Why Biofuels Burned Up (Your) Dollars

Why Biofuels Burned Up (Your) Dollars

Farm state politicians, entrepreneurs and venture capitalists have sold biofuels to rest of us as a way to revive rural America, attack the problem of global warming and reduce our dependence on foreign oil.

In response, investors and taxpayers have poured many millions of dollars into corn ethanol. The returns have been skimpy.

That, at least, is the conclusion of a new report from the Worldwatch Institute called Red, White, and Green: Transforming U.S. Biofuels. The unhappy news is that we don’t seem to have learned much from our dismal experience with corn ethanol, and unless things change in Washington, we’re going to burn a lot more of it.

“From an environmental perspective, corn ethanol has not delivered in terms of climate benefits,” says Alice McKeown, an author of the report.

Worse yet, we could repeat the problems all over again with so-called next-generation biofuels. That’s sorghum, below.
A sorghum field.
Both the science and economics of biofuels are complex, McKeown told me by phone earlier today after I read the 50-page report, which offers a useful overview. It’s easy to find people who will argue about precisely how much corn ethanol reduces greenhouse gas emissions, if at all. (It depends on how and where the corn is grown, and how the ethanol refinery is fueled, among other things.) There’s also lots of debate about the impact of corn ethanol on food prices. (Recall the 2007 tortilla riots in Mexico.) Currently there’s a raging debate going on in Washington about whether the rising demand for corn generated by biofuels is is causing farmers elsewhere to turn forests into land for food or biofuels cultivation.

The study says:
Of particular concern is the link between biofuels expansion and the global conversion of land for agriculture, as biofuel crops compete with forests and food crops for limited land and other resources.
The ethanol industry hates the idea that it might be held accountable for the so-called indirect land use effects of corn ethanol. You can read Tom Zeller’s blog post and Kate Galbraith’s blog post, both at The New York Times’ Green Inc., for more on this controversy, which will be fought out this fall in Congress.

Despite those uncertainties. there are some things we do know about corn ethanol. For one thing, we know that the ethanol industry has been built with massive government subsidies -- a $1 a gallon production credit, along with a Renewable Fuel Standard (RFS) mandate that will require production of 36 billions of biofuels by 2022, as well as import tariffs on imported sugar-cane ethanol from Brazil. The tariffs persist despite the fact that Brazilian ethanol is cheaper to produce and better for the environment. The fact that presidential campaigns begin with caucuses in Iowa has been very, very good for the corn ethanol industry.

Government support “is the only reason the industry is up and running,” McKeown says. “Otherwise it wouldn’t be profitable.” Even so, much of the industry has failed to survive the combination of rising corn prices, declining oil prices and the credit crunch. Last October, VeraSun, the nation’s second-largest producer of ethanol, went bankrupt. So far in 2009, ten ethanol production plants have filed for bankruptcy, including those operated by Aventine Renewable Energy and Pacific Ethanol, according to Zacks.

“When is this going to be considered a mature industry that doesn’t need support from the government?” McKeown asks.

What’s more, while about a third of the corn grown in the U.S. this year will be used to make transportation fuels, ethanol will supply only about 10 percent of those fuels–not enough to bring the U.S. significantly closer to energy independence, according to the Worldwatch Institute.

Nevertheless, corn ethanol isn’t going away anytime soon because the government mandate ratchets up every year. Under the mandate, up to 15 billion gallons a year of biofuels don’t have to meet newly-imposed sustainability standards if they are supplied from existing plants. “That 15 billion mandate is probably going to be met by corn ethanol,” McKeown says.

So as we move gradually to so-called next generation biofuels such as cellulosic ethanol or fuels made from algae, what can we take away from the experience with corn ethanol? The Worldwatch Institute has three eminently sensible recommendations:
1. Base the tax credits for ethanol and biodiesel on performance, with fuels that achieve deeper greenhouse gas emissions reductions eligible for greater support.

2. Revisit the Renewable Fuel Standard mandate to ensure that it will promote second-generation biofuels instead of propping up first-generation biofuels.

3. Lower or eliminate the ethanol import tariff for fuels that meet sustainability criteria.
Put simply, we shouldn’t provide taxpayer-funded benefits without a demonstrable environmental payoff.

The trouble is, next-generation biofuels have been slow to arrive. And while a big pile of government money is on the way to speed their development -- the Department of Energy has committed $385 billion for six cellulosic ethanol plants, according to Worldwatch -- there are no guarantees that they won’t generate environmental problems of their own, especially if adapted at a large scale.

My own take? For all the promise of biofuels (and, for that matter electric cars), we should not overlook less glamorous actions that will provide clear-cut environmental benefits right away. Supporting public transportation, for one. (The Washington D.C. metro system, which I ride, is literally breaking down before our eyes.) Driving smaller, more efficient cars. Working from home. Riding bikes.
Strolling in Venice Beach. By vmiramontes
Or walking -- which costs you nothing, improves your fitness, reduces your dependence on foreign oil, generates zero GHG emissions (other than those from the food you need to fuel your body) and requires no support from Congress.

Cornfield -- Image by pavaranda.
Venice Beach -- Image CC licensed by Flickr user vmiramontes.