levels and, thus, could not be attained even if EPA shut down every car, power plant, and factory in the United States.

Once the regulatory cascade starts, climate policy risk to the U.S. economy could function as a gigantic, permanent, Anti-Stimulus Package. For the gory details, see my comment on EPA’s Endangerment Proposal, especially pp. 33-48.

It’s not enough for Ceres and other eco-zealots to clobber big emitters and industrial energy consumers with costly regulation. They also want those companies to scare away investors in advance of climate regulation via public disclosure of the potential burdens.

However, the Ceres strategy could backfire. If the SEC adopts the Ceres plan, targeted corporations should use the mandated information to publicize the destructive impacts of climate regulations on jobs, growth, investment, and shareholder value. Such information would reveal that the risks of climate policy vastly outweigh the risks of climate change. It could and should fuel a broad-based political backlash against the self-anointed saviors of Planet Earth.