Common Tragedies

Thoughts on Environmental Economics

A bit too honest about Ethanol

Posted by jab12004 on November 21, 2008

One of the large problems with ethanol is that there is no “correct” way to measure its impacts. A recent editorial in the NY times (it is short and worth reading) addresses this point, and highlights the important role the E.P.A. plays in the process. However, before discussing it, I think it makes sense to describe the biofuels requirements referenced in the article.

The mandate, called the Renewable Fuel Standards, was first created under EPACT 2005. Ethanol production, however, exceeded the standard by wide margins. The Energy Independence and Security Act of 2007 updated the standard to MUCH higher levels, put more focus on cellulosic ethanol and extended the timeline out to 2022.

There are a few things of note in the new standard. First, corn ethanol, while playing a significant role, only represents 15 of the 36 billion gallon requirement in 2022. Cellulosic ethanol requirements start at small levels in 2010, but quickly increase to 16 billion gallons by 2022. Cellulosic ethanol is placed under a larger 21 billion gallon umbrella of generic “advanced biofuels” that include 1 billion gallons of biodiesel.

The second layer to these standards is the Greenhouse Gas (GHG) reduction requirements. Corn ethanol is required to have a 20% reduction of lifecycle GHGs “compared to baseline lifecycle GHG emissions.” This terminology is a bit vague, but the general idea is that the production and burning of corn ethanol must release 20% less GHGs than petroleum. Advanced biofuels have a 50% reduction target, with cellulosic having a specific target of 60%.

The trouble comes from how you evaluate these levels. The EPA is put in charge of the rulemaking, and ultimately how they choose to set the standards will dictate a large part of how the RFS functions. The EPA administrator also has the authority to lower mandate or GHG reduction levels if they feel it is appropriate. As mentioned in the NY Times article, previous studies showed corn ethanol as carbon neutral, while newer analyses show that corn ethanol might create more GHGs than gasoline. While these studies are important, my feeling is that they should not shape the debate.

This goes back to the fact that there is no one way to count GHG emissions . Opponents of biofuels will want all potential sources to be taken into account, while proponents will argue the opposite. It also begs the question of how far upstream are we looking in the petroleum process. Do we just include emissions from combustion? How about the emissions from finding and extracting the oil? What about pirate protection?

Considering all of these uncertainties, I try not to worry about where corn ethanol falls on the GHG balance sheet. We all know corn ethanol isn’t that great (well, most of us).  So is it worth that much time debating just how bad it is? Instead, the most important decision will be how the EPA  calculates their life cycle standards. It is a bit unclear as to when these will come out, but they should be done soon. Expect to see a lot of people angry, I know I’m excited.

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One Response to “A bit too honest about Ethanol”

  1. dWj said

    Do you know how the standard functions? In particular, if we don’t get to n billion gallons of whatsit, who gets fined or thrown in jail? Is the government simply going to buy that much at any price and then resell it somehow, or require that certain producers of something each produce or buy a certain quota?

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