Philpott: Don't Suffer Biofuels Gladly

Tom Philpott at Grist covers the new report from a coalition of environmental groups, suggesting reasonable changes to biofuels policy.

They charge that the U.S. biofuel program actually "exacerbates global warming" because of greenhouse gas emissions from nitrogen fertilizers and the conversion of grasslands and rainforest to cropland. Further, the mass production of monocropped fuel feedstocks like corn, soy, and palm degrades soils, increases water pollution, drives out biodiversity, and endangers the food security of vulnerable populations. In the process of creating these lamentable side effects, biofuels are offsetting a relatively small amount of conventional fuel use -- and are grabbing the lion's share of federal support for alternative energy. In short, biofuels have been an abject failure.

Whether or not you agree with their analysis, it's hard to see how any sane person could object to their policy proposals....

Here are the proposals Tom mentioned:

1. Ensure that all policy incentives for renewable fuels, including mandates and subsidies, require attainment of minimum environmental performance standards for production and use, to ensure that publicly supported "renewable fuels" do not degrade our natural resources. Such standards would: certify net life-cycle greenhouse gas emission reductions through 2050, taking into account direct and indirect land use change; and do not cause or contribute to increased damage to soil quality, air quality, water quality, habitat protection, and biodiversity loss. Compliance with these standards must be verified regularly.

2. Restrict the RFS to fuel options that do not cause environmental harm, adverse human health impacts or economic disruption.

• Cap the RFS at current levels and gradually phase out the mandate for biofuels, unless it is clearly demonstrated that such fuels can meet minimum environment, health, and consumer protection standards.
• Establish feedstock- and technology-neutral fuel and environmental performance standards for all biofuels and let the market devise ways of reaching them.
• Periodically reevaluate the sustainability and performance of renewable fuels.
• Provide a mechanism and requirement to mitigate unintended adverse effects, including authority to adjust any mandate downward.

3. Tie the biofuels tax credits to the performance standards

• Phase out the biofuels tax credit to blenders while phasing in tax credits or subsidies for renewable fuels that are scaled in accordance to the fuels' relative environmental, health, and consumer protection merits.

4. Rebalance the U.S. renewable energy and energy conservation portfolio to reflect the relative contribution these options can make to reducing fossil fuel use, enhancing the environment, spurring economic development, and increasing energy security.

• Subsidies to renewable energy and conservation should be distributed more evenly between alternative energy sources, and should be allocated in a manner that is fuel - and feedstock -neutral; biofuels, particularly corn ethanol, must no longer receive the lion's share of federal renewable energy subsidies.
• New policy must: Emphasize energy conservation (we cannot drill or grow our way out of the energy crisis); Create a level playing field among renewable energy options; Set fuel-, feedstock- and technology-neutral standards, so as to reduce fossil fuel consumption and greenhouse gas emissions, improve environmental quality and biodiversity, and reduce pressure on agricultural markets.

5. Support research to improve the analysis of net climate impacts, net non-climate environmental impacts, commodity price impacts, and other social factors that are substantially affected by policies that promote biofuels. All of the previous policy asks must be based on better research on the impacts from biofuels; understanding these impacts are crucial to developing sound policies.

The environmental groups include the Clear Air Task Force, Environmental Working Group, Friends of the Earth, Network for New Energy Choices, and the New York Public Interest Research Group.

Human fat for fuel

According to an article in Forbes Magazine, a Beverley Hills doctor has been transforming the fat from his liposuction operations into biodiesel to power him and his wife's SUVs. According to the article:

Fat--whether animal or vegetable--contains triglycerides that can be extracted and turned into diesel. Poultry companies such as Tyson are looking into powering their trucks on chicken schmaltz, and biofuel start-ups such as Nova Biosource are mixing beef tallow and pig lard with more palatable sources such as soybean oil. Mike Shook of Agri Process Innovations, a builder of biodiesel plants, says this year's batch of U.S. biodiesel was likely more than half animal-derived since the price of soybeans soared.

A gallon of grease will get you about a gallon of fuel, and drivers can get about the same amount of mileage from fat fuel as they do from regular diesel, according to Jenna Higgins of the National Biodiesel Board. Animal fats need to undergo an additional step to get rid of free fatty acids not present in vegetable oils, but otherwise, there's no difference, she says.

Greenies like the fact that waste, such as coffee grounds and french-fry grease, can be turned into power. "The vast majority of my patients request that I use their fat for fuel--and I have more fat than I can use," Bittner wrote on lipodiesel.com. "Not only do they get to lose their love handles or chubby belly but they get to take part in saving the Earth." Bittner's lipodiesel Web site is no longer online.

Using fat to fuel cars might be environmentally friendly, but it's definitely illegal in California to use human medical waste to power vehicles, and Bittner is being investigated by the state's public health department.

Although it's unclear when Bittner started and stopped making fat fuel or how he made it, his activities came to light after recent lawsuits filed by patients that allege he allowed his assistant and his girlfriend to perform surgeries without a medical license.

Crossposted from EpicureanIdeal.

How much would a change in ethanol policy affect corn prices?

Here is the story from one of the most authoritative sources in agricultural economics, the Center for Agricultural and Rural Development at Iowa State University.

In a working paper (.pdf) released this month, Lihong Lu McPhail and Bruce Babcock consider the impact of three policy changes: (1) removing the Renewable Fuel Standards, which mandate that a certain fraction of fuel comes from ethanol, (2) removing the blenders tax credit, a direct tax subsidy to blenders, and (3) removing the tariff on imported ethanol, which encourages the conversion of U.S. corn to ethanol by keeping domestic ethanol prices high.

They reach the following conclusion about short term effects:

Eliminating any one of the policies would reduce average corn prices by less than 4%. Removal of all three programs would decrease average corn prices by 14.5%. The reason why the changes are relatively modest is that existing U.S. ethanol plants will only shut down if their variable cost of production is not covered. Changes in ethanol policies would have large distributional impacts. Corn growers, ethanol producers, and fuel consumers have a large incentive to maintain high ethanol consumption. Gasoline producers have a large incentive to reduce ethanol production and imports. Livestock producers have a large short-run incentive to reduce domestic ethanol production.

The authors plan future work to consider the corn and soybean markets jointly, and to lengthen the time period focus.

I would add that 14.5% seems like too big a price reduction to dismiss lightly. Also, the authors explain that ethanol plants will keep operating even if they are failing to pay for themselves, so long as their sales cover at least their variable costs (such as purchases of inputs). But, the investments in the plants themselves were in many cases also subsidized by the federal government, so the impact of federal policies has almost certainly been to raise corn prices by more than 14.5%, and in the midst of an unusual price spike to boot.

For further reading, the Environmental Working Group has just released a blistering report on ethanol policies (see coverage at Mulch).

Joe Biden: "Defuse this crisis"

A reader points out that Senator Joe Biden's column on the food crisis and agricultural policy includes some hard reflections, ostensibly in the form of questions but packing a punch.

Ask the hard questions and re-examine our own food policies. Does our current biofuels policy, which I have supported, that diverts corn from food to fuel make sense? Should we provide more flexibility to our food-aid program and allow USAID to locally purchase food abroad instead of requiring them to buy American food and shoulder all the transportation costs associated with that?

Ethanol and food prices

The increase in ethanol production from corn is not the only reason for rising food prices, Helen Jensen and Bruce Babcock point out in a recent article from Iowa State University. Some observers have been concerned that demand for biofuels will bid up prices for food uses of corn, with especially bad consequences for the price of meat and dairy products that use corn as feed. Jensen and Babcock don't dismiss this concern entirely, but they put it in perspective by noting the comparatively small contribution of corn to final meat and dairy prices and the wide variety of other supply and demand factors that influence these prices.

The authors cite recent analyses suggesting that a 30% increase in the price of corn might raise egg prices by about 8%, beef prices by 4%, dairy prices by 3% and total food prices by 1%.

I might point out a flip side of this comparatively unconcerned perspective on high corn prices: it suggests that farm subsidies that lower corn prices probably have not been helping consumers much either, as subsidy supporters claim.

Also, though not dramatic, a 1% increase in food prices is enough to matter. The article concludes:

And finally, food price increases, from whatever source, will directly affect the cost of U.S. nutrition programs. Higher commodity prices combined with shrinking inventories mean that the U.S. government will be forced to pay high market prices for food for school lunch programs. And the automatic food price escalators built into the food stamp program mean rising expenditures there. The silver lining, as far as the federal budget is concerned, is that at least a portion of the higher costs of nutrition programs will be offset by lower support payments for farmers because of high commodity prices.

Will biofuels starve the poor?

The law professor and applied economist C. Ford Runge and the agricultural economist Benjamin Senauer write in the recent issue of Foreign Affairs about "How Biofuels Could Starve the Poor." Quote:

By putting pressure on global supplies of edible crops, the surge in ethanol production will translate into higher prices for both processed and staple foods around the world. Biofuels have tied oil and food prices together in ways that could profoundly upset the relationships between food producers, consumers, and nations in the years ahead, with potentially devastating implications for both global poverty and food security.

Ethicurean links to Will Saletan at Slate and the Washington Post, who dissents ... er, half-dissents.

True, biotechnology can go wrong. But it can also go wonderfully right. Scientists are learning to split corn so it can make ethanol and still feed animals. We're studying the use of microbes to extract fuel from straw and wood waste. We're trying to grow biofuel in algae. We're even learning to make fuel from animal fat and excrement.

Yes, ethanol subsidies are a scam. Yes, we should drop our trade barriers and let Brazilian sugar cane wipe out American corn. Yes, we need solar power, conservation, and efficiency. But don't give up on biofuel. It just needs time to grow.