Renewable Fuels Association

Food vs. Fuel? Part Deux

by Brian McGraw on October 15, 2010

in Agriculture, Energy, Environment, Ethanol

Last week, the U.S. Department of Agriculture lowered its estimate on yields from 2010 corn crops to 12.7 billion bushels for 2010 from the previous September estimate of 13.2 billion bushels. In 2009, 13.1 billion bushels were produced. The lowered estimate led to the largest daily corn spike since 1973 (Financial Times, free registration required). A rise in corn prices raises the price of food products that use corn, most red meats, and ethanol.

Reuters, Salon, and the Financial Times covered the price spike, explaining that estimated supply reductions can have severe consequences due to increasing global demand for corn. Adbolreza Abbassian, a grain economist with the UN, noted, “We need a record crop every year. If not, we are in trouble.” The U.S. produces 40 percent of the world’s corn supply, while 30 percent of that goes towards ethanol — meaning that over 10 percent of global corn production is being used for fuel. The Financial Times also secured an interview with Tom Vilsack, U.S. Agriculture Secretary, who does not believe we will see a repeat of the 2007-2008 food crisis.

The ethanol industry, hoping to contain the damage, immediately blogged about these reports: “As Before, ‘Food vs. Fuels’ Arguments Strike Out.”

Geoff Cooper, of the Renewable Fuels Association, writes:

Last Friday’s USDA Crop Production and WASDE reports, which slashed estimates for the 2010 corn crop and average yield, sent the anti-biofuels crowd scurrying to find their trusty “Food vs. Fuel” playbooks. The alarmist rhetoric over the past several days seems virtually cut and pasted from the raft of doomsday press releases and manufactured “studies” that cluttered the media channels in 2008 when record oil prices and rampant speculation pushed grain prices to unprecedented levels and food prices to the highest levels in recent memory. For opponents of ethanol and beneficiaries of cheap corn, pointing the finger at biofuels has become the reflexive knee-jerk response any time grain prices start to rise.

But this time, the Malthusians are failing to gain any traction.

What a bombshell! This post is an excellent example of Propaganda 101. Notice the language Cooper employs, referring to “alarmist rhetoric,” “doomsday press releases,” “manufactured studies,” “rampant speculation,” and the worst: “Malthusians.” He frames the debate as a bunch of wackos making false claims, attacks Wall Street, and implies that the opponents of ethanol paid for misleading studies to be created. That’s a pretty damning accusation. Unfortunately for Mr. Cooper, the wide consensus among academics at the time was that the increase in biofuel usage did play a significant role in the 2007-2008 food crisis.

Indeed, as Cooper acknowledges:

The World Bank, which in 2008 hastily suggested biofuels was playing a large role in higher food prices, released an mia culpa analysis just a few months ago that found …the effect of biofuels on food prices has not been as large as originally thought…

Apparently, when you don’t agree with the corn ethanol industry your academic work is sloppy and was completed hastily, even when you’re the World Bank. It’s also appropriate to call into question their academic integrity by suggesting that groups with a financial interest in the outcome of the study paid for the results. On the other hand, when the World Bank reverses course and completes a study vindicating the ethanol industry, it is seen as a mea culpa (I’m not confident the World Bank cares much about offending a relatively small U.S. industry) and should be taken as gospel.

It is important to note that the World Bank did mostly vindicate the diversion of corn towards ethanol from playing a large role in the food crisis, as they had previously thought. However, they didn’t completely vindicate the industry, and the price of corn has doubled in the last ten years. Furthermore, it is worth pointing out that even a small jump in the price of corn can have a devastating effect on people living in poverty. The increased demand for corn to be converted to fuel will raise the price of corn in the short term, as long run adjustments are made to plant more (at the expense of other crops or previously unused farmland).

“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.