Advanced Search
November 5, 2013
Farewell to Ned Ned Stowe, who has been our Sustainable Biomass and Energy Policy Associate since 2009, is leaving EESI to pursue new opportunities. He will be missed here, and we wish him the very best in his new endeavors! Sustainable Bioenergy, Farms, and Forests will go on hiatus temporarily. If you haven't already subscribed to Climate Change News, our other weekly newsletter, please consider doing so ! Should the Renewable Fuel Standard Be Reformed? The Renewable Fuel Standard (RFS) is meeting many of its goals – improving energy security, stimulating rural economic development, and reducing climate pollution from transportation fuels. Although many problems have risen along the way and the policy has fallen short of meeting some of its goals, the EPA has the authority and flexibility to deal with most of these. Building upon the success of the first five years, the RFS policy’s most significant achievements are yet to come. However, changing the RFS statute now could bring this significant progress to a halt. The end result would be prolonged, dangerous, unhealthy, and environmentally destructive petroleum dependence. Since late 2007, when Congress enacted the second Renewable Fuel Standard (RFS) as part of the Energy Independence and Security Act (P.L. 110-140), the United States has moved toward lessening petroleum dependence, strengthening energy security, boosting both the rural economy and the broader domestic economy, and increasing the production and consumption of renewable, low-carbon biofuels. From 2008 through 2012, the United States consumed more than 59 billion gallons of renewable ethanol and 2.7 billion gallons of renewable biodiesel, instead of petroleum-based gasoline and diesel (the energy equivalent of about four months of current U.S. gasoline consumption). Renewable ethanol today displaces almost ten percent of the gasoline consumed in the United States (by volume) and renewable biodiesel displaces about 1.5 percent of diesel fuel. This has produced many positive effects for U.S. energy security, the economy, and climate stability:
This is not to say that the RFS implementation has been without problems. A number of challenges unrelated to the RFS and beyond the EPA’s or the biofuel industry’s control had significant impacts on RFS implementation. The economic recession significantly delayed the development and deployment of next generation biorefineries. Little capital was available. The unanticipated decline in U.S. liquid fuel consumption reduced the time in which ethanol supply would saturate the gasoline market at the ten percent blend rate. Extreme weather around the globe during this period, culminating in the 2012 U.S. drought, caused significant crop failures and dramatic agricultural commodity price spikes and volatility, resulting in increased competition among various industries for scarce corn supplies and other commodities. As a consequence of all of these problems, RFS progress has been delayed. Yet, throughout, the ethanol industry and markets have adjusted, and the EPA has used its authority and flexibility under the existing statute to adjust RFS implementation as needed in response to these challenges and changing conditions. Progress is now accelerating. However, a problem that the RFS has contributed to in part is land use change. The RFS – by design -- put upward pressure on the price of corn and soybeans. Farmers needed higher prices to make ends meet a decade ago. Many other factors also contributed to rising prices from 2008 through 2012 (e.g., weather-related crop failures, U.S. and other government policies, financial speculation, growing global population, increasing global demand for meat, etc.). Higher prices encouraged increased corn production. Most of the increased production came from increased yields on existing corn acreage, reducing corn-soy rotations, switching from cotton, barley, and oat production to corn, and converting pasture. However, some of the increased production came from converting grasslands and former Conservation Reserve Program lands to row crops, and opening other marginally productive land to row crop production. These latter types of land conversion cause the greatest environmental concern. Corn production requires considerable nitrogen fertilizer, and more nitrogen is often used on less fertile, marginal land. Inevitably, some of the nitrogen escapes into the atmosphere where it becomes a highly potent GHG. Excess nitrogen and phosphate fertilizers also flow into surface and groundwater, polluting rivers, lakes, estuaries, and fisheries. Land conversion also increases GHG emissions in and of itself, when carbon dioxide is released from converted soils; it increases soil erosion; and it can destroy wildlife habitats and biodiversity. However, the RFS is only one among many contributing factors to rising farm commodity prices and demand for agricultural land. For example, Chinese demand for soy bean imports exerts a far greater demand for global agricultural land than the RFS. The best way for Congress to address these problems is by fixing the Farm Bill – not rewriting or repealing the RFS. Congress could limit and reduce these environmental harms significantly by strengthening Farm Bill conservation policies, expanding and investing more in conservation programs, and investing more in sustainable biomass energy crop establishment and advanced biofuel programs. Federal subsidies for crop insurance should be tied to conservation compliance. Federal benefits should not be extended to producers who convert existing grasslands and wetlands to land for row crops. Conservation program incentives and rents should be strengthened in parallel when crop prices and land values rise. Establishing more sustainable perennial biomass energy crops and agroforestry systems on highly erodible lands, in flood plains, and as watershed buffers should be encouraged, as should double cropping and the planting of cover crops. These steps combined would help protect and restore soils, water quality, habitats, and healthy ecosystems. Another problem that has been attributed to the RFS is that it has driven up food prices. But a review of USDA data reveals that food inflation in the United States has slowed significantly since peaking in 2007 and 2008, despite accelerating production of corn ethanol during this time. The price of meat, poultry, and dairy has increased at a faster rate on average during this time because of the industry’s sensitivity to feed prices. But in 2013, overall U.S. food inflation is expected to slow to between 1.5 and 2.5 percent, compared to 2.6 percent last year, and the global food commodity price index has dropped sharply. (USDA data showed that very little of the food price increase was due to biofuels production – the price of oil as an input and for transportation and processing was much more significant). Finally, much concern has been expressed about the ethanol blend wall. The oil industry has formally petitioned the EPA to reduce the RFS volume requirements for 2014, arguing that the ethanol market is saturated. However, now that corn and ethanol prices have dropped sharply with the harvesting of a bumper corn crop, there seems to be significant room yet for the ethanol market to grow – without reducing the 2014 volume requirement. Lower-priced E85 and E15 blends can now offer consumers a much better deal at the pump than gasoline. The gap between ethanol and gasoline prices has widened in recent months ($0.80 to $1.00 per gallon). Ethanol is now at least 30 percent less expensive, making it cheaper than gasoline on an energy equivalent basis. This price gap has opened a new opportunity for fuel retailers to market higher ethanol blends (E85 and E15) and pass on the savings to consumers. Consumers are apparently ready to buy higher blends of ethanol, if the price is right. According to a recent public opinion poll, more than 80 percent say they would like to have the choice to buy higher E15 and E85 blends at their local gas stations. And, selling more E15 and E85 at competitive prices may be better for some fuel blenders as well: it may be cheaper to sell more ethanol at a discount than to buy additional Renewable Identification Numbers (RINs) in lieu of ethanol. If fuel marketers take advantage of this, the ethanol "blend wall" will begin to shift well above ten percent of the gasoline market. There will be no need for the EPA to reduce the overall renewable fuel requirements in 2014. Looking ahead, corn and corn ethanol production are steadily improving in terms of yields, productivity, co-products, energy efficiency, resource conservation, and GHG emissions. Corn producers, in general, are using less nitrogen fertilizer and fuel per bushel produced. Corn yields are continuing to increase (on average, with good weather). New corn varieties have improved the uptake of nitrogen fertilizer, reducing both the amount of fertilizer that is needed and the amount lost to the environment. Other new varieties have reduced the amount of enzymes and energy needed to process corn into ethanol. Corn ethanol plants are extracting more ethanol, corn oil, high protein animal feed, and other co-products from each bushel of corn. New enzymes are being used that increase the ethanol yield, while also increasing oil extraction and reducing energy use. Soon cellulosic biofuels will be made from other parts of the corn plant not previously used – the corn kernel fiber and corn stover -- producing even more renewable fuel from each corn plant. The corn ethanol industry is already approaching a 50 percent life cycle GHG emission reduction level compared to gasoline -- well beyond the goal set in the RFS for conventional biofuel emission reductions in 2022 . Of course, corn ethanol is only the first generation of biofuels. Next generation, advanced, cellulosic, and algae biofuels offer much greater potential for reducing costs, life cycle GHG emissions, land use, resource inputs, and environmental impacts. For example, the Argonne analysis estimates that the life cycle GHG emissions from using corn stover to make cellulosic biofuel will be 96 percent less than gasoline; switch grass, 88 percent less; and miscanthus, 108 percent less. The RFS has encouraged the development of these next generation advanced biofuels. Hundreds of biodiesel plants are now on line, with the capacity to produce about two billion gallons of advanced biofuel per year. Each is meeting or exceeding GHG reduction thresholds of 50 percent or more compared to petroleum-based diesel. The first two commercial-scale cellulosic biofuel plants (INEOS Bio (Florida) and KiOR (Mississippi)) have come on line this year and are starting to produce biofuels. INEOS Bio is using agricultural residues and yard waste to produce ethanol and renewable electricity, and KiOR is using woody biomass to produce bio-crude and other drop-in fuels. They are expected to achieve life cycle GHG emission reductions greater than 80 percent compared to petroleum-based fuels. Many more commercial-scale, advanced and cellulosic biofuel plants are under construction and scheduled to start up over the next 18 months. These include Abengoa (its first commercial scale facility is being built in Kansas), AltAir (California), Cellana (Hawaii), Cool Planet Biofuels (Louisiana), DuPont (Iowa), Fiberight (Iowa), Fulcrum (Nevada), Gevo (Minnesota), Joule (New Mexico), Poet/DSM (Iowa), Sapphire (New Mexico), and Solazyme (Illinois). They use a wide variety of biomass feedstocks (e.g., algae, woody biomass, yard waste, municipal solid waste, switch grass, corn stover, wheat straw) and energy conversion technologies. Some would use no biomass feedstock at all (e.g., Joule, in New Mexico). All of these projects will meet or exceed GHG reduction thresholds of 50 percent or more compared to petroleum-based fuels, and some by a very wide margin. This is just a partial list of advanced and cellulosic biofuel projects that are now underway and nearing completion thanks to a strong RFS. Environmental Entrepreneurs (E2) reported recently that there are 160 commercial-scale, advanced biofuel projects now planned, under construction or completed, representing almost $5 billion in private investment since 2007 and additional billions in public investment. By 2016, E2 predicts the United States will have an additional 0.6 to 1.1 billion gallons of new advanced biofuel capacity installed – if current trends and policies continue. Few, if any, of these projects would have been started had it not been for Congress’s long-term, bipartisan commitment to renewable fuels and feedstocks, research and development, public investments and incentives, Farm Bill energy programs, and the RFS. Many of the next generation of advanced biofuels plants are building upon the success, experience, infrastructure, and markets established by the first generation of biofuels. Others are charting new paths. Progress is beginning to accelerate. That is why the possibility that Congress may change the RFS now is of such great concern. Changing the RFS statute now, as the oil industry and some in Congress are suggesting, could bring this significant progress to a halt. Making changes now, after so much has been invested to meet the current policy goals, will delay or halt further advances, cause significant economic losses, and introduce more uncertainty across the industry, among investors, and in the markets. All to what end? The result would be prolonged, dangerous, unhealthy, and environmentally destructive petroleum dependence. It would be a blow to the nation’s energy security, economic development, job creation, climate change mitigation, and to its sustainable future. It would be far better at this juncture in the implementation of the RFS for Congress to stay the course.
Top-Rated Climate Nonprofit – 4-Star Charity