Promoting Smart Biofuels Policy at the State Level

In the search for alternatives to oil, biofuels have emerged as a
promising answer to wean us off our oil addiction.  By some estimates,
biofuels could reduce
greenhouse gas emissions by 1.7 billion tons per year, be cost
competitive with gasoline and provide a major source of revenue for
farmers.  

However, not all biofuels
are created equal and the rapid rush to develop biofuels is beginning
to show some dangerous trends.  Biofuel material is being grown
on protected lands, fuel production is competing with food production,
and recent data seems to indicate that almost all biofuels used today
in the United States cause more greenhouse gas emissions than conventional fuels when the full emissions costs of producing the biofuel is taken into account.

This Dispatch
looks at some of the problems with biofuel production and how states
can implement smart policy to ensure sustainable biofuel development.

The Problem with Bad Biofuel Policy

Biofuels
are a type of fuel made from plants and other forms of biomass.  The
two main forms of biofuels are ethanol and biodiesel.   Ethanol is made
from a variety of materials, including sugar cane, corn, trees, grass
and even municipal solid waste.  Cellulose, which makes up a majority
of a plant's structure, can be broken down into sugars, which can then
be converted into ethanol.

Most of the ethanol produced in the United States is from corn. According to the National Corn Grower's Association, 1.8 billion bushels of corn were used to produce 4.9 billion gallons of renewable fuel.  Ethanol production consumes
20% of the corn crop in the U.S. and the new federal energy
legislation, which mandates a doubling of ethanol made from corn, is
predicted to increase that amount to one third of the total corn crop.
 Yet, environmentalists are seriously concerned with the heavy dependence on corn-based ethanol.

The
myopic focus on only developing corn-based ethanol is leading our
alternative fuels into a bad direction. Corn-based ethanol is among the
least efficient, most polluting, and overall least sustainable biofuel
feedstock. In contrast, Brazil has been very successful in developing an efficient ethanol source from sugarcane, which, unlike corn in the U.S., has a higher energy return.

The Dependence on Corn:  For
starters, growing corn relies on fertilizers and pesticides that are
derived from fossil fuels.  Beyond the energy needed to cultivate corn,
ethanol has a tendency to absorb water
so it must be transported by trucks or trains, instead of in the
pipeline system used for oil and gasoline.  When all the energy needs
are taken into consideration, each gallon of ethanol takes the
energetic equivalent of about three-quarters of a gallon of ethanol to
produce.

Negative Environmental Consequences:  Beyond
the inefficient production process, the potential negative
environmental impacts of corn-ethanol production have begun to be
raised.  An alternative fuel policy is certainly desirable, but not if
the environmental consequences begin to outweigh the benefits.  An Environmental Defense study
drew attention to the increased water demands from new ethanol plants,
particularly with the construction of new plants in areas with existing
water stress, like the Ogallala Aquifer region, which supports the
majority of agriculture in the southern Great Plains.

Recently, the ability of corn-based ethanol to decrease greenhouse gas emissions has been called into question.  A studyScience
looked at the overall effect ethanol production has on greenhouse gas
emissions.  The study found that once all the land use implications are
taken into effect, corn-based ethanol actually doubles greenhouse
emissions over 30 years, instead of producing a 20% savings.  The study
argues that previous greenhouse emissions savings were calculated
without taking into consideration the emissions from land-use changes. 
For exmaple, with more demand for biofuels, farmers will plow up more
forest or grassland, which had previously acted as carbon sinks, releasing the stored carbon into the atmosphere. published in

In addition, another study analyzed
the effect of nitrogen leaching from fertilized corn fields.  The
results show that the increase in corn cultivation needed to meet the
renewable fuels goal of the federal energy policy would increase the
amount of dissolved nitrogen in the Mississippi and Atchafalaya Rivers
substantially.  Excess nitrogen in rivers can be toxic to humans and cause water quality problems.

The problem with a hastily developed ethanol policy is best seen in Iowa, a state known for its active ethanol production.  Iowa's increased ethanol production has led to 394 instances in the past few years in which ethanol plants violated regulations meant to protect the health of citizens and their environment.  As one of the state's environmental inspectors said, “It's very significant. We anticipated some issues, but were disappointed there were so many issues.”

Food versus Fuel:  Beyond
the environmental impacts, there is the uncomfortable competition
between growing corn for food and growing corn for fuel.  In the rush
to develop the biofuel market, mass subsidies were given to the corn
industry.  In 2006, corn ethanol subsidies totaled $7 billion
for 4.9 billion gallons of ethanol.  That works out to a subsidy of
$1.45 per gallon of ethanol.  In the long term, such a high level of
subsidy makes ethanol use unaffordable.  Additionally, it shifts the
incentive for farmers to begin growing corn for fuel instead of for
food.

The problem gets worse.  Besides farmers
choosing to grow corn for fuel instead of food, rising demand for corn
increases its costs for consumers.  If oil is at $50 a barrel, then
converting corn into ethanol is profitable as long as a bushel of corn
is less than $4.  But currently a barrel of oil is twice
that price, which translates into corn ethanol still being profitable
if it trades at almost $8 per bushel.  When the price of corn rises, food prices rise and not just in products that directly use corn, but also in indirect products like meat, eggs and milk.

Not all is lost, however.  As stated earlier, not all biofuels are
created equal.  The key is ensuring that a smart, healthy biofuel
policy is developed and implemented.

The Smart Way to Produce Ethanol

Even the studies that harshly criticize corn-based ethanol recognize the need for and potential of other biofuel sources.  Some research also argues that the food versus fuel threat is overstated
and the tension can be avoided with smart, sustainable policy that
ensures the health of the soil and water resources and ensures fair
prices for farmers.  And, despite all the controversy, it does appear
that there is a net greenhouse gas reduction
from using ethanol last year.  States are taking the lead in biofuel
production and development and a few examples are listed below.

Diversifying Ethanol Production:  Diversifying
biofuel production is the first step.  Cellulosic ethanol, for
instance, is more efficient than corn-based ethanol and cellulose is
more abundant.  Cellulose
is the fibrous material that makes up most of plant matter in wheat,
switch grass, corn stalks, rice straw, and even wood chips.  Cellulosic
ethanol provides 540% of the energy used to produce it, compared with just 25% more energy returned by corn-based ethanol.  The study in Science magazine points to ethanol production from waste products as a way to bypass the problems of ethanol production from food stocks.  Waste products can include
sawdust, peanut hulls, sewage sludge, cotton ginning waste, and chicken
litter.  Producing ethanol from these sources not only ends the food
versus fuel competition, but also finds a productive way to deal with
waste.  This technology has not yet reached commercialization but would
benefit from state support.  

• Minnesota currently has two bills looking to develop other forms of ethanol.  HB 589/SB 480 and HF 2200/SB 2074, among other things, support projects that develop cellulosic ethanol and improve the efficiency of hydrogen.

• Virginia's SB 689,
  which was signed by the Governor, establishes a grant program for the
  development of biofuels and ethanol fuels and expands qualifying
  ethanol products to potatoes, cereal grains, whey, sugar beets, forest
  products, residue and waste.

• North Carolina  SB 1451
  creates a biodiesel incentive fund that prioritizes grants based on the
  amount of North Carolina waste products used in the production of
  biodiesel. 

• Florida SB 2870 expands the definition of renewable energy resources to include waste products from livestock or poultry operations.

Strengthening Ethanol Delivery Infrastructure:  Once
ethanol has been produced, the delivery infrastructure must be in place
to ensure that people can actually use and have access to ethanol. 

• Iowa has two bills that look to increase renewable fuel distribution and use.  HF 2247 provides for motor fuel pumps which dispense renewable fuel.  HF 2632 provides for, among other things, infrastructure associated with storing, blending, and dispensing renewable fuel. 

• Arizona is also looking to establish a Biofuels Conversion Program within the state's Department of Energy to convert existing and future equipment at motor fuel dispensing sites so that they will be able to dispense biofuels.

• Hawaii's HB 3179
  expands the definition of “renewable energy producer” to include
  growers and producers of organic materials used primarily for the
  production of biofuels or other fuels, so that they will be eligible
  for direct leases of public land.  This not only encourages production
  of biofuels, but also removes any potential bias against biofuel
  development by allowing access to leases of public land.

• Illinois has introduced HB 5855,
  the Renewable Energy Sources Act, to provide for the interconnection of
  eligible electric generators with the distribution systems of electric
  utilities.  Electric generators include renewable energy sources, like
  hydroelectric power, landfill gas or sewage treatment gas, biomass or
  biogas, geothermal energy plants, wind-powered plants and solar powered
  plants.  This will make it easier for renewable energy electricity to
  be distributed throughout the state.

Providing Incentives to Encourage Ethanol Use: There are several levels at which states can provide incentives for ethanol use.

• Some can be as simple as New York's AB 9051, which provides a tax credit for the purchase of an alternative fuel or hybrid car.

• Others are more involved, such as Connecticut's SB 261, which provides tax credits for households that install alternative energy-based heating and cooling systems in their homes.

Finding money to support production development is not always easy. Virginia did it through SB 444,
which increased the state motor fuels tax rate by $0.02 per gallon with
half of the revenue deposited into the Biofuels Production Fund to give grants for biofuels production.
States can also practice what they preach and mandate biofuel use for their own uses.

• Kentucky HB 529
  requires state-owned vehicles capable of using ethanol, biodiesel or
  other biofuels to refuel with such biofuels whenever available.

• Wisconsin's AB 936 would have also required state-owner or leased trucks to use biofuels, but the measure failed to pass the Senate.

Conclusion

Biofuels policies are complex.  The urgency and excitement surrounding
renewable energy can result in oversight of negative environmental
consequences if policy is not designed to encourage the most
energy-efficient versions of biofuels.  Ensuring that biofuels are
developed in a sustainable manner will lead to long-term gains and
finally help wean us off our oil addiction.