Promoting Smart Biofuels Policy at the State Level

Promoting Smart Biofuels Policy at the State Level

Monday, March 31st, 2008


By J. Mijin Cha

Promoting Smart Biofuels Policy at the State Level

In the search for alternatives to oil, biofuels have emerged as a promising answer to wean us off our oil addiction.  By some estimates, biofuels could reduce greenhouse gas emissions by 1.7 billion tons per year, be cost competitive with gasoline and provide a major source of revenue for farmers.  

However, not all biofuels are created equal and the rapid rush to develop biofuels is beginning to show some dangerous trends.  Biofuel material is being grown on protected lands, fuel production is competing with food production, and recent data seems to indicate that almost all biofuels used today in the United States cause more greenhouse gas emissions than conventional fuels when the full emissions costs of producing the biofuel is taken into account.

This Dispatch looks at some of the problems with biofuel production and how states can implement smart policy to ensure sustainable biofuel development.

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The Problem with Bad Biofuel Policy

Biofuels are a type of fuel made from plants and other forms of biomass.  The two main forms of biofuels are ethanol and biodiesel.   Ethanol is made from a variety of materials, including sugar cane, corn, trees, grass and even municipal solid waste.  Cellulose, which makes up a majority of a plant's structure, can be broken down into sugars, which can then be converted into ethanol.

Most of the ethanol produced in the United States is from corn. According to the National Corn Grower's Association, 1.8 billion bushels of corn were used to produce 4.9 billion gallons of renewable fuel.  Ethanol production consumes 20% of the corn crop in the U.S. and the new federal energy legislation, which mandates a doubling of ethanol made from corn, is predicted to increase that amount to one third of the total corn crop.  Yet, environmentalists are seriously concerned with the heavy dependence on corn-based ethanol.

The myopic focus on only developing corn-based ethanol is leading our alternative fuels into a bad direction. Corn-based ethanol is among the least efficient, most polluting, and overall least sustainable biofuel feedstock. In contrast, Brazil has been very successful in developing an efficient ethanol source from sugarcane, which, unlike corn in the U.S., has a higher energy return.

The Dependence on Corn:  For starters, growing corn relies on fertilizers and pesticides that are derived from fossil fuels.  Beyond the energy needed to cultivate corn, ethanol has a tendency to absorb water so it must be transported by trucks or trains, instead of in the pipeline system used for oil and gasoline.  When all the energy needs are taken into consideration, each gallon of ethanol takes the energetic equivalent of about three-quarters of a gallon of ethanol to produce.

Negative Environmental Consequences:  Beyond the inefficient production process, the potential negative environmental impacts of corn-ethanol production have begun to be raised.  An alternative fuel policy is certainly desirable, but not if the environmental consequences begin to outweigh the benefits.  An Environmental Defense study drew attention to the increased water demands from new ethanol plants, particularly with the construction of new plants in areas with existing water stress, like the Ogallala Aquifer region, which supports the majority of agriculture in the southern Great Plains.

Recently, the ability of corn-based ethanol to decrease greenhouse gas emissions has been called into question.  A study published in Science looked at the overall effect ethanol production has on greenhouse gas emissions.  The study found that once all the land use implications are taken into effect, corn-based ethanol actually doubles greenhouse emissions over 30 years, instead of producing a 20% savings.  The study argues that previous greenhouse emissions savings were calculated without taking into consideration the emissions from land-use changes.  For exmaple, with more demand for biofuels, farmers will plow up more forest or grassland, which had previously acted as carbon sinks, releasing the stored carbon into the atmosphere.

In addition, another study analyzed the effect of nitrogen leaching from fertilized corn fields.  The results show that the increase in corn cultivation needed to meet the renewable fuels goal of the federal energy policy would increase the amount of dissolved nitrogen in the Mississippi and Atchafalaya Rivers substantially.  Excess nitrogen in rivers can be toxic to humans and cause water quality problems.

The problem with a hastily developed ethanol policy is best seen in Iowa, a state known for its active ethanol production.  Iowa's increased ethanol production has led to 394 instances in the past few years in which ethanol plants violated regulations meant to protect the health of citizens and their environment.  As one of the state's environmental inspectors said, "It's very significant. We anticipated some issues, but were disappointed there were so many issues."

Food versus Fuel:  Beyond the environmental impacts, there is the uncomfortable competition between growing corn for food and growing corn for fuel.  In the rush to develop the biofuel market, mass subsidies were given to the corn industry.  In 2006, corn ethanol subsidies totaled $7 billion for 4.9 billion gallons of ethanol.  That works out to a subsidy of $1.45 per gallon of ethanol.  In the long term, such a high level of subsidy makes ethanol use unaffordable.  Additionally, it shifts the incentive for farmers to begin growing corn for fuel instead of for food.

The problem gets worse.  Besides farmers choosing to grow corn for fuel instead of food, rising demand for corn increases its costs for consumers.  If oil is at $50 a barrel, then converting corn into ethanol is profitable as long as a bushel of corn is less than $4.  But currently a barrel of oil is twice that price, which translates into corn ethanol still being profitable if it trades at almost $8 per bushel.  When the price of corn rises, food prices rise and not just in products that directly use corn, but also in indirect products like meat, eggs and milk.

Not all is lost, however.  As stated earlier, not all biofuels are created equal.  The key is ensuring that a smart, healthy biofuel policy is developed and implemented.

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The Smart Way to Produce Ethanol

Even the studies that harshly criticize corn-based ethanol recognize the need for and potential of other biofuel sources.  Some research also argues that the food versus fuel threat is overstated and the tension can be avoided with smart, sustainable policy that ensures the health of the soil and water resources and ensures fair prices for farmers.  And, despite all the controversy, it does appear that there is a net greenhouse gas reduction from using ethanol last year.  States are taking the lead in biofuel production and development and a few examples are listed below.

Diversifying Ethanol Production:  Diversifying biofuel production is the first step.  Cellulosic ethanol, for instance, is more efficient than corn-based ethanol and cellulose is more abundant.  Cellulose is the fibrous material that makes up most of plant matter in wheat, switch grass, corn stalks, rice straw, and even wood chips.  Cellulosic ethanol provides 540% of the energy used to produce it, compared with just 25% more energy returned by corn-based ethanol.  The study in Science magazine points to ethanol production from waste products as a way to bypass the problems of ethanol production from food stocks.  Waste products can include sawdust, peanut hulls, sewage sludge, cotton ginning waste, and chicken litter.  Producing ethanol from these sources not only ends the food versus fuel competition, but also finds a productive way to deal with waste.  This technology has not yet reached commercialization but would benefit from state support.  

  • Minnesota currently has two bills looking to develop other forms of ethanol.  HB 589/SB 480 and HF 2200/SB 2074, among other things, support projects that develop cellulosic ethanol and improve the efficiency of hydrogen.

  • Virginia's SB 689, which was signed by the Governor, establishes a grant program for the development of biofuels and ethanol fuels and expands qualifying ethanol products to potatoes, cereal grains, whey, sugar beets, forest products, residue and waste.

  • North Carolina  SB 1451 creates a biodiesel incentive fund that prioritizes grants based on the amount of North Carolina waste products used in the production of biodiesel.  

  • Florida SB 2870 expands the definition of renewable energy resources to include waste products from livestock or poultry operations.

Strengthening Ethanol Delivery Infrastructure:  Once ethanol has been produced, the delivery infrastructure must be in place to ensure that people can actually use and have access to ethanol.  

  • Iowa has two bills that look to increase renewable fuel distribution and use.  HF 2247 provides for motor fuel pumps which dispense renewable fuel.  HF 2632 provides for, among other things, infrastructure associated with storing, blending, and dispensing renewable fuel.  

  • Arizona is also looking to establish a Biofuels Conversion Program within the state's Department of Energy to convert existing and future equipment at motor fuel dispensing sites so that they will be able to dispense biofuels.

  • Hawaii's HB 3179 expands the definition of "renewable energy producer" to include growers and producers of organic materials used primarily for the production of biofuels or other fuels, so that they will be eligible for direct leases of public land.  This not only encourages production of biofuels, but also removes any potential bias against biofuel development by allowing access to leases of public land.

  • Illinois has introduced HB 5855, the Renewable Energy Sources Act, to provide for the interconnection of eligible electric generators with the distribution systems of electric utilities.  Electric generators include renewable energy sources, like hydroelectric power, landfill gas or sewage treatment gas, biomass or biogas, geothermal energy plants, wind-powered plants and solar powered plants.  This will make it easier for renewable energy electricity to be distributed throughout the state.

Providing Incentives to Encourage Ethanol Use: There are several levels at which states can provide incentives for ethanol use.

  • Some can be as simple as New York's AB 9051, which provides a tax credit for the purchase of an alternative fuel or hybrid car.

  • Others are more involved, such as Connecticut's SB 261, which provides tax credits for households that install alternative energy-based heating and cooling systems in their homes.

Finding money to support production development is not always easy. Virginia did it through SB 444, which increased the state motor fuels tax rate by $0.02 per gallon with half of the revenue deposited into the Biofuels Production Fund to give grants for biofuels production.
States can also practice what they preach and mandate biofuel use for their own uses.

  • Kentucky HB 529 requires state-owned vehicles capable of using ethanol, biodiesel or other biofuels to refuel with such biofuels whenever available.

  • Wisconsin's AB 936 would have also required state-owner or leased trucks to use biofuels, but the measure failed to pass the Senate.

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Biofuels policies are complex.  The urgency and excitement surrounding renewable energy can result in oversight of negative environmental consequences if policy is not designed to encourage the most energy-efficient versions of biofuels.  Ensuring that biofuels are developed in a sustainable manner will lead to long-term gains and finally help wean us off our oil addiction.

More Resources

HB 589/SB 480 and HF 2200/SB 2074,

Virginia: SB 689

North Carolina:  SB 1451

Florida: SB 2870

Iowa:  HF 2247 and HF 2632

ArizonaBiofuels Conversation Program

Hawaii HB 3179

Illinois: HB 5855

New York: AB 9051

Connecticut: SB 261

Virginia: SB 444

Kentucky: HB 529

Other Resources

Energy Future Coalition - Quick Facts on Biofuels

National Corn Growers Association

Clean Energy Minnesota - Growing Better Fuels

The New Rules Project - Ethanol and Land Use Changes

Institute for Agricultural and Trade Policy - AgObservatory


The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
J. Mijin Cha, Policy Specialist
Julie Schwartz, Policy Specialist
Christian Smith-Socaris, Policy Specialist
Adam Thompson, Policy Specialist
John Bacino, Operations Manager
Marisol Thomer, Outreach Coordinator

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