Legislation Would Require Most Vehicles to Be Flex Fuel by 2015

Legislation Would Require Most Vehicles to Be Flex Fuel by 2015

On March 12, Representatives Eliot L. Engel (D-NY), Bob Inglis (R-SC), Steve Israel (D-NY), and Roscoe G. Bartlett (R-MD) introduced the “Open Fuel standard Act of 2009” (H.R. 1476) to require automobile manufacturers to ensure that not less than 80 percent of the automobiles manufactured or sold in the United States by each manufacturer by 2015 will be equipped to operate on fuel mixtures containing 85 percent ethanol, 85 percent methanol, or biodiesel. The bill was referred to the Committee on Energy and Commerce. Rep. Engel said, “We must take action as a nation to break our dependence on foreign oil and simultaneously aid efforts to halt the potentially harmful climate change affecting our planet.”

The transition to flex fuel vehicles is already underway. According to the Department of Energy (DOE), there are at least 36 FFV models on the market in the U.S. for the 2009 model year, and over 8 million FFV’s are on already the road. Conventional gasoline engines need to be modified slightly (at an additional cost of about $100) to handle higher blends of ethanol, the primary biofuel used in the United States. Most conventional automobile warrantees allow the use of fuel containing up to 10 percent ethanol without adjustments to the engine. The experience of Brazil, a country that relies heavily on ethanol as its primary transportation fuel, has demonstrated the feasibility of converting large segments of its national fleet to run on higher ethanol blends. In order to achieve this goal, however, Brazil needed to make substantial investments to create the alternative fuel distribution infrastructure and to produce FFVs – just as the U.S. is trying to do now.

The introduction of H.R. 1476 is timely, as the debate on Capitol Hill is heating up concerning what role ethanol and other renewable fuels should play in meeting future of U.S. climate, energy, and transportation needs. If enacted, the bill would send a strong signal of a continuing U.S. commitment to domestic biofuels production. The ethanol industry has been struggling due to low oil prices and decreased overall demand for fuel. Currently, gasoline blends can only contain a maximum of 10 percent ethanol (except for E85 used in FFVs). At current levels of demand, ethanol producers are concerned that the U.S. will soon hit a “blend wall” at which the market for ethanol will be saturated. Ethanol advocates, including Retired General Wesley Clark and Growth Energy, are lobbying the administration to raise the blend levels for conventionally equipped vehicles to 15 percent. Without an expanded market for ethanol, they say, the U.S. will fall short of meeting the mandated renewable fuels standards set in the 2007 Energy Independence and Security Act, more ethanol producers will likely go out of business, and it will be more difficult for next generation, advanced, cellulosic biofuels production to start up successfully.

In other ethanol-related legislation, the Imported Ethanol Parity Act (S. 622) was recently introduced by Senators Feinstein (D-CA), Gregg (R-NH), Bingaman (D-NM), Collins (R-ME), Cantwell (D-WA), and Martinez (R-FL). The bill would lower the U.S. tariff on imported ethanol to achieve parity with the current subsidy for domestically produced ethanol ($0.45 per gallon). The bill would give greater access to the U.S. market for Brazil’s ethanol industry. Brazil’s ethanol is produced from sugar-cane, and its long growing seasons and high productivity per hectare makes it cheaper to produce than U.S. corn-based ethanol. Senator Feinstein said, “The current real trade barrier on sugar-based ethanol imported from Brazil and other foreign sources gives gasoline imports a competitive advantage. This legislation provides a sensible policy fix. It lowers the tariffs on imported ethanol to a level at or below the 45 cent ethanol blender credit – while ensuring that foreign ethanol suppliers neither benefit from the ethanol subsidy nor are penalized by artificial barriers to trade.” According to Brazilian news sources, U.S. agriculture giant Archer Daniels Midland (ADM) has been looking into investing in the Brazilian ethanol industry, possibly purchasing the Unialco group among other assets.