GMF brings Biofuels debate to Capitol Hill
On Wednesday, March 7, 2007, GMF hosted the second of a series of luncheon discussions on transatlantic approaches to biofuels. This event, held on Capitol Hill with staff from key Senate and House Committees, together with representatives of NGOs, think tanks, and embassies, focused on the benefits and challenges of expanding ethanol production in the United States.
The expert panel was made up of Reid Detchon, Executive Director of the Energy Future Coalition and a strong proponent of biofuels; Dr. Bruce Babcock, Director of the Center for Agricultural and Rural Development (CARD) at Iowa State University; Tim Searchinger with the Land, Water, and Wildlife Program at Environmental Defense; and Jean-Marc Trarieux, Agricultural Attaché at the European Commission Delegation to the United States. The discussion was moderated by Ken Cook, President of the Environmental Working Group. A podcast interview with Dr. Bruce Babcock can be found here.
Mr. Detchon emphasized three aspects of biofuels: the drivers, the targets, and the economic impacts. Climate change and oil dependence are the two main drivers of increased ethanol production in the United States, and corn has enormous potential as a fuel source, according to Mr. Detchon: current production is at 5.5 billion gallons of ethanol, while corn could potentially be the source for as much as 15 to 20 billion gallons. By contrast, the goal of the U.S. Renewable Fuel Standard is 7.5 billon gallons by 2012. Despite these numbers, Mr. Detchon said the goal should be to go beyond corn to cellulosic materials for ethanol production. The Department of Energy has recently given out grants for six cellulosic refineries which will start to come online within the next five years. He dismissed the "so-called Food vs. Fuel discussion," contending that global agriculture has long suffered from over- and not under-production of food. Global hunger is caused by lack of money or infrastructure for distribution, not a lack of food itself.
Dr. Bruce Babcock then explained the links between the ongoing ethanol boom and shifts in agricultural production and prices. According to Babcock, corn prices have doubled since last June, and the result will be increased corn production in the United States and worldwide. The U.S. will soon reach ethanol production levels of 14 to 15 billion gallons, and the increased production or corn for ethanol (now standing at 13 percent of the U.S. corn crop) has been driven by four factors: high oil prices; the mandatory replacement of MTBE in fuels; the fuel tax credit; and the Renewable Fuel Standards. There has been a great deal of fluctuation in corn prices in the past, but Dr. Babcock predicted that this time prices-which have increased from $2 to $3.50 due to increase biofuels production-won't come down again. And, due to its huge world market share, U.S. corn prices are essentially the world price.
Babcock's predicted surge in U.S. corn acreage-which could reach 94 million acres-would likely have at least two major side-effects: as U.S. farmers switch soybean acres to corn, South America will step in to replace that part of current U.S. soybean production; and livestock production will temporarily go down (though re-adjusting in the medium-run), driven by higher food prices.
Dr. Babcock was not optimistic about cellulosic ethanol replacing corn-based ethanol, at least in the near future. There is no market yet, he contended, and the resulting lack of investment will only lead more and more producers and investors to jump into corn production. Dr. Babcock's GMF policy brief, "Impacts of Increased Corn-Based Ethanol Production in the United States," can be found here.
Tim Searchinger turned to the issue of ethanol production's net impact on the environment, arguing that-contrary to much of the talk about supposed benefits, some methods of producing biofuels will actually increase global warming, due to land conversion and the carbon release it triggers. The conversion of forests and grassland into farmland for ethanol production leads to the release of huge amounts of carbon that otherwise would remain stored in plants and soil. This is especially true when rainforests are burned down-as happened in Indonesia and Malaysia-for the sake of palm oil produced for export to Europe to fulfill Europe's renewable fuel mandates. This had contributed to Indonesia moving to third place in carbon dioxide emissions. One solution, he argued, is to produce biofuels from products that don't involve major shifts in land-use, including the conversion to energy use of agricultural waste products, wood chips, and manure-the latter conversion producing the highest greenhouse gas benefits. He proposed that biofuels policies be based on carbon reduction goals and not on the fulfillment of renewable mandates.
Shifting the focus to Europe, Jean-Marc Trarieux outlined the European Union's biofuels targets and policies. The emphasis in Europe is on biodiesel, which makes up 80 percent of the EU's combined use of biofuels. The EU's target of moving to 2 percent of total fuel consumption from biofuels by 2005 was missed, but the EU did manage a jump from 0.5 percent in 2003 to 1 percent in 2005. The next target is 5.75 percent by 2010, and Mr. Trarieux also mentioned that European leaders were currently discussing to introduce far-reaching, legally binding renewable energy targets. [On March 8-9, European leaders did agree on a legally binding objective to meet 20 percent of their energy needs and 10 percent of their fuel needs with renewables by 2020.] Mr. Trarieux explained that, though European biodiesel is at present mainly produced from rapeseed, the goal is to achieve diversity of supply using domestic agricultural waste for second generation biofuels, and-to an even larger degree-biodiesel imports.
The subsequent discussion demonstrated the huge interest, from a variety of policymaking and other perspectives, in the question of domestic interests that will shape biofuels policies in the United States and Europe, the prospects of sustainable biofuels production in the U.S. and abroad, and the future of cellulose-based second-generation biofuels production.