Blogging Ethanol & Biodiesel

"Nobody" understands diversion of food to fuel cars

Tensions on government biofuel policies came to a breaking point Tuesday at the opening of the United Nations food summit in Rome as the head of the UN's Food and Agriculture Organization (FAO) asserted that "nobody" understood the diversion of food to fuel cars.

          Environmentalists and academics have cited biofuels for its part in the 60% increase in food costs since the beginning of 2007 and ensuing food shortage riots in more than 30 countries. Diversion of land from food crops to biofuels has added to about a third of the rise, Washington D.C.-based International Food Policy Research has said.

"Nobody understands how $11 to $12 billion a year on subsidies and protective tariff policies had the effect on diverting 100 million tons of cereals from human consumption, mostly to satisfy a thirst to fuel for vehicles," said Jacques Diouf, FAO director-general.

The position of the United Nations is that biofuels such as ethanol and biodiesel can help decrease global warming and create jobs for the rural poor, but the benefits may be counteracted by serious environmental problems and higher food prices. However, Brazilian President Luiz Inacio Lula da Silva soundly rejected criticism that ethanol production in Latin America's biggest nation has cut food output, blaming higher oil prices and farm subsidies instead.

It seems to be the never ending debate: one side cites all the evidence for increasing food prices, while the other side continues to reject it.

Minnesota rolling in soybeans

Last week, Minnesota Gov. Tim Pawlenty signed into law a measure that increases the state's current 2% biodiesel mandate ten-fold in less than a decade. There could have been no increase in the mandate at all, but what, or who, caused the increase?

In December 2005, Minnesota officials had to temporarily roll back the requirement in response to complaints from truckers that the fuel was becoming viscous and clogging fuel filters.

The state currently requires diesel to contain 2% biodiesel, but the new rules under set a new mandate of 5% by May 1, 2009, 10% by 2012, and 20% by 2015. Those are some of the largest increases in the nation, putting Minnesota at the forefront of biodiesel mandating.

Minnesota farmers raise 280 million bushels of soybeans annually (about 10% of the total U.S. crop) on 7 million acres, a 165% yield increase per acre. Soybeans and soybean products now account for about one-third of Minnesota's total agricultural exports.

It takes Mother Nature 250 million years to renew her fossil fuels, but for Minnesota soybean producers it takes only nine months. Thus, Minnesota is in a better position than most to produce more biodiesel from soybeans.

President Bush to veto farm bill?

Criticizing Congress's "massive, bloated farm bill" that would support millionaire non-farmers, President Bush's comments from the Rose Garden Tuesday indicate that he will veto the package if changes aren't made.

Looking to offset the increased spending that would doom the bill, congressional negotiators on April 25 reduced the volumetric ethanol tax credit for a second time in the talks. Incentives for biodiesel and renewable diesel were removed entirely. Negotiations on the now-$280 billion bill are ongoing, with discussions focused on finding ways to compensate for the proposed $10 billion increase to the farm direct payments program.

A major breakthrough occurred late last week when senior lawmakers agreed on a $1.7 billion package of tax breaks, and ways to finance the overall package. The 51¢/gal tax credit for corn-based ethanol would drop to 45¢, which would save over $1 billion alone. But another $500 million would be netted out by a new $1.01/gal cellulosic tax credit, assuming of course, that any gets made.

Unfortunate turn of events for German automakers

Amid rising fuel prices and anxiety as to whether the higher blend level could be run in German car engines, the country's Environment Minister Sigmar Gabriel said Friday that plans to raise the ethanol level from 5% to 10% had been utterly cancelled.
        The government had previously warned the 10% blend level plan would be abandoned if more than one million vehicles could not run the fuel. He said that the government was now estimating that, in fact, the engines of 3.3 million vehicles would have been unable to tolerate E-10.
        In a dynamic familiar to that which has transpired in the U.S., German automakers, whose cars generally do not score well in efficiency, had been supportive of the E-10 strategy as a way to forestall legislation that might enforce better fuel economy.
        Industry association Verband der Automobilindustrie, anchored by BMW and Mercedes-Benz's had previously submitted what they thought was the correct figure for the number of cars on German roads not capable of running E-10, but somehow, at 360,000 their number was way, way off.
        Now, with the cancellation of E-10, the German car industry will "have to come up with other technical measures" to meet European Union emission targets of 120 grams per kilometer, Gabriel said, joking that auto parts makers would be pleased.

It's about time...

TIME takes a moment from declining to name a Person of the Year to open up a discussion about ethanol - about four months and one "Energy Independence and Security Act" passage too late.
        The cover article, by Michael Grunwald, brings biofuels back into the spotlight for the time being, but the timing (apologies) is somewhat baffling. The issue, which hit newstands today, is basically a re-hash of the false environmental promise of corn-based ethanol.
        But this argument is already so well-documented that most journalists, at this point, have moved on and are now trying to be cynical about next-generation feedstocks, like biomass. No doubt the presses of the venerable weekly were held up so the author could coalesce a compelling lead ("I watched him grab a small anaconda with his bare hands") and spend a day in the Amazon with the Kamayura tribe.
        The article also falls short in that its foot-wide exploration of the negative consequences of biofuel mandates does not at all consider the harm to consumers who must pay more for food, or even the taxpayers who are essentially subsidizing the rural redevelopment of the interior Midwest. 
        But the worst offense of the article is that it wants to lump all biofuels, existing and future, together. This, in turn, forces Grunwald to make an entirely unsupported jab at technology that is not hurting anybody, let alone the environment, because it is not yet being practiced on any meaningful scale.
        "Even cellulosic ethanol made from switchgrass ... looks less green than oil-derived gasoline," Grunwald writes.
        This is not only a glib statement, it is likely wrong. The USDA's Agricultural Research Service is presently developing switchgrass for use on marginal, highly erodible lands. A recent study, meanwhile, showed that switchgrass yielded 93% more biomass per acre than corn.

Straight talk on ethanol comes into political fashion

Without getting into the specifics as to which presidential candidate we'd rather answer that red phone, we heard this week possibly one of the least pandering positions on ethanol a non-Michigan office-seeker has ever given.
        Speaking at a campaign stop in Terre Haute, Ind., Sen. Barack Obama, himself from one of the biggest corn states, said ethanol is a "transitional" technology that shouldn't be expected to cure the nation's addiction to oil.
        "Corn-based ethanol is not optimal. I've been a big supporter of corn-based ethanol... It's a good transitional technology, but the truth is, it is not as efficient as what the Brazilians are doing with sugar cane," Obama said.
        No word yet as to whether the Senator would support any change to the $3 billion of ethanol subsidies the U.S. doled out last year, but he's got competition as far back as 2000, when youthful upstart Sen. John McCain called ethanol "not worth it because it does not help the consumer."
        Debating the GOP field in Des Moines, of all places, McCain said "Ethanol subsidies should be phased out, and everybody here on this stage, if it wasn't for the fact that Iowa is the first caucus state, would share my view that we don't need ethanol subsidies. It doesn't help anybody."
        If you're curious, McCain drew 5% of the vote in the 2000 Iowa Caucus, or, behind W., Steve Forbes, Alan Keyes, and this guy.

Science Mag author hits back at pro-ethanol critics

Timothy Searchinger, the lead author of one of the Science pieces that found "there was little little doubt that ethanol is making global warming worse”, struck back at the RFA's coalition of ethanol backers, issuing an 11-page rebuttal against the bad science claims, including that the comparison between the oil and ethanol industries had been unfair.
        "The amount of land used to produce a gallon of gasoline is extremely small ... it is less than 1% off the amount of land used to produce a gallon-equivalent of ethanol," wrote Searchinger, a visiting scholar at Princeton's Public and International Affairs School. "And many oil-drilling lands, such as desert, support little carbon."
        Responding to criticism from the New Fuels Alliance (NEFA) and Argonne National Laboratory's Michael Wang that his study should have included the indirect impacts of oil, Searchinger responded: "Much of the world’s oil is either produced in deserts or offshore or on land that still remains in productive agricultural use. Because the effect of oil production on emissions from land use change is small, it is reasonable to omit it."
        Searchinger also took critics to task for claiming that the indirect land use study used an irrelevant ethanol usage figure.
        "This criticism could be valid if the study focused on the total increase in emissions from expected increases in corn-based ethanol," wrote Searchinger, "But the study focuses on the rate of emissions for ethanol, in other words, the level of greenhouse gas emissions per gallon (unit of energy) of ethanol.
        Searchinger added: "NEFA’s criticism could also be valid if the agricultural model used by the study calculated that more land use change would occur per gallon of ethanol at higher levels of ethanol than at lower levels ... But the agricultural analysis used for our study does no such thing. The results vary somewhat at different levels of ethanol but tell a comparable story."

U.S. import tariff on ethanol safe for now

        Speculation last week that the Bush Administration would be ending the tariff the U.S. levies on foreign imports of ethanol were shown to be unfounded Monday as the budget sent to Congress contained no such change.
        Some media outlets' overblown interpretation of comments made by Energy Secretary Bodman at a U.S. Chamber of Commerce luncheon last week had already prompted swift outcry from ethanol's formidable protectionist regime.
        Sen. Chuck Grassley (R-Iowa), the ranking minority member of the Senate Finance Committee, voice his opposition on the rumored move, while Sen. Ben Nelson said the 54 cent per gallon tariff on ethanol would be eliminated over the Nebraskan Democrat's “dead body.”

        But, according to the budget proposal sent Monday, the Administration will simply in the 2009 budget year hold discussions with lawmakers regarding the tariff, which is set to expire at the end of this coming December.
        The tariff, designed to protect U.S. corn-based ethanol makers from Brazilian imports, may not be in any imminent danger and yet, Bush's support for the ethanol industry may nonetheless be beginning to wane.
        In the nearly 5,800 words of the President's State of the Union address last week, Bush, who in the 2005, 2006, and 2007 addresses given prominent lip service to ethanol, did not even mention support for the industry, nor the multibillion-dollar Farm Bill measure now pending in Congress.

EU environmental groups rally against 10% biofuel target

         Citing water shortage and deforestation concerns, a consortium of 17 environmental non-governmental organizations are contesting the European Council's (the highest political body of the European Union) plan for a 10% binding minimum target for the share of biofuels in transport by 2020.
         In the groups' letter to EU Energy Commissioner Andris Piebalgs, the NGOs said the Council's target did not fully address the two issues, particularly because the proposal does not provide protection for savannas or permanent grasslands that may be threatened by expanding agriculture.
         Added to that is the NGOs' contention that the greenhouse gas calculator in the Council's draft proposal is not only "too simplistic," but also that it is "skewed towards making biofuels look better than they really are." In addition, "large scale biofuel production can cause indirect or knock-on impacts, such as increasing food and feed prices and increasing water scarcity, which would lead to negative impacts on the world's poor," the groups said.
         The NGOs are calling for a ban on the use of sugar cane, corn, and some varieties of canola and palm oils in biofuels production.
    Talk Back! Tell us if you think the critique is fair, or another cheap shot by naysayers at an easy target.

Senate legislation has two-tiered effect on ethanol stocks

        Equity shares of ethanol producers were mixed Monday after rising 9.7% on anticipation of the energy bill's passage in the U.S. Congress Thursday. As investors took profits and digested the impact of the Senate passage of the energy bill, which mandates a doubling of corn-based ethanol to 15 billion gallons by 2022.
        Large, diversified agribusinesses such as The Andersons and Archer Daniels Midland Co. closed at or near annual highs, benefiting from the fact that they are positioned to take advantage of last week's farm bill as well, which preserves existing subsidy programs for grain and cotton farms.
        "Pure" ethanol producers, however, sank Monday, Aventine Renewable Energy shares fell 38¢, or 3.3%, while VeraSun Energy and US BioEnergy, which announced plans to merge last month, declined around 1% each.
        In addition to not being affected by the subsidy aspects of the farm bill, smaller ethanol-only producers, while benefiting from the increased Renewable Fuels Standard, may not be in as strong a position as the majors to take advantage of the farm bill's cellulosic incentives.