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Category — Biofuels

Biofuels as America’s Biggest Loser (with apologies to NBC)

Biofuel mandates in the U.S. suffer from a high-octane blend of politics and special interest agendas that have corrupted physical science, economic analysis, and the policy prescriptions alike. This is the predictable outcome when process and policy are de-linked from basic economics and marketplace realities. Unintended consequences and distortions always result.

Historian, professor and author Burton Folsom in his book, The Myth of the Robber Barons, makes an important distinction between “market entrepreneurs” and “political entrepreneurs.” Market entrepreneurs compete by utilizing their own funds, resources and private investment in an effort to create and market a superior product. Political entrepreneurs, on the other hand, fund their business models off of government subsidies, federal protections and vote buying.

This is a useful distinction to keep in mind when evaluating the perverse outcomes of the subsidized U.S. ethanol industry where the participants consist mainly of political entrepreneurs.

Baker Institute (Rice University) Study

Corn-based ethanol and other U.S. feedstock biofuels programs are not supportable on economic, environmental nor logistical grounds. That is the conclusion of a recent comprehensive study by Rice University’s James A. Baker III Institute for Public Policy, Fundamentals of a Sustainable Biofuels Policy. This report was previously cited by Ms. Caroline Boin in her recent post, in which she correctly labels the U.S. biofuels program a “scam” and little more than a sop to farm lobbies and corporate agri-business interests. In short, the Baker Institute study represents a clear indictment of the nonsense that passes for federal energy policy.

One key recommendation from the study is that Congress reconsider its biofuels volume mandates outlined in the Energy Independence and Security Act of 2007.

EISA called for production targets of 9 billion gal/year of biofuels in 2008 increasing to 36 billion gal/year by 2022. Corn ethanol is capped at 15 billion gal/year of this total but even that will be nearly impossible to reach due to significant logistical and commercial barriers that exist (aside from the fact that virtually no environmental benefits are derived from ethanol).

The Baker study identifies multiple reasons to question achievability of mandated volumes, claims of energy independence and alleged environmental benefits cited by ethanol advocates. A few are outlined below. [Read more →]

March 25, 2010   10 Comments

The U.S. Biofuel Scam: A View from Abroad

The U.S. Department of Agriculture (USDA) has estimated that one quarter of America’s corn cereal production in 2009 went to biofuels, which in effect turned cheap food into expensive fuel.

Despite pushing up food prices and having unintended consequences for the environment, the U.S. Environmental Protection Agency (US EPA) recently reiterated its support for ethanol. President Obama also promised continued investment in advanced biofuels in his recent State of the Union address.

Bad Economics

A leaked paper on the 2007/2008 food crisis by the World Bank Development Prospect Group estimated that U.S. and European Union biofuel production was responsible for 75% of the price rises–a far cry from the 3% estimate by USDA.

Biofuels from crops like corn, sugar, and palm oil have more than tripled since 2000. In accordance with its 2007 energy bill, America is targeted to increase biofuels production to 15 billion gallons by 2012 and 36 billion by 2022, up from the current 10.6 billion. Of that 36 billion, ethanol is capped at 15 billion gallons.

Just last month, US EPA announced that despite doubts as to its energy and environmental record, they would still support further ethanol production. The new guidelines will allow for the production of an additional 2 billion gallons of corn ethanol and potentially much more.

These subsidies are about political pandering, not cutting greenhouse gases.

The EPA admitted that a considerable amount of current ethanol production would, as a result, fail to meet the 20% reduction criteria. It is difficult to see on what grounds these subsidies to biofuels can be justified–if not outright agricultural protectionism. [Read more →]

March 9, 2010   4 Comments