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Coalition calls on President Obama to follow the science and reject more giveaways to old, dirty corn ethanol

Sasha Stashwick

Posted October 19, 2010

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Today, a broad coalition of environmental organizations, including NRDC, sent a letter to President Obama expressing strong opposition to the policy proposals recently released by the corn ethanol lobby groups Growth Energy, the American Coalition for Ethanol, the Renewable Fuels Association and the National Corn Growers Association to expand the consumption of unsustainable biofuels. With the corn ethanol tax credit—known as the Volumetric Ethanol Excise Tax Credit or VEETC—set to expire at the end of the year, growing hesitancy on the part of lawmakers to extend more subsidies to the mature corn ethanol industry, telling admissions by industry insiders that the VEETC is unnecessary, and waning public support for ethanol, the proposal is a last-ditch attempt by the industry to shore up billions in taxpayer support for conventional corn ethanol.

As we noted here, just under the surface of the industry’s proposal is an important shift in position: an explicit acknowledgement that the VEETC in its current form should end and that taxpayer dollars should be spent encouraging better biofuels rather than just more biofuels, better or worse. The group has proposed a shift to a production tax credit, paid to ethanol producers instead of fuel blenders (as is the case with today’s VEETC) and based on reduced GHG emissions. Because the tax credit would go only to domestic producers, it would allow an end to protectionist import tariffs that keep foreign-made ethanol out of the U.S. market, regardless of its environmental performance.

Whatever the motivation, this is a step in the right direction. Unfortunately, the details of the industry’s proposal demonstrate that it intends to continue pushing for policies that would lock more old, dirty corn ethanol into the market. The worst parts of the industry “wish list” include an extension of corn ethanol subsidies, loan guarantees for ethanol pipelines, a redefining of “advanced biofuels” under the Renewable Fuels Standard (RFS) to include conventional corn ethanol, and a suspension of the EPA’s effort to account for emissions from market-driven deforestation—commonly referred to as indirect land use change (ILUC)—when assessing the lifecycle emissions of biofuels.

The coalition letter responds to these “asks” one by one, so let’s do the same here.

Should corn ethanol subsidies—in any form—be extended?  For months we’ve discussed the massive cost and redundancy of the corn ethanol tax credit, which we pay to oil companies for each gallon of ethanol they blend into our gasoline despite the fact that since 2006, the RFS has required them to do so. Paying oil companies billions to obey the law would be fiscally irresponsible in the best of times, but in our current economic slump and with mounting deficit concerns, it is fiscally indefensible. But you don’t have to take our word for it. This summer, the Congressional Budget Office agreed, publishing a sobering study showing just how costly the VEETC is for U.S. taxpayers, which we discussed here.

But besides the cost, does the VEETC actually drive domestic corn ethanol production? Would its expiration spell the demise of the domestic corn ethanol industry as the industry claims?  A growing stack of studies concludes that the answer to this is a resounding no. The University of Missouri and Iowa State University have both published studies in the last year estimating the additional gallons of ethanol production that we’d see if the VEETC was extended. We’ve blogged in more detail on their findings here, here and here but the basic conclusion is: removing the VEETC would have little impact on the domestic market for ethanol, since RFS mandates are the primary driver of domestic ethanol production.

Should we also fund the expansion of infrastructure that supports corn ethanol?  Earlier in the summer, Growth Energy released its Fueling Freedom Plan, which called for ending the corn ethanol tax credit and shifting support to infrastructure investment. After reported squabbling amongst ethanol industry groups, it seems that the ethanol lobby now wants both! Investing in pipelines designed to accommodate corn ethanol is a huge waste of taxpayer money, locking us into ethanol when the advanced biofuels industry is quickly shifting gears and investing in biofuels that can drop right into our current fueling system.

Should the administration accept a redefinition of “advanced biofuels” in the RFS to include corn ethanol?  On this, our response is clear: corn ethanol is a mature, mainstream industry that now provides about 10% of our light duty vehicle fuel supply and has been in commercial production for more than 30 years—not an advanced biofuel. Besides competing with our food supply, EPA has found that when all direct and indirect costs are added, corn ethanol creates more GHG emissions than the gasoline it is meant to replace. Making conventional corn ethanol eligible as an advanced biofuel would completely undermine the purpose of the RFS advanced biofuels mandate—namely, the development of cleaner, more efficient next generation biofuels. Furthermore, opening the floodgates to more corn ethanol and pulling the legs out from under the advanced biofuels industry would almost certainly kill any investments in real advanced biofuels.

Can we afford to not follow the science on terrestrial carbon accounting?  Our letter expresses our categorical opposition to undermine EPA’s efforts to accurately account for the lifecycle greenhouse gas emissions of biofuels, including ILUC. The science is clear: ILUC emissions are the largest component of total emissions from conventional biofuels and can sharply reduce or negate any climate benefits we hope to see from using biofuels. Ignoring these emissions would result in promoting biofuels that are responsible for a net increase in global warming and hamper our overall ability to make good energy policy.

What are ILUC emissions and why is this such a serious concern? Carbon emissions from land use change result when carbon-storing forests are cut down and converted to farmland, either to grow dedicated energy crops or to meet unmet global demand for food when land elsewhere is diverted to grow crops for fuel, as in the case of U.S. corn grown for ethanol. The result?  Instead of reducing emissions, we simply shift our emissions from fossil fuels to our agricultural and forest lands, risking our ability to address our climate challenges in time to prevent the worst impacts of climate change. [To better understand this dynamic, I recommend watching this great video by my colleague Nathanael Greene].

Our bottom line: any attempt to undercut the science by preventing EPA from accounting for ILUC emissions when assessing the lifecycle impacts of biofuels would raise serious concerns about the RFS and, importantly, erode environmental community support for all biofuels.

The transition away from old corn ethanol to the advanced biofuels we need will require smart policies and the right incentives. That is why we cannot continue to prop up a decades-old corn ethanol industry with more subsidies and infrastructure investments that lock this outdated, dirty fuel into the marketplace, allow the definition of “advanced biofuels” to be gutted, or EPA’s efforts to follow the science on ILUC to be undermined. What we need are investments in the development of the next generation of newer, cleaner, more competitive and advanced biofuels. Here at NRDC, we’ve proposed a Greener Biofuels Tax Credit, a technology-neutral incentive that would pay for real environmental performance, and a Billion Gallon Challenge, which would focus support on developing 1 billion gallons of truly low-carbon biofuels by 2014, produced using feedstocks and conversion technologies that promise scalability and broad sustainability. As the Obama administration considers energy policy, our letter expresses our hope that it rejects the corn ethanol industry’s cynical attempts to keep us locked into the biofuels of the past and instead embraces policies that will speed the transition to the biofuels of the future—biofuels that will deliver more green jobs, more energy and food security, and a cleaner environment.

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Bill BrandonOct 25 2010 12:27 PM

The blogs and statements coming from the NRDC increasingly resemble those of a jihadist zealot who believes only he has the true perspective. Some positions here are highly questionable at the least and some, when examined from another perspective are paternalistic and neo-colonial in nature.

Your characterizing the proposals set fort by the ethanol industry as a “last ditch effort” totally reverses their position. In reality it is a first effort to change the politicized market economy that they exist in and to eliminate VEETEC and tariffs in an orderly manner. Producer credits are to be given only to producers who invest in lowering their carbon footprint. You admit that “Whatever the motivation, this is a step in the right direction.”

You state “Our letter expresses our categorical opposition to undermine EPA’s efforts to accurately account for the lifecycle greenhouse gas emissions of biofuels, including ILUC. The science is clear: ILUC emissions are the largest component of total emissions from conventional biofuels.” What is clear is that ILUC is not settled science. In a soon-to-be published paper, researchers at the Department of Energy's Oak Ridge National Laboratory conclude that indirect land use change (ILUC) resulting from expanded corn ethanol production over the past decade has likely been “minimal to zero.” Measurable data is not aligning with the predictions of ILUC theory. The ethanol lobby is not saying to ignore science but to apply it evenly for all indirect emissions for ALL fuels and make it a true science with empirical data. (There has been zero empirical data produced on ILUC when compared to the empirical studies on using higher blend amounts of ethanol.) The ethanol industry also wants an ACCURATE accounting for lifecycle GHG emissions.

But let’s assume that ILUC theory is correct and that ‘shortages of US corn’ (which don’t exist as there is a 1.7 billion bushel carry over from last year) cause third world farmers to cultivate fallow fields. Isn’t that what we should want them to do and need them to do? Poor US policy dating from the Nixon administration has marginalized many third world farmers or worst driven them out of business and into cities. We cannot eliminate world hunger and help developing economies by exporting our commodities. Countries should strive for food independence and cultivate their land in a productive and sustainable way. To assume otherwise is a neo-colonialist mentality. If there is a causal relationship between US ethanol production and foreign land use change for production of their own food, I say great, who cares right now. But more importantly, there has been no empirical evidence to support such a causality.

You represent that the ethanol industry is asking for conventional corn ethanol to be classified as an ‘advanced biofuel’. This is incorrect and you should know it. They are only asking for a path for corn ethanol to be classified as an advanced biofuel. Right now the RFS has a feed stock bias. A recent correction to that bias was made to include algae as a feed stock. (This should be extended to also included direct microbial production and MSW.) So why leave out corn? Corn ethanol presently has a capitation limit in the RFS. If producers using corn as a feed stock can meet the standards of an advanced biofuel by using bolt on technologies and other methods of increased productivity to lower its carbon footprint, why should it be excluded? Your contention that ethanol produces more GHGs than gasoline depends solely on using the elusive GHGs from ILUC (and of course not counting similar or corresponding indirect effects for oil). As noted above the DOE is not buying this argument.

Your belief that ethanol is an ‘old technology’ that is giving way to ‘drop-in fuels’ is a far more complicated issue than your casual comment would suggest. Big Oil support the idea of ‘drop-in’ fuel as it compliments their existing hard asset infrastructure. Ethanol does not. Existing pipe line distribution is only a small part of their infrastructure. Most of their hard assets are in upstream and down stream extraction and refining facilities. When oil prices are relatively high they will push the upstream activities as this is where their highest ROI is. When oil prices are relatively low they push their down stream assets. With appropriately priced bio-crude their ROI on down stream assets will override upstream assets. (Big Oil generally does not believe in ‘peak oil’, only ‘peak price’.) Big Oil does not want to diminish their asset value by abandoning hard assets. (Valero, as a refiner only, specializing in poor quality crude is abandoning refining facilities in Barbados and New Jersey and trying to dispose of them. They are the exception.) Big Oil knows that at some time they will need to become involved in biofuels in a significant way. They are, however, not favorable to abandoning their refining assets in favor of constructing new ethanol assets. As an executive with Verenium told me a while ago, “We (the US) need to settle on a molecule. The emphasis on drop-in fuels may solve energy independence but it will come into conflict with our desire to lower GHGs.” Bio gasoline is still the same crappy, inefficient fuel as fossil gasoline.

Assuming that you are not familiar with IC engine technology, I will simply state that E100 and E95D have been demonstrated to have slightly better performance and thermal efficiencies that present diesel engines. Nox are lower from the engine and other emissions can be adequately controlled well below existing standards. Since ethanol is a 2 carbon molecule and diesel is averaging a 16 carbon molecule, tailpipe CO2 is significantly lower for ethanol and can more than offset any potential upstream emissions and these upstream emissions are poised to decrease drastically. The key to the bio revolution that we are entering is efficiency and utilization of all ‘waste streams’. We can recycle or sequester GHGs at the production facility but not at the tail pipe. I would not be jubilant about ‘drop-in’ fuels knocking off ethanol. The future of pure play biofuels is not that bright and jumping from corn ethanol to cellulosic ethanol to drop-in biofuels is naively looking for the nonexistent ‘silver bullet’. First generation ethanol is well on its way to integrating technologies: to wit Poet’s project Liberty and Green Plains experience in growing algae using fermentation CO2. Monsanto continues to advance productivity and increase nitrogen uptake ability. Farmers are no till planting and using riparian barriers. Bio ammonia is being produced at the demonstration level. Don’t be a patsy for Big Oil’s interests here.

We can argue back and forth that Big Oil gets subsides so why shouldn’t ethanol. These arguments will not be fruitful. Instead, we need to agree that US energy exists in a highly politicized market economy and analyze it as such. (Michael Barzelay’s work would be helpful here.) To argue that government mandates are sufficient to support ethanol’s market (reminiscent of a government command economy demonstrated as ineffective) can be turned on its head by saying the mandate to use 90% gasoline unfairly restricts ethanol’s access to a free market (a partially delusional theory that does not exist). Retail distribution is controlled by a competitor. Big Oil. The original rational for VEETC was to support development of infrastructure. Big Oil did some modifications for blending at distribution facilities but nothing at their retail operations. Instead, they sold their retail operations off as franchises. There was no accountability as to where this money was going. Corn ethanol production may be a ‘mature’ business, but their distribution system is not. I am fine with eliminating VEETC but not supporting installation of blender pumps on the basis that drop-in fuels don’t need distribution modification will be counter productive to your goals.

The only two proven drop-in fuels are pyrolytic synthetic gasoline and butanol. The pyrolytic approach has been around since WWII and has never been able to make the necessary price point. Butanol is ready to go and is being pushed by BP. The Agri-energy ethanol facility in Luverne MN has recently been sold and conversation to butanol production has begun. Lets do a quick look at the figures. Production volume of butanol will drop by about 80%, but butanol has about 1.3 times the BTU’s of ethanol. 80% x 1.3 = 1.04 or a 4% boost in BTU output as defined in the RFS. Since butanol is hydrophobic, there is no need for a molecular sieve for the azeotropic water, about a 25% reduction in distillation costs and energy. With installation of additional equipment, Butanol can be separated from the thin stillage by mechanical methods rather than thermal, a near total elimination of distillation costs which may make it an advanced biofuel. This is why some believe that despite the decrease production volume, production of butanol will result in a higher ROI. But, because of the higher BTU content of butanol over ethanol, it can presently be blended at a higher ratio – 16%. Production volume at .8 times of ethanol but blending at 1.6 times ethanol means at present full blending restrictions, twice as much corn will be needed for butanol as for ethanol. Being a 4 carbon molecule, butaol will have slightly higher tail pipe emissions. Is this really what you are advocating?

We exist in a politicized market economy regarding energy where top authorities pursue contradictory goals and where policy making authority tends to be diffused among many agencies. With these conditions, political signals are highly ineffective. Investments made by ‘privileged investors’ (Big Oil) constrain the likelihood of future policy reversals. It is my opinion that, especially at this time, we employ a micro-analytic approach with attention paid to objectives pursued by participants in both the policy and investment sides. The ethanol industry seems to be making a greater effort in this direction than you are.

We need to invest in a retail distribution system of blender pumps because it opens the door for engine advancements. As long as Big Oil controls adding biofuels to gasoline before distribution, it pollutes the potential of ethanol (and butanol).
There are four blends that make sense, E6, E30 – E40, E70 and E95D. E6 is sufficient for an Oxygenate for gasoline. E30 – E40 promotes a more complete combustion of gasoline resulting in improved thermal efficiencies and somewhat better gas mileage in conventional vehicles (minor retuning may be helpful). E70 can be used in a high compression SI engine for increased thermal efficiencies. E95D can replace diesel and be used in heavy duty engines like trucks (Scania) and railroad engines (AHL-Tech). Without the biofuel being mixed at the retail station, we block options for engine improvements.

Sasha LyutseOct 26 2010 08:13 AM

Bill -

NRDC has a long record of opposing all dirty fuels, be it oil or corn ethanol. More of either or replacing one with the other does not move us forward.

We will be posting a full blog on the Oak Ridge National Lab study later today, but the short response is that while the authors have given us a descriptive account of the supply side of the corn market over the last decade, they've made no attempt to compare what happened to a baseline scenario, withhout which their analysis tells us nothing about the actual impacts of U.S. ethanol policies--i.e. what global demand for corn and U.S. corn exports would have been absent those policies.

Also, a brief reminder on language: though we welcome passionate debate on Switchboard, offensive name-calling cannot be tolerated. If it continues, we will have to remove your comments.

Clay OggOct 29 2010 12:52 PM

Your blog has very interesting articles. Environmental groups' efforts to get biofuels done right may become their most important contribution in saving the world's forests, prairies, and other threatened ecosystems.

One of your articles found that farmers benefit from saving forests as well as from corn ethanol. While I share the concern for farmers, I think that crop prices need to be addresses as a food issue, not just a farmer issue. Billions of poor people in the world spend most of their income on food, and for them, getting our food/agricultural/environmental policy right is a life or death issue.

Both corn ethanol and forest preservation can greatly influence crop prices. John Reilly, who is co-director of MIT's climate research program, and others have an article in the American Journal of Agricultural Economics that quantifies these food, fuel, and forests trade-offs. If you like, I can send you the link.
I have a Policy Issues article (accessed at Choicesmagazine, July issue of Policy Issues) that describes the links between crop prices and fuel prices.

I greatly appreciated reading your blog, and hope that some of the above may be of interest.

Comments are closed for this post.


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