US biofuels policies flawed, study finds

US policymakers need to reconsider the unintended consequences of federal subsidies and tariffs that go to domestic ethanol producers, concluded a study from Rice University’s Baker Institute for Public Policy.

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Jan. 7 -- US policymakers need to reconsider the unintended consequences of federal subsidies and tariffs that go to domestic ethanol producers, concluded a study from Rice University’s Baker Institute for Public Policy.

A paper on the study results, "Fundamentals of a Sustainable US Biofuels Policy," questions the economic, environmental, and logistical basis for corn-based ethanol. The paper’s authors question whether mandated volumes for biofuels can be met.

"We need to set realistic targets for ethanol in the United States instead of just throwing taxpayer money out the window," said Amy Myers Jaffe, one of the paper’s several authors. Jaffe is a fellow in energy studies at the Baker Institute and associate director of the Rice Energy Program.

The US government spent $4 billion in biofuel subsidies during 2008 to replace roughly 2% of the US gasoline supply. The average cost to the taxpayer of those “substituted” barrels of gasoline was roughly $82/bbl, or $1.95/gal, on top of the retail gasoline price.

A research grant in environmental engineering from Chevron Technology Ventures supported the study.

The paper suggests that Congress should reconsider biofuels mandates as outlined in the Energy Independence and Security Act, which outlines production targets for renewable fuels, mainly biodiesel and ethanol. EISA calls for production targets of 9 billion gal/year of biofuels in 2008 rising to 36 billion gal/year by 2022.

“Corn ethanol is capped at 15 billion gal/year in the law, but even that level will be difficult to reach given logistical and commercial barriers,” the study said, adding that the use of flex-fuel vehicles is unlikely to be extensive enough to achieve the EISA mandates.

EISA also called for 21 billion gal of advanced biofuels, produced from sources like switch grass, corn stover, and algae, to be used in the US fuel supply by 2022. But the Baker Institute study said existing US mandated volumes for cellulosic ethanol and other nonfood biofuels currently are not achievable commercially.

The study’s authors also question the tariff imposed on ethanol imported from Latin America and the Caribbean.

Because sustainable production of US corn-based ethanol faces limitations, the study found "tariff policies that block cheaper imports are probably misguided…. We believe on balance that the economic and geopolitical benefits to this trade with select regional suppliers would outweigh any 'energy security' costs to having some larger percentage of US ethanol supplies arriving from foreign sources."

Increased corn-based ethanol production from the Midwestern Corn Belt could exacerbate damage to ecosystems and fisheries along the Mississippi River and in the Gulf of Mexico, the study said.

Runoff from nitrogen fertilizers contributed to the gulf’s “dead zone,” a large area of poorly oxygenated water near the mouth of the Mississippi River in which some organisms cannot live. Runoff includes fertilizers and chemicals such as herbicides, fungicides, and pesticides.

Increased corn production to meet growing ethanol mandates also means farmers will use more water for irrigation. This could create water shortages in some areas experiencing significant increases in fuel crop irrigation.

Moreover, the study challenges claims that ethanol use lowers greenhouse gas GHG emissions.

"There is no scientific consensus on the climate-friendly nature of US-produced corn-based ethanol, and it should not be credited with reducing GHGs when compared to the burning of traditional gasoline," the study said.

Contact Paula Dittrick at paulad@ogjonline.com.

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