If ethanol subsidies were phased out, the price of corn would fall relative to the price of oil, to the point that it was again profitable to frement corn into ethanol… the main effect of the subisidies is to change the relative prices of corn and oil, by increasing the volume of ethanol.

The industry will be marginally profitable over the long term with or without subsidies. However, the industry is bigger, and the corn price is higher because of the subsidies. Because of peak oil, ethanol will remain part of the fuel mix, and become increasingly necessary. It does not do much for climate change, but it does do something for the liquid fuels problem.

First, the science is not nearly as settled as many would lead us to believe. Depending on which report you look at, ILUC either doubles ethanol’s carbon score or isn’t happening at all (according to the creator of the GREET model for calculating fuel emissions). On the direct carbon effects of fuels you don’t see a tenth of that variation. According to Dr. Lee Lynd at Dartmouth College, using biomass from converted land (to produce biofuels or pulp and paper) along with sustainable cropping practices would make any carbon debt from land use disappear.

But that is assuming that using land for energy crops has caused or will cause land use changes on the other side of the world. The data simply does not support this theory. Over the past five years, while ethanol production in the U.S. doubled, deforestation in Brazil declined by 50%. This was primarily due to the passage of laws that addressed the real causes of deforestation and some progressive partnerships between industry and NGOs. Moving forward, due to crop yield increases and the use of waste products (corn cobs in our company’s case) we won’t need new land to produce the biofuels required by the RFS.

The second and I believe more important beef that ethanol producers have with ILUC is that it selects only one indirect, market-mediated effect (land) and applies it to only one fuel pathway (biofuels). It leaves out the indirect effects that come from electric vehicles through increased nickel mining for batteries and increased coal-fired power plants for electricity. It ignores the indirect effects of petroleum, like disposing of petroleum coke and the GHG’s from military protection of foreign oil interests. They also ignore the increasing amounts of oil that come from more carbon-intensive sources like the Canadian Tar Sands. Ironically, while the EPA pieces together nine different models to try to predict the carbon intensity of biofuels 100 years from now, they use five year old data on oil.

The additional five-year study period that was in the final version of Waxman-Markey will give time to further understand a potential carbon emissions source that was first mentioned 18 months ago. As is suggested by Alice, the 15 billion gallons of corn ethanol in the RFS is already grandfathered in, so why not take the time to fully study this theory before including it in law?

Love your blog and read every one the moment they come out. Have never felt the need to comment until this article, which seems too tolerant of a biofuel that is ineffective in that its financial returns minus govt subsidies are negative.

Ethanol is too inefficient when produced from corn. This was railroaded through Congress in an election year. Heavy corn producing states were among the few states being fought for between the two-party system (also inefficient, another story another time). Standards for ethanol from corn (not sugar) were heavily lobbied.

Sugar ethanol is highly productive – on the order of 6 times more productive than corn ethanol. This means far fewer acres of forest or food-farmland lost to agriculture because the production yields are so much stronger. Why we have to have ridiculous tariffs on sugar ethanol, or sugar for that matter, highlights just how government intervention can create massive inefficiencies.

I’m all for supporting a biofuel or mode of transportation through subsidies when over the long-term, ie 5-10 years, the demand for the product(s) create financial returns. Financial returns, not forgetting social ones, are the only way that something will remain in existence without subsidies (remember the dot-com companies claiming negative gross margins would make them money? didn’t work.).

Time and research dollars on finding viable fuels from items already available in the US – ie landfills, wind, solar, kitchen grease (pick up a Whopper and fill your car’s tank) kills two birds with one stone. The only reason we have not made this a focus is bc companies want to PATENT their strains of grain and put a lock on the fuel market to their benefit.

Please be a bit more critical in your analysis around why something is currently in place. Your voice carries a lot of weight – please don’t waste it in the wind of rhetoric.

Thanks and keep up the good writing

First, Nathan is correct on the tax credits amount. The tax credit for ethanol is 45 cents per gallon and for biodiesel is $1 per gallon.

Regarding the ethanol tariff, the effect is to reduce the amount of foreign ethanol imported into the U.S. Although some Brazilian sugarcane ethanol is imported through a back door—known as the Caribbean Basin Initiative—the amount is limited and would arguably increase if the tariff was reduced or eliminated. Several members of Congress proposed a bill earlier this year to lower the tariff and allow in more foreign sources of sustainable biofuels.

The larger issue, however, is the question of indirect land use changes. In fact, the effects of these changes have been studied and are reasonably known (covered in the full report). The issue is not whether these effects have an impact and are measurable, but rather that when they are included the climate benefits estimates for corn-based ethanol are slashed dramatically—which has caused an outcry from the industry. We saw this earlier this year when California attempted to include land use changes in their low carbon fuel standard (delayed due to industry pressure) and when the EPA proposed a rule in May including land use changes as required by law (the industry has successfully added a measure to the moving climate bill to delay this for five to six years.) Both processes—California and the EPA—relied on transparent, science-based methods.

Regarding what the RFS will accomplish, the Energy Information Administration estimates that the mandate for 21 billion gallons of advanced biofuels will not be met by 2022. It’s important to note that the EPA can lower the annual volume requirements for advanced fuels and that the mandate itself is not a guarantee that the production levels will be met.

Concerning the first reader’s comment, current corn-based ethanol relies on significant fossil fuel inputs, including fertilizers and pesticides, farm machinery, irrigation pumps, biofuel refineries, and transport of the final fuels, among others.

Readers who are interested in how we can draw from a diverse set of energy options to cut our emissions and reduce our dependence on fossil fuels may be interested in another report by Worldwatch titled, “Low Carbon Energy: A Roadmap.” (download for free at http://www.worldwatch.org/press/prerelease/EWP178.pdf)

Many thanks,
Alice McKeown
Worldwatch Institute

Before I get into the substance of their argument, there are a few errors that need to be corrected. First, ethanol does not receive a “$1 a gallon production credit.” That’s biodiesel. There is a 45 cent per gallon tax credit that goes to blenders of ethanol, not producers.

Second, the tariff does not exist to keep Brazilian ethanol out of the U.S. We are and will remain their largest export market for some time. It exists to offset the tax credit which was established to encourage the growth of a domestic industry. The ethanol produced locally gives enormous economic benefits to taxpayers that you don’t get from ethanol imports.

Third, the ethanol industry does not hate the idea of being held accountable for any carbon emissions that are caused by ethanol. What we are opposed to is being assigned a massive carbon penalty for indirect effects before those effects are fully (or even partially) understood and before we calculate the indirect effects of all of the other fuels we compete against.

Fourth, two of the three things Worldwatch Institute are asking for are already being done. The RFS mandates 36 billion gallons of renewable fuel, 21 of which come from cellulosic ethanol and other advanced biofuels. In order to qualify for the RFS, those have to provide at least a 50 or 60 percent decrease in greenhouse gas emissions relative to gasoline. Cellullosic ethanol that meets those targets receives the $1 per gallon tax credit.

But what I’d really like to address is their contention that government support “is the only reason the industry is up and running.” Isn’t that true of all renewable energy sources? Isn’t the problem we’re facing one that was caused by our addiction to cheap fossil fuels that are harmful to the environment? If ethanol had a level playing field on which to compete with petroleum, it could easily compete. Until that day arrives, government support is crucial to keep our only existing alternative to oil.

Dunno. When is big oil not going to be supported by the government?
When is there going to be a level playing field for the two fuels?
When do we fess up that the difference between the environmental impact of fossil fuels and that of ethanol, which DOES NOT require fossil fuels of any kind to be made, if done properly, is MASSIVE?
When is war overseas going to be factored into overall impact, environmentally as well?
When are people going to stop whining about doing biofuels wrong and do it right?
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