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Archive for the ‘Biofuels’ Category

One Step Forward, Two Steps Back

Posted by jab12004 on May 5, 2009

Today was a curious day in biofuels land, where it seems that the corn ethanol industry both lost and won on the same day.  Here’s some background and what happened.
The Energy Independence and Security Act of 2007 stipulated that 15 billion gallons of conventional biofuels must be produced in 2015 under the Renewable Fuel Standards.  These 15 billion gallons need to have 20 percent less lifecycle emissions than gasoline, as judged by the EPA.  When the bill was written, the conventional biofuel was assumed to be corn ethanol.  However, a proposed ruling released today shocked many people by declaring that currently corn ethanol was only 16% better.
Much of this low estimate results from indirect land use statistics.  These account for previously uncultivated land being brought into production to produce biofuels (or displaced food).  This is a good development since these effects have the potential to be sizeable.
This could be a giant thwack on the head for the already ailing biofuels industry.  If strictly enforced, this means that all current corn ethanol production does not satisfy the 10.5 billion gallon ethanol requirement for 2009.  However, a statement from Lisa Jackson, the EPA administrator, illustrates how this will most likely play out
“There are things that could be done to make corn-based ethanol more sustainable” (http://www.eenews.net/Greenwire/2009/05/05/2 sub required)
Basically, the ethanol industry just needs to clean up their act…a little bit.  This most likely can be accomplished by using more sustainable land management (conservation tillage techniques) or switching to cleaner fuels (natural gas instead of coal) for the distillation process.
If the corn ethanol industry is able to clean up its act (and I would bet my corn futures on them being able to without much work) then this ruling might actually be of little consequence.    The flip side of the coin is that ruling also included a nice juicy carrot to the ethanol industry.  The new “Biofuels Interagency Working Group” will provide around billion for ethanol companies with difficulties.
So in the end, it seems that a potential attack on the corn ethanol industry might just end up as a way to hand them a fat wad of cash.  This isn’t how Environmental Capital sees it, in their post   Out of LUC: Team Obama Prepares Ethanol Smackdown. [http://blogs.wsj.com/environmentalcapital/2009/05/05/out-of-luc-team-obama-prepares-ethanol-smackdown/]  I agree with what they are saying about how this highlights how dependent the ethanol industry is on the government.  However, at the end of the day, today’s biofuels news seems more like a stealthy way to provide a handout.

Today was a curious day in biofuels land.  It seems that the corn ethanol industry both lost and won on the same day, potentially coming out on top.  Here’s some background and what happened.

The Energy Independence and Security Act of 2007 stipulates that 15 billion gallons of conventional biofuels must be produced in 2015 under the Renewable Fuel Standards.  These 15 billion gallons need to have 20 percent less lifecycle emissions than gasoline, as judged by the EPA.  When the bill was written, the conventional biofuel was assumed to be corn ethanol.  However, a proposed ruling released today shocked many people by declaring that currently corn ethanol was only 16% better.

Much of this low estimate results from indirect land use statistics.  These account for previously uncultivated land being brought into production to produce biofuels (or displaced food).  This land, when left unused serves as a carbon sink which releases a sizable amount of carbon when cultivated.

This could be a giant thwack on the head for the already ailing biofuels industry.  If strictly enforced, this means that all current corn ethanol production does not satisfy the 10.5 billion gallon ethanol requirement for 2009.  However, a statement from Lisa Jackson, the EPA administrator, illustrates how this will most likely play out

“There are things that could be done to make corn-based ethanol more sustainable” (sub required)

Basically, the ethanol industry just needs to clean up their act…a little bit.  My guess is that this can be accomplished by using more sustainable land management (conservation tillage techniques) or switching to cleaner fuels (natural gas instead of coal) for the distillation process.

If the corn ethanol industry is able to clean up its act (and I would bet my corn futures on them being able to without too much work) then this ruling might actually be of little consequence.    The flip side of the coin is that Obama included a nice juicy carrot to the ethanol industry.  The new “Biofuels Interagency Working Group” will provide around $1.8 billion for ethanol companies.

So in the end, it seems that a potential attack on the corn ethanol industry might just end up as a way to hand them a fat wad of cash.   Environmental Capital takes a different perspective it in their post   Out of LUC: Team Obama Prepares Ethanol Smackdown.  I agree with what they are saying about how this highlights how dependent the ethanol industry is on the government.  However, at the end of the day, today’s biofuels news seems more like a stealthy way to provide a handout than a smackdown.

Posted in Biofuels, Climate Change, Ethanol, Land Use | Leave a Comment »

Offsets and Algae

Posted by jab12004 on March 26, 2009

After spending a lunch seminar listening to a number of knowledgeable Europeans talk about the ETS, I feel a bit overwhelmed by how many potential strange side effects there might be in a huge cap and trade system.  These might not be preplanned nor malicious, but I have a feeling there will be some unintended consequences.

With this on my mind, one article caught my attention about biofuels producing algae under a U.S. cap and trade system.  If algae biofuels are eligible for offsets, we might see some strange side effects.  Right now algae based biofuels are years away from commercialization.   However, if the right offsets are granted and carbon prices are high enough, the biofuels algae industry might find itself on a perverse fast track of sorts.  One quote sums it up.

At a high enough carbon price — maybe $40 to $50 per ton — producers could sell the environmental attributes of their fuel for more than the actual fuel. “You could make biodiesel, pour it down the drain, and make a lot of money,” Ballentine said.  (E&E subscription required)

While I am in favor of putting a price on carbon, I don’t think I could find anyone who likes the above situation.  My first reaction is to say we shouldn’t have offsets, but I am in no way an expert on this topic and won’t pretend to be.  All I know is that I constantly hear about the problems they cause and not much about the benefits they might have.  So I leave it as an open question, what do you think about offsets?  Could they provide enough advantages  to make them worth it?

 

Posted in Biofuels, Offsets | 2 Comments »

Live Green, Go Yellow???

Posted by jab12004 on March 19, 2009

Recently legislation was introduced  that would require 50% of new vehicles in the U.S. to be Flex Fuel Vehicles (FFVs) by 2012.  Flex Fuel vehicles are basically normal cars with stock modifications which allow them to run on E85.  FFV models usually cost between $30 and $300 more than their standard counterparts.

The laughable part is that most FFV’s don’t use E85.  Part of this is due to the lack of E85 stations out there and that it is really only easy to come by in those states which produce corn ethanol.  Nationally, only 1% of filling stations sell E85. 

However, the icing on the FFV cake is that 70% of FFV owners don’t even KNOW that they can use E85.  The same General Motors sponsored study also found that only 10% used any E85 at all .   This has prompted them to launch the “Live Green, Go Yellow” campaign, which, besides making me chuckle to myself a few times, probably won’t make me buy a FFV based on this commercial.

Laughing aside, there are a few serious issues having to do with FFVs.  Most of the 7 million FFVs on the road are there due to loopholes credits  in CAFE standards.  Also, as we move forward with the RFS, we will need something to burn the 36 billion gallons of ethanol in 2022.  Maybe having 50% of the fleet as FFVs will help us correct that blunder attain that target…

 

 

Posted in Biofuels, Uncategorized | Leave a Comment »

A biofuels conundrum

Posted by Daniel Hall on December 19, 2008

Who is going to build the vehicles to burn the biofuels that we are not going to grow?

Posted in Biofuels | 1 Comment »

Buzzworthy biodiesel news

Posted by Evan Herrnstadt on December 15, 2008

Science Daily reports that scientists have begun using spent coffee grounds to make biodiesel:

In the new study, Mano Misra, Susanta Mohapatra, and Narasimharao Kondamudi note that the major barrier to wider use of biodiesel fuel is lack of a low-cost, high quality source, or feedstock, for producing that new energy source. Spent coffee grounds contain between 11 and 20 percent oil by weight. That’s about as much as traditional biodiesel feedstocks such as rapeseed, palm, and soybean oil…The scientists estimated, however, that spent coffee grounds can potentially add 340 million gallons of biodiesel to the world’s fuel supply.

Obviously we’re still going to have to make some serious changes and luck into some currently unknowable innovations to really transform the transportation sector, but every additional silver BB helps.  A new way to turn waste into fuel is always a welcome development in my mind.

The best part?  The fuel actually smells like coffee.

Posted in Biofuels | Leave a Comment »

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.

Posted in Agriculture, Biofuels, Climate Change, Ethanol | 1 Comment »

A Short Primer on Biofuels

Posted by jab12004 on November 17, 2008

Having never posted on this or any blog before, I was kind of excited when Evan told me I should write a bit about biofuels. I’ve spent the last few months working on the topic, and for better or worse have often found myself spouting out strange biofuels facts at usually inappropriate times. This seems like a good way to channel what I’ve researched.

The term biofuels has come to mean a lot, but generally it can be applied to anything which can be grown and eventually used as some sort of power. Ethanol, however, remains the most important/significant biofuel used, and hence receives most of the attention.

Currently, there are 2 ways to make Ethanol in the U.S.

Corn ethanol: Most people know what it is and its limitations.  One interesting fact… even if we were to put our entire 13.2 billion bushels of corn production to ethanol, it could only replace 16.7% of annual petroleum usage

Cellulosic ethanol: ethanol made from any sort of plant mass, like trees or grass. We currently have the ability to make ethanol from cellulose, but the technology isn’t very advanced and it is costly. Projections show that it could become cost competitive with corn ethanol over the next 5-10 years, but no one is sure when the process will be commercially viable and competitive.

My general feeling is that corn ethanol isn’t any sort of solution, but cellulosic ethanol presents interesting opportunities for the future. Cellulosic ethanol can be made from various native grasses, usually called switchgrass, which present many advantages to corn. Switchgrass does not require large amounts of fertilizer, it can be grown in most areas in the country, and do not destroy the soil like corn.

There are many other statistics which back up why Cellulosic ethanol is the biofuel of the future, but there are some large hurdles that lay between us large scale ethanol usage. These include

1. Currently, ethanol cannot be blended with gasoline before being shipped in pipelines. This means it must be transported by rail, truck and barge to its destination. Pipelines can be used with modification, but that is costly and has only been done once

2. Even if it is possible to get lots ethanol to American drivers, conventional cars can only burn a gasoline/ethanol blend that is 10% ethanol (E10). That means that without building more specialized Flex Fuel Vehicles and distributing E85 (85% ethanol), it will be impossible to replace more than 10% of our gasoline with ethanol.

Needless to say, we are all a long way off from driving around in grass fueled cars.

More to come later on biofuels and the Obama administration.

Posted in Biofuels | 4 Comments »

Assorted links

Posted by Daniel Hall on November 7, 2008

1. What is the likely direction of energy and climate policy under the new Obama administration and a Democratic Congress?  Joe Romm gives his thoughts on E&E TV; here is a panel of respondents at Green Inc.  There is a fair amount of wishful thinking floating around.  Count me among the skeptics that a cap-and-trade bill will pass in calendar year 2009.

2. Henry Waxman has launched an insurgency against John Dingell, attempting to take over as chairman of the Energy and Commerce Committee.  If you have an E&E Daily subscription there is a good article here.  Brad Plumer also provides ungated commentary at the Vine.  I don’t really know much about this but I will take a shot in the dark and predict that Dingell is not going anywhere.

3. Obama will keep Bush’s ethanol mandate.  Blech.

4. Here is another (longer) version of that story about carbon sequestration that Rich linked below.  Here is Sarah Forbes of WRI talking about guidelines they have published for CCS.

5. The Economist has a story this week on urbanization, largely touting its benefits.  It is a nice mix of economic geography and history.  Hmmm, no byline of course, but could this be the work of urbanist Ryan Avent?  Speaking of Ryan, he is blogging from a conference this week on urban design in a post-oil age; here he discusses the role of urban design in solving climate change.

6. And in (mostly) non-environmental economics news, everyone is aware, right, that one of the worst wars/humanitarian crises of the last half-century has now reignited in a big way in eastern Congo?  (Yes, I could make this on topic for the blog by discussing the natural resource curse but given the scale of the crisis at the moment that seems coldly academic.)  For those who are perplexed by (shamefully cursory Western) media coverage of events I recommend this post and its four predecessors from Wronging Rights.

Posted in 2008 Elections, Biofuels, Climate Change, Coal/ CCS, International, Natural Resources, Urban | Leave a Comment »

Greenpeace takes on biodiesel

Posted by Evan Herrnstadt on May 29, 2008

So I’m in week two of a three-week trip through Argentina, which is why I haven’t been posting.  Basically, I’ve had limited internet access, and frankly have been more focused on eating steaks and goat than on economics. 

But last night I was half-watching TV at the café, and in between skits centered on the hilarity of men wearing wigs and news segments alternately worshipping and subtly mocking Diego Maradona, there was an advertisement from Greenpeace Argentina (in conjunction with GP Germany) blasting soy biodiesel production.  Basically, it pointed out how the nation is literally burning through its land to plant energy crops.  Over 2 million hectares of forest have been converted into energy croplands in the past nine years — much of this goes to fuel German diesel vehicles that are widespread in Europe.  Diesel vehicles are indeed often longer-lasting and more efficient than the US’s gas-fueled fleet, but as with ethanol we must be careful about leaping too enthusiastically on the biofuel bandwagon.  Not this is that new to anyone; it’s just becoming more and more apparent to me that the solution to our transport emissions has to involve a move away from liquid fuels through a combination of efficiency and the tricky electric car. 

Anyway, I’ll be back around June 10th or so, with (hopefully) better thought-out posts not hastily written in an internet café.

Posted in Biofuels, International, Land Use | 2 Comments »

Farm bill

Posted by Daniel Hall on May 22, 2008

I’ve been surprised by the lack of attention that the U.S. farm bill has received in the corners of the blogosphere I frequent. The current food crisis is getting lots of attention, but the farm bill… not so much. I’ve refrained from commenting largely because of how shamefully little I know about U.S. farm policy.

I suspect that some of the current silence among bloggers is a result of similar ignorance, but a larger portion represents a combination of shame and despair. Nearly every policy wonk of any political persuasion agrees U.S. agricultural policy is a disaster — conservatives hate it (or should) for the massive governement handouts, while liberals decry (or should) who the handouts go to and the environmental damages they cause. But at the same time the political interests entrenched behind leaving policy ‘as is’ mean that substantive reform is a non-starter. Hence the shame and despair.

Now that the bill has passed (over the President’s veto) I thought I’d point you to the best post I’ve seen so far on the bill’s problems: Greg Mankiw quotes an insider at the White House on some of the bill’s most distasteful provisions. Do read the whole thing, but here’s a couple candidates for worst part of the policy:

Too much spending: The bill increases spending by almost $20 billion over the next ten years, at a time when net farm income is at an all-time high. …

New sugar program: The bill would make the government buy sugar for 2X the world price, store it, then resell it at about an 80% loss to the taxpayer. Sugar sells for about 11¢/lb on the world market. The US government would have to buy sugar for about 22¢/lb, store it, and then auction off the excess to ethanol plants. …

Using food aid $ inefficiently: Under current law, US food assistance for hungry people around the world must be spent purchasing US crops. The President proposed to allow up to 25 percent of US global food assistance to be spent purchasing food from local farmers (in the country where the people are starving). This allows US dollars to be spent purchasing food, rather than paying transportation costs.

Meanwhile, the WaPost editorial page highlights another real loser from the bill:

…the bill could authorize up to $16 billion more in crop subsidies than previously projected…

The culprit is a new program called Average Crop Revenue Election, or ACRE for short. ACRE gives farmers an alternative to direct payments, which come regardless of how much money they make, and other subsidies. Starting in 2009, farmers can choose to trade in some of their traditional subsidies in return for a government promise to make up 90 percent of the difference between what they actually made from farming and their usual income. …

[ACRE] pegs the subsidies to current, record-high prices for grain, meaning farmers would get paid if prices fall back to their historical and, for farmers, perfectly profitable norms. A program that started out as a streamlined insurance policy against extraordinary hardship has mutated into a possible guarantee of extraordinary prosperity. [emphasis added]

As the editorial makes clear, the policy change could have actually been a welcome reform, by providing a way to transition from direct subsidies to a more insurance-based model where farmers got paid in bad years. The problem is that by using record-high grain prices as the baseline for ‘usual income’, the program is insuring that farmers make bank. On the other hand, there’s always the chance that this won’t cost the government as much as we think:

The farm bill’s defenders insist that a budgetary disaster will not come to pass, because grain prices will not come down much during the five years the bill will be in effect.

Ah, what a relief! The government won’t have to pay for this program because the world’s urban poor are going to continue to be choked by food prices for the next five years. Glad we got that cleared up.

If readers are aware of other good analyses of the farm bill I’d be thankful for a pointer. Here’s Tim Haab recently on the effects of U.S. farm subsidies.

Posted in Agriculture, Bad Economics, Biofuels, Government Policy | 1 Comment »

Energy subsidies in the U.S.

Posted by Daniel Hall on April 25, 2008

Have I mentioned recently how absolutely amazing the Energy Information Administration (EIA) is? As much as researchers frequently run into problems getting exactly the data they need to do the analysis they want, it’s pretty remarkable to live in a time and place where such incredibly detailed information about energy in the U.S. is available at your fingertips.

The EIA’s latest feat is this new report on federal energy subsides. I’m pretty sure I’ll be revisiting this report frequently, but on first glance two things stood out.

1. What the heck is “refined coal”? Based on a cursory reading it sounds like coal used to produce synthetic fuels. It is getting a huge portion of federal energy subsidies (check out table ES1): around $2.4 billion of the $16.6 billion total. Part of my confusion though is that the EIA analysis classifies most of this subsidy under electricity generation (so is it a synfuel or coal?) and this makes refined coal the biggest subsidy recipient on a dollar-per-megawatthour ($/MWH) basis (see table ES5): it receives $29.81/MWH, versus $23.37/MWH for wind, $1.59/MWH for nuclear, and $0.44/MWH for (regular) coal. (These are the only electricity generating technologies which receive more than a $0.3B in federal support.)

2. Besides refined coal, who’s the other enormous hog at the trough? Three guesses, and the first two don’t count. That’s right, ethanol/biofuels chewed through $3.2 billion in 2007. The metric used to report subsidy payments here is dollars per million BTUs (table ES6), and ethanol is more than double the nearest competitor at $5.72/mBTU. It’s a little tricky comparing this subsidy level to the subsidies for electricity, since electricity is a more valuable form of energy than heat, but a simple back of the envelope calculation using standard conversion factors suggests that this is in the ballpark (slightly lower) than the dollar-per-output subsidies for wind I listed above.

So, to summarize, just with those two items, one-third of federal energy subsidies are going 1) to the most polluting fuel used today and 2) to a form of liquid food that is driving up world prices and at best is saving us a tiny bit of greenhouse gas emissions. Awesome.

Posted in Biofuels, Electricity, Government Policy | 3 Comments »

Assorted links

Posted by Daniel Hall on April 8, 2008

1.  New York City’s congestion pricing plan dies in Albany.  Felix Salmon and Ryan Avent are depressed and disappointed, respectively.  Disgust comes to mind as well.

2.  Tyler Cowen has been providing a thought-provoking discussion on Jeff Sachs’ new book Common Wealth: Economics for a Crowded Planet.  The first three installments are on climate change, water policy, and biodiversity.

3.  Someone was listening to Rich’s complaint about the lack of coverage of escalating food prices: Paul Krugman discusses it on the New York Times Op-Ed page.  Plus the blogosphere is on the case — Energy Outlook examines the food-energy nexus, Free Exchange questions whether grain markets are behaving rationally, while this guy just wants to know he’ll still be able to afford his craft beer.

4.  David Zetland is blogging on the economics of water.

5.  Tim Haab issues a green jobs analysis challenge.

6.  And speaking of Env-Econ, UCLA couldn’t push me past Tim on Saturday night, so he edged me out in the Env-Econ NCAA tournament pool. But the combination of the Memphis win and UNC loss actually put Evan in front of both of us and gave CT bragging rights in the EE-CT showdown.  I think I’m now supposed to thank Evan for providing me cover when my “mouth starting writing checks my ass couldn’t cash.”  Or something like that.

Posted in Agriculture, Biofuels, Climate Change, Green Collar Jobs, Random, Transportation, Water Resources | Leave a Comment »

Biofuels quote of the day

Posted by Evan Herrnstadt on March 5, 2008

From The Onion, in regard to the recent article in Science claiming that biofuels do not have a positive impact on GHG emissions:

“Just once, why can’t one of our poorly considered quick fixes work?”

Posted in Biofuels, Humor | Leave a Comment »

The Ethanol Recession?

Posted by Evan Herrnstadt on March 3, 2008

If you had qualms about corn ethanol before, how about facing the prospect of an Ethanol Recession? From the LA Times:

Economists are cautioning that the nation’s growing dependence on corn would make for a double jolt in the event of a drought across the Midwest: soaring prices not just for food but also for gasoline. Analysts now warn that a “corn shock” might not be far off — and it could lead to $5 gas and $3.50 eggs as the effects reverberate across the economy. “We are replacing price volatility from the Middle East with Midwestern weather price volatility,” said Michael Swanson, a Wells Fargo & Co. vice president and agricultural economist.

As our food and fuel sectors become more and more integrated, we face the possibility that high food prices would be made all the more potent by a slowing economy driven by high fuel prices. However, in lamenting the consequences for our grocery budgets, it’s easy to forget that other economies would likely be hit even harder than our own. Lester R. Brown, president of the Earth Policy Institute, notes:

“The rest of the world is less able to pay high prices for food. What’s annoying for us is life-threatening elsewhere.”

Honestly, in general terms, I think we would all do well to think in these terms as we go forward making policy.

Posted in Agriculture, Biofuels | 1 Comment »

Subsidies quote of the day

Posted by Daniel Hall on November 19, 2007

If the biofuels industry expects taxpayers to make it competitive through subsidies, they will quickly break the bank. Subsidies to oil need to be eliminated as well, of course. But we doubt doing so would change the relative competitiveness of biofuels. What do subsidies to gasoline and diesel work out at on a per-litre basis? The estimates we’ve seen suggest that in the USA the value of the various tax breaks are worth around 3% of the current price of oil. That comes out to a big number in terms of total transfers. Perhaps they are as high as 10%. But that would still put them far below subsidies as a percentage of market value for biofuels, which are typically on the order of 50% of the retail price, or more.

That is Ronald Steenblik, in an interview about a report he co-authored entitled “Biofuels: Is the cure worse than the disease?”

Posted in Biofuels | Leave a Comment »

Sentence of the day

Posted by Evan Herrnstadt on November 12, 2007

“The amount of water needed to grow the corn, process the fuel and dispose of the waste at a small ethanol plant is about equal to the water needs of a town of about 10,000, according to an Environmental Defense Fund report.”

Wall Street Journal (subscription req’d, sorry)

Posted in Biofuels, Water Resources | Leave a Comment »

Edwards’ ethanol guarantee

Posted by Evan Herrnstadt on November 12, 2007

John Edwards continues to develop his energy platform in his new “Plan to Build One America“. Specifically, he comes a step closer to advocating full auctioning of permits (quote from page 52):

Edwards will cap emissions of greenhouse gases and reduce them by 20 percent by 2020 and at least 80 percent by 2050. He will auction the right to emit any greenhouse gases after a short transition period.

His overall plan retains many of the vague gimmicks noted by Rich in his earlier, more comprehensive post on the Democratic front runners, such as establishing a Green division of Americorps. He also still loves his command-and-control measures, many of which have questionable value:

Require oil companies to install biofuel pumps at 25 percent of their gas stations and require all new cars sold after 2010 to be “flex fuel” running on either gasoline or biofuel.

One policy I found particularly interesting is a plan to offer loan guarantees to new ethanol refineries. Under such a scheme, the government essentially co-signs a loan. There are two sides to this policy. On the one hand, by overcoming information asymmetries in the credit market, the government can help allocate credit to unproven but promising projects. This theoretically releases societal benefits that would have otherwise gone untapped. On the other hand, there is the issue of moral hazard; those partnering with the government are more likely to take on excessively risky projects.

Loan guarantees have been used to underwrite coal gasification, ethanol, and geothermal projects in the past with varying levels of success. Of the three ethanol projects, two defaulted and were sold for salvage, while one defaulted but became a major ethanol producer after extensive refinancing.

However, the point of a loan guarantee is to fund a large project with a huge amount of associated risk. At this point, are ethanol plants really the sort of thing the government ought to be cosigning on? They seem to be a pretty proven investment at this point (especially if Edwards mandates that all cars be able to use E85 after 2010 and oil prices continue on their way up). Perhaps loan guarantees would be more appropriate for truly risky, potentially revolutionary technologies such as CCS coal or tidal energy.

Posted in 2008 Elections, Biofuels, Cap and Trade, Government Policy | Leave a Comment »

Michael Bloomberg, economist

Posted by Daniel Hall on November 2, 2007

As reported (and rejoiced over) elsewhere, the New York City mayor will be calling for a national carbon tax in a speech later today. His full speech will apparently call for four key measures to address climate change: a price on emissions (preferably a carbon tax), more funding for energy-related R&D, an end to agricultural subsidies for biofuels, and an increase in CAFE standards. I’ll bet you could get most economists solidly behind at least three of those four proposals (and some would support all four). Excerpts from his prepared speech below the jump: Read the rest of this entry »

Posted in Biofuels, Cap and Trade, Carbon Tax, Climate Change, Technology Policy, Transportation | 1 Comment »

Biofuels

Posted by Daniel Hall on October 31, 2007

Martin Wolf has a column in the Financial Times about biofuels, summarizing the report Biofuels — At What Cost? from the Global Subsidies Initiative:

Energy security and climate change are two of the most significant challenges confronting humanity. What we see, in response, is the familiar capture of policymaking by well-organised special interests. A superb example is the flood of subsidies for biofuels. …

Already the support in members of the Organisation for Economic Co-operation and Development costs about $13bn to $15bn a year. But this sum generates much less than 3 per cent of the overall supply of liquid transport fuel. To bring the biofuel share to 30 per cent, as some propose, would cost at least $150bn a year and probably more, as marginal costs rose.

EtOH Costs and Benefits

Read the rest of this entry »

Posted in Biofuels, Climate Change, Energy Security | Leave a Comment »

Ethanol-industrial complex

Posted by Evan Herrnstadt on October 29, 2007

Cross-posted from my personal blog:

Quite often we hear plaudits for ethanol. So here is an interactive page from Conde Nast Portfolio which gives a simple overview of the anti-ethanol side of the story. Swallow an enormous grain of salt, then check it out. To quote Futurama: interesting if true.

The site has some interesting features, notably a list of the major players in the ethanol game. However, it departs from any fundamental discussion of whether or not ethanol is sustainable or efficient to produce. Instead, it mostly focuses on the impacts of ethanol on the prices of other corn-based goods.

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