skip to main content

→ Top Stories:
Fracking
Safe Chemicals
Defending the Clean Air Act

Nathanael Greene’s Blog

From all corners: Congress shouldn't waste dollars on ethanol or cut support for clean energy

Nathanael Greene

Posted December 9, 2010 in Moving Beyond Oil, Solving Global Warming

Tags:
, , , , , , , ,
Share | | |

Progressive and conservative Senators, clean energy advocates, livestock farmers, fiscal conservatives, and today a new wave of editorial boards all agree: Congress and President Obama shouldn't waste tax dollars on corn ethanol that pollutes the air we breathe nor fail to support wind, solar and efficiency, which create clean, renewable electricity and put Americans back to work. This means letting the wasteful corn ethanol tax credit and tariff expire and extending the grants and tax credits for renewable power and energy efficiency.

The New York Times get's it exactly right:

Congress should keep the subsidies for renewable energy while jettisoning the subsidies for corn ethanol. That makes sense for the environment, the economy, and for American taxpayers.

The current package being negotiated in the House and Senate would end support for wind, solar, clean tech manufacturing and energy efficiency. Specifically, the proposal would not extend the “Treasury Grant Program” (Sec. 1603 of the American Recovery and Reinvestment Act), the Advanced Energy Manufacturing tax credit (section 48C of the tax code) and the building energy efficiency incentives (sections 45L, 25C, and 45M of the tax code). These are programs that have created clean energy and construction and manufacturing jobs in nearly every state. (Here's a factsheet on these tax credits.)

The Washington Post and the Chicago Tribune focus on the wasteful corn ethanol tax credit, which would cost $6 billion next year and more than $31 billion over the next 5 years and essentially bribes the corn ethanol and oil industries to obey the Renewable Fuels Standard law, which already guarantees the ethanol market:

If you're wondering which of America's leaders are serious about cutting wasteful government spending, you might start by examining who's behind the effort to extend tax breaks to America's corn ethanol industry, which expire at the end of the year. - the Washington Post.

It's not every day that California Democrat Barbara Boxer, one of the most liberal members of the U.S. Senate, joins forces with Arizona Republican Jon Kyl, one of the most conservative. But they and 15 other senators signed a letter calling the existing 45-cent-per-gallon federal subsidy to ethanol fuel and the 54-cent-per-gallon tariff on imported ethanol "fiscally irresponsible and environmentally unwise." They oppose renewal of the two programs, which are scheduled to expire at the end of this year.

Yet there's talk that an extension of the subsidy, and even a boost in the tariff, could be included in the tax deal reached by President Barack Obama and Republican leaders. That would be a terrible mistake.

The fiscal tab of the federal tax credit comes to about $6 billion a year, which is more than the entire savings from President Obama's two-year freeze on federal civilian pay. The more dire our fiscal predicament grows, the harder it is to justify this special-interest expense. - the Chicago Tribune.

As most of the major environmental groups said in a letter to the House, Senate and President Obama yesterday:

Continuing the massive subsidy for corn ethanol while eliminating needed support for innovative clean energy technologies would take U.S. energy policy in precisely the wrong direction. Such a bill would provide handouts to an established enterprise that markets a product that drives environmental degradation and that already gets more than enough assistance from government mandates, while eliminating critically important support for newer, cleaner, and more struggling efforts.

The Congress should not, as one of its final acts take a giant step backward on U.S. energy policy, disadvantaging the very industries and technologies the U.S. needs to progress economically and environmentally.

Share | | |

Comments

Tom KoehlerDec 9 2010 07:00 PM

Nat, you are right on Q -- when Junk Food and Meat Industry say "jump" you say "how high?" Of course that is where the money is in this well coordinated campaign. Your continued polarization of the issue is a disservice to all the service men and woman risking their lives in the Middle East and a disservice to our political discourse. I can only hope the corrupt influence of Junk Food money stops sooner than later at NRDC.

BrianDec 10 2010 09:48 AM

^^Beautiful. The ethanol issue has caused NRDC to be accused of pandering to donors (which is of course not true) rather than pushing policies they believe are right.

Tom KoehlerDec 10 2010 02:11 PM

Hi Brian -- I note that NRDC has not denied and or proved that they are not taking any money from the Junk Food or Meat Industries or from groups or consultants associated with them. Until they are willing to open their books their silence and lack of transparency speaks volumes as does their total coordinated campaign. All while American die in far off places to protect the free flow of oil into our country. Has any American soldier ever died fighting for corn ethanol? Corruption can be the only reason to NRDC's total polarizing position on this issue.

John LiffeeDec 10 2010 02:51 PM

@Tom – As I wrote over here, you've got some stones on you.

This guy is making allegations without citing any source, allegations that strike me at least as absurd, and meanwhile he's not divulging that HE WORKS FOR AN ETHANOL COMPANY.

tom koehlerDec 10 2010 03:11 PM

Hey John no stones here. I am a proud co-founder of Pacific Ethanol in California. The California Air Resources Board has certified our corn ethanol to be the LOWEST CARBON fuel produced in the nation . Much better than gasoline. Our CEO has been a member of the Green Party his whole adult life. We are environmentalists on the front lines of business. These facts about us and what we do is why i am so upset with NRDC as they ignore the facts and demagogue the issue. And I know they are receiving support from the very well financed and coordinated campaign by the Junk Food and Meat Industries. Let them open their books. I did not fall off a turnip truck yesterday.

Cindy ToyDec 11 2010 03:35 PM

In trying to understand more about this issue, I googled NRDC’s look on ethanol. I did read the one report your organization published. It was a factual, cited and scientific report:

Excepting..."Pimentel and Patzek as an outlier, the energy return on investment values
produced in the five other studies indicate that corn ethanol has a solid renewable energy return on its
fossil energy investment – its use does indeed help reduce our fossil fuel consumption….Still, the examination contained in this paper does indicate that ethanol production can reduce carbon dioxide emissions and that different production methods can produce greater or lesser greenhouse gas emissions. Fortunately, two of the corn ethanol studies in particular (Graboski and Shapouri et al.) took the additional step of estimating the reductionin crude oil consumption achieved by driving the same distance using ethanol versus gasoline. These studies show that very little petroleum is used in the production process of ethanol and thus a shift from gasoline to ethanol will reduce our oil dependence regardless of its impacts on our use of other
fossil fuels."

Beyond your own positive look at ethanol and its benefits in reducing CO2, improving air quality, and reducing our dependence on dangerous Middle East oil, let’s talk about what your defense council is supposed to be looking after: the environment. We just had one more major oil tragedy in the gulf of Mexico. I understand that if there had been an ethanol spill, there would have been people still enjoying the beach, a virtually unchanged healthy sea life and no environmental disaster. An Ethanol spill would easily dissipate. We do not have to drill in environmentally sensitive areas to find ethanol. We do not have to lay pipe lines in Alaska or create islands off the coast of Alaska as BP is doing right now to get around regulations to lay pipe under water for more fossil fuel.

As your article is about subsidies, what kind of subsidy is it going to take to clean up after a spill like the one in the gulf this year? The towns and coastal boarders around the Exxon Valdez spill are still recovering years later, and we don’t even hear about the “smaller accidents”. The American people have to pay for that. If you could even put a price on fossil fuels, what would it cost if we had to pay for wars and spills. What kind of subsidies are we talking about? Our nation is feeling the effects of supporting fossil fuel now as we close our own schools, libraries and are unable take care of our poor and older citizens. What about the wars in Afghanistan, and Iraq to protect our oil interest, creating destabilization in the Middle East and need for protection.

Isn’t it true that the reason corn prices are rising is from the food industry, adding corn into more and more products? What is the amount of corn in foods versus the amount used in ethanol? Aren’t we sending more corn out of the country to feed other countries increasing meat production? Even if ethanol use is on the rise and our use of corn in foods is increasing, thank God we are providing a good wage for our American farmers instead of sending dollars out of the country to buy fuel in the Middle East and buy corn elsewhere.

I did not see a solution in your article. Your own published report states that ethanol reduces CO2 and reduces our dependence on fossil fuels. When you choose to not support ethanol, it follows that you support fossil fuel consumption. The less ethanol we use, the more fossil fuels we use. The more fossil fuels we use, the more soldiers die and are wounded and in rehabilitation hospitals when they get home for years. We have more environmental clean-up costs. We have more toxic substances in our sensitive environmental areas. In the end, more than just hidden subsidies spent, but lives, a healthy environment, homes and jobs lost.

The solution seems to be ethanol. The fallow land that has been put out of production, due to farmers selling off their lands and businesses, could be put back in production as well as jobs created in building ethanol plants and in ethanol production. Better agricultural techniques could be employed to even further the benefits of ethanol, providing more jobs, and we can get this country and environment back on its feet.

Your article does nothing, in fact it hurts the environment, as what you are supporting is less ethanol use, meaning more fossil fuel use, more drilling, more oil spills and more war. In effect you are advocating to attack the environment even harder. And that is the honest truth. Ethanol is not the enemy but one of the solutions. You should be writing articles that would support our American made fuel, instead you are advocating for a non-renewable, toxic and hazardous to the planet, fossil fuel. There is no better alternative at this point than home grown, renewable ethanol. It would be a good and just action to rescind your article and write a better and more truthful position that reflects the research on ethanol done by your own organization.


Ron SteenblikDec 12 2010 05:11 PM

It is really sad to see, once again, industry reps engaging in attempts at character assassination instead of engaging on the issues. How lame.

Cindy's lengthy post at least attempts to debate the issues. Let's take up a few of her comments, however:

We do not have to drill in environmentally sensitive areas to find ethanol.

No, but there is a lot of drilling in environmentally sensitive areas to find natural gas, which is a vital energy input into ethanol distillation. The oil well that burst in the Gulf this spring was actually an oil-and-gas well, as is common.

[W]hat kind of subsidy is it going to take to clean up after a spill like the one in the gulf this year?

Is there going to be a subsidy? You may be right (if so, please provide documentation). My understanding was that BP was going to cover all the costs, including those related to lost earnings.

Isn’t it true that the reason corn prices are rising is from the food industry, adding corn into more and more products?

No. Here are charts of the amounts of of U.S. corn used for cereal and food (1st chart) and for sweeteners (2nd chart) . You will see that these uses have essentially flat-lined since 1999.

http://www.worldofcorn.com/images/graph_consumption_food.gif

http://www.worldofcorn.com/images/graph_consumption_sweetner.gif

By contrast, here is a graph of corn use for ethanol -- exponential growth:

http://www.worldofcorn.com/images/graph_consumption_ethanol.gif

When you choose to not support ethanol, it follows that you support fossil fuel consumption.

Ah, the false dichotomy again. How about investments in alternative transport, hybrid technologies, next-gen fuels? In any case, Nathanael is not rejecting ethanol per se but the idea that with a mandate it also needs a subsidy.

As for that issue, which none of you seem to address even though it is the focus of Nathanael's article, can you please answer this question? How much additional ethanol production, domestic use and subsidized exports would be stimulated -- beyond the sales guaranteed under the Renewable Fuels Standard -- by the extension of the VEETC?

Tom KoehlerDec 12 2010 07:33 PM

Ron - By industry reps are you referring to the Junk Food and Processed Meat Lobby that NRDC has hooked up with?

The simple facts are these:

1Corn ethanol is displacing close to10% of our gasoline.
2 It directionally reduces CO2 compared to gasoline and in some cases quite large reductions.
3. It is creating the market and technology infrastructure for more displacement of oil with even further advanced fuels.
4 Corn ethanol is a part of the solution.
5. Its subsidies pale in comparison to oil
6. Is the subsidy ready for reform ? YES.

Lets have a thoughtful discussion and civil discourse over the next year of what that looks like and what we are doing with all of the energy subsidies and policies.
That can't and should not happen in the lame duck.

Corn ethanol is part of the solution.

NRDC has a history of policy saying just that: corn ethanol is part of the solution. It's time for them to get back on that same page.

Ron SteenblikDec 13 2010 01:19 AM

By industry reps are you referring to the Junk Food and Processed Meat Lobby that NRDC has hooked up with?

Ah, now it's "hooked up with". Before it was alleged corruption. Yes, politics makes strange bedfellows. The Corn Refiners Association (www.cornnaturally.com; www.sweetsurprise.com), to which several of the biggest players in the ethanol industry belong, don't seem to have any problem with trumpeting the use of their products by what you call "Junk Food" manufacturers.

1. Corn ethanol is displacing close to10% of our gasoline.

On a volumetric basis, not on an energy-equivalent basis.

2. It directionally reduces CO2 compared to gasoline and in some cases quite large reductions.

"Directionally"? I guess it depends on what one considers "large". The EPA, after making assumptions about improving yields and technologies, gives it a rating of a 21% reduction.

3. It is creating the market and technology infrastructure for more displacement of oil with even further advanced fuels.

Perhaps if one assumes the future is ethanol, though even then few current starch-to-ethanol plants are likely to be converted to be significant converters of cellulose-to-ethanol. Sure, spend enough money and any plant can produce just about anything. But, absent policies to drive the future in that direction, would ethanol become the dominant alternative transport energy source? Aviation has no alternative to liquid fuels. Ground transport does.

5. Its subsidies pale in comparison to oil.

Really? Source, please. If you are making the comparison on a per-gallon basis, I beg to differ.

6. Is the subsidy ready for reform ?YES. Lets have a thoughtful discussion and civil discourse over the next year of what that looks like and what we are doing with all of the energy subsidies and policies. That can't and should not happen in the lame duck.

LOL. "Civil discourse"?! That was not the tune we were hearing from the industry back in the spring, when discussions about whether to extend the VEETC and import tariff began in earnest. At that point, there was no talk of "reform", and the discourse from the industry was hardly what I would call "civil", especially towards critics like Nathanael.

It was only when the extensions did not look like a sure bet when some in the industry started looking for alternatives. I agree that rushing through a decision during a lame duck session is not ideal, but it looks to me as if it is in fact working very much in the industry's favor, it looks to me.

So, I have responded to you points. But you still have not answered Nathanael's main point, nor my question:

How much additional ethanol production, domestic use and subsidized exports would be stimulated -- beyond the sales guaranteed under the Renewable Fuels Standard -- by the extension of the VEETC?

Ron SteenblikDec 15 2010 02:33 AM

Well, it seems nobody here wants to answer my question. Meanwhile, others have. For example, Jed Graham over at Investors Business Daily asserts that extending ethanol subsidies at a cost of $6 billion for one year would result in an extra 600 million gallons, putting the subsidy at $10 per incremental gallon, according to recent projections from Iowa State University’s Center for Agricultural and Rural Development. Center Director, Bruce Babcock, said in an e-mail that each 100 million gallons of ethanol creates 70 jobs. Thus, 600 million gallons would result in 420 jobs, or about $14 million per job.

Meanwhile, Cornell University agricultural economist and Cato Institute scholar Harry de Gorter contends that while ethanol displaces some demand for oil, the resulting drop in oil prices pulls back much of that demand.

Using Babcock’s figure of $10 per incremental gallon of ethanol, which de Gorter believes is understated, he puts the subsidy cost per displaced gallon of gas at $30.

Tom KoehlerDec 15 2010 04:27 PM

Ron, re veetc - bioblogger posted below has a good answer to your question. My own two cents is subsidies are required until there is full open market access which today does not exist. That means flex cars. Lets give consumers the power to choose. Without flex cars that cannot happen. If we are serious about getting off petroleum we are going to need a robust portfolio of all kinds of alternatives. A very eloquent alternative is a plug-in flex hybrid. All cars sold into the market that have a combustion engine should be Flex.

bioblogger — Dec 13 2010 12:39 PM

The impact of reducing subsidies will be felt by all ethanol developers, not just those who sell corn ethanol. The abrupt cessation of VEETC would impact emerging and small ethanol producers of all biofuels more than those that are established because the subsidies support not only fuel sales but also infrastructure and market development. Without that, cellulosic ethanol and other biofuels don't have a chance at market entry.

It isn't enough to criticize a technology because it isn't perfect. If it is a means to a better paradigm (biogenic vs. fossil fuels) then it should be respected as such. We can't expect the government to fund, Manhattan Project style, the R&D and deployment of oil alternatives. Congress and the Executive Branch (for now) realize that we need investors to step up and assume the risks of new industry development. Hence, subsidies, RECs, and loan guarantees. But investors suspect that the government energy policy is extremely fickle and political. An abrupt end to the subsidies would only succeed at validating that suspicion.

This is about liquid alternatives to oil - not windmills and solar cells. NRDC needs to decide whether they support biofuels or not. If not, what other liquid fuel alternatives are there? If they do, they have got to realize it is a long-term commitment. They need to demonstrate to developers and investors that they won't undermine policies that move biofuels market entry and infrastructure development forward.

Comments are closed for this post.

About

Switchboard is the staff blog of the Natural Resources Defense Council, the nation’s most effective environmental group. For more about our work, including in-depth policy documents, action alerts and ways you can contribute, visit NRDC.org.

Feeds: Nathanael Greene’s blog

Feeds: Stay Plugged In