Friday, January 08, 2010

RFA Charges "Orchestrated Campaign" Against Biofuels

Jan 6: The Renewable Fuels Association (RFA), the national trade association for the U.S. ethanol industry, issued a press release on a recent “policy paper” from Houston-based Rice University and sponsored by Chevron which they say seeks to continue the "orchestrated campaign to limit, and ultimately eliminate, the use of biofuels to displace foreign oil." RFA said that in its commentary, researchers from Rice "rely upon out-of-date information and questionable assumptions to denigrate Congress, farmers, and ethanol producers for their support of domestically-based renewable fuels."

The Paper issued by Rice University’s Baker Institute for Public Policy says, "The United States needs to fundamentally rethink its policy of promoting ethanol to diversify its energy sources and increase energy security." The paper, Fundamentals of a Sustainable U.S. Biofuels Policy, "questions the economic, environmental and logistical basis for the billions of dollars in federal subsidies and protectionist tariffs that go to domestic ethanol producers every year." Amy Myers Jaffe, one of the report's authors and associate director of the Rice Energy Program said, "We need to set realistic targets for ethanol in the United States instead of just throwing taxpayer money out the window."

As an example of the unintended economic consequences of U.S. biofuels policy, the Rice report notes that in 2008 "the U.S. government spent $4 billion in biofuels subsidies to replace roughly 2 percent of the U.S. gasoline supply. The average cost to the taxpayer of those 'substituted' barrels of gasoline was roughly $82 a barrel, or $1.95 per gallon on top of the retail gasoline price (i.e., what consumers pay at the pump)." The report questions whether mandated volumes for biofuels can be met and whether biofuels are improving the environment or energy security.

The Energy Independence and Security Act (EISA) that mandated production targets for "renewable fuels," mainly biodiesel and ethanol. The bill mandated production targets of 9 billion gallons of biofuels a year in 2008 and rising to 36 billion gallons a year by 2022. Corn ethanol is capped at 15 billion gallons a year in the law, but the study indicates "even that level will be difficult to reach given logistical and commercial barriers." The EISA also calls for 21 billion gallons of advanced biofuels, produced from sources like switchgrass, corn stover and algae, to be used in the nation’s fuel supply by 2022. But the report determines, "existing mandated targets for advanced biofuels are not currently achievable -- scientifically or commercially -- and should be revisited."

RFA Director of Public Affairs Matt Hartwig said, “Not surprisingly, this oil industry-sponsored analysis relies on myths, generalities, half-truths to dismiss ethanol while providing no comparison to our increasingly dangerous and costly addiction to oil. A debate about the appropriate role of biofuels is valid and should occur, but not without proper context and based upon last century’s assumptions.”

RFA indicates that the Rice paper makes a number of misleading statements and assumptions, including: (1) The paper assumes 44% of the 2007 corn crop will be needed to meet the 15 billion gallons of ethanol called for in the Renewable Fuels Standard. It does not account for the 1/3 of each bushel that is returned to the feed market in the form of distillers’ grains, nor does it give credence to increased yields. Despite difficult planting and harvesting conditions, American farmers achieved record yields in 2009.

(2) The paper states, “The preponderance of evidence shows that existing biofuels offer no improvement over gasoline…” when it comes to carbon emissions. Every credible lifecycle analysis directly comparing ethanol to gasoline shows a carbon benefit to ethanol use, including the U.S. Environmental Protection Agency’s assessment of a 61% benefit. Only when the unproven and controversial notion of international indirect land use change (ILUC) is applied to ethanol and not to gasoline do the carbon benefits of ethanol suffer.

(3) The paper assumes additional land, including marginal acres, will be needed to fulfill the RFS mandates. This is not necessarily true. Based upon yield trends, corn production on roughly the same amount of acres being cultivated will be sufficient to meet the corn-based ethanol demands of the RFS. New feedstocks, such as crop residues, wood waste, and grasses, will also be used and will require no additional acres.

(4) The paper criticizes the secondary tariff on imports of ethanol, but provides no context. The secondary tariff exists to offset the tax credit available to imports of ethanol. The tariff does not restrict trade, as evidenced by the import of ethanol when needed, but rather protects American taxpayers. Moreover, no discussion is given to the 25% tariff Brazil places on imported ethanol. Given the poor sugar crop in Brazil, it is likely U.S. ethanol could be exported and face the 25% tariff.

(5) The paper generalizes that irrigated corn used for ethanol production will be in the same proportion as all irrigated corn (~18% of the total crop). Analysis from the National Renewable Energy Laboratory indicates that 96% of all corn used in ethanol production is non-irrigated.

Access a release from Rice University’s Baker Institute (click here). Access links to the complete study and related information (click here). Access a release from the RFA (click here). Access the RFA website for additional information (click here).

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