US producers of fuel ethanol must be gritting their teeth. First, markets turned against them. Then political support began to weaken. Now pressure increases from both directions as biofuel from another source, algae, shows promise and demands its share of the public weal.
The golden age of ethanol turns out to have been 2006-07, when oil refiners needing oxygenate to meet federal gasoline specifications abandoned methyl tertiary butyl ether under threat of product-liability lawsuits. Congress had just enacted a generous mandate for grain ethanol and left in place a hefty tax credit for blenders and a tariff on imports. Responding to inevitably overbuilt production capacity, Congress in 2007 helped yet again by expanding the mandate.
By then, however, ethanol's environmental virtues had come under doubt, and food prices were rising with the growing demand for grain. So Congress capped the mandate for ethanol from corn while stipulating a large, phased-in increment to be filled by "advanced biofuel," including biodiesel and ethanol from cellulosic sources such as switchgrass and corn waste.
Large mandate
Despite the cap, the mandate set in 2007 for corn ethanol remained industrial scale, twice the level written into law just 2 years earlier. And, at least to some observers, the broad ambition for cellulosic ethanol gave the grain-based pioneer intellectual cover: Burning food for fuel didn't look quite so injudicious if the practice opened gates for ethanol from indigestible plant matter. The progression still would benefit agricultural interests and keep political favors flowing.
But markets and technology haven't cooperated. A margin squeezed has forced many ethanol producers into bankruptcy. And cellulosic ethanol, despite reports of advancing technology, remains a perpetual step behind commercialization. Oil refiners, forced to worry about supply of materials they must sell in growing amounts with gasoline and diesel, have begun to buy distressed ethanol plants. The process won't help ethanol's heretofore saintly standing with politicians, who prefer farms and agribusiness giants to oil companies.
Now come biofuels from algae, which have interesting advantages over ethanol made from grain. Algae can grow on land that won't support food crops. Biofuel yields per acre are higher with algae than they are with ethanol from traditional agricultural sources. Natural processes by which algae produce oils absorb carbon dioxide. And hydrocarbon fuels from algae, it is hoped, will include products such as gasoline, diesel, and jet fuel meeting the same specifications as corresponding petroleum products.
Like agricultural ethanol and biodiesel now on the market or under development, fuels from algae can't compete without subsidization. Supporters of them, therefore, are asking to be treated the same as advanced biofuels. This month, the Algal Biomass Organization (ABO) and Biotechnology Industry Organization called on congressional leaders to support legislation classifying algae as an advanced biofuel feedstock. The change would make production of biofuel from algae newly eligible for a $1.01/gal tax credit and accelerated depreciation of plants. ABO Executive Director Mary Rosenthal calls the current disparity "one of the biggest barriers to the further commercialization of algae-based biofuels."
Test of motives
The initiative tests congressional motives. Algae lacks the automatic political support that grain-based ethanol receives from its ties to farming. It also has early support from large corporations unrelated to agriculture. Last year, ExxonMobil Corp. formed an alliance with Synthetic Genomics Inc. to conduct long-term research into biofuel production from photosynthetic algae. It expects to invest more than $600 million in the venture. Dow Chemical Co., too, is exploring biofuels from algae. Working with Algenol Biofuels Inc., it plans a pilot plant in Freeport, Tex., to capture carbon dioxide for use in the conversion of algae into ethanol.
Projects like these, backed as they are by companies able to invest for the long term, challenge the farming industry's domination of biofuels. Whether they also represent a competitive threat, no one yet can know. They and the nascent industry to which they belong do, however, force Congress to show that its support for biofuels hasn't been just a huge political favor to agribusiness and farm states. Even in industries dependent on subsidies, competition is healthy.
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