Environmental Groups Oppose Ethanol Bailout in Stimulus Package
Environmental groups and food producers oppose the Renewable Fuels Association’s requests for support from the stimulus package that includes $1 billion to finance current operations and a $50 billion federal loan guarantee, as well as job tax credits.
The Clean Air Task Force, Environmental Working Group, Friends of Earth, and the Network for New Energy Choices released a statement today saying that federal government subsidies and mandates for corn-based ethanol produce potentially catastrophic consequences to the environment, and have no payback to taxpayers in terms of alleviating global warming effects, providing for energy security, or even simply reducing the cost of driving. The group’s stance:
“With evidence mounting that biofuels are worsening global warming and harming water quality and wildlife habitat, it makes no sense for the federal government to lavish billions more on an industry already flush with government assistance. It is time for ethanol to stand on its own.”
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The spokesman for Renewable Fuels Association, Matt Hartwig, responded: “We are not asking for a bailout or anything like that.”
But environmental groups say that the ethanol industry already receives more federal support than any other renewable energy program. According to the EWG statement, two out of every three dollars that the government spends on what it calls renewable energy programs (including wind, solar, and geothermal) already goes to the ethanol industry.
“It’s utterly irresponsible to continue to expand this conventional biofuels industry.” - Craig Cox, Environmental Working Group
Food producers aren’t happy either, saying that America should be looking toward second generation solutions that don’t compete with the need to produce affordable food. “An additional $50 billion in government support for the corn ethanol industry will only calcify the status quo and reduce the urgency for innovation,” says Scott Openshaw, with the Grocery Manufacturers of America.
The RFA replied to the detractors, stating that “The RFA recognizes that by stimulating increased production, innovation, and investment in new technologies and cellulosic feedstocks, a revitalized renewable fuels industry can help bail out the flagging U.S. economy and lessen America’s dependence on foreign oil.”
Update: Just after finishing this post, I Tweeted it, and got a response from @nathanschock, saying “The environmental groups are opposing something that doesn’t exist.” He left a link to Biofuels Journal, which published this statement from RFA:
“America’s ethanol producers share the vision of President-elect Obama of a domestic industry that is innovating to include ethanol production from a wide array of materials including switchgrass, wood chips, and municipal solid waste.
That vision can only become a reality if today’s ethanol technologies and producers are successful. As such, the RFA is having discussions with the Obama team on how ethanol fits into a green stimulus package.
Today, ethanol is the only alternative transportation fuel having any impact reducing America’s dependence on foreign oil. Moreover, ethanol is uniquely poised to employ new technologies and scale up production significantly in the short term to greatly reduce imports of foreign oil and more meaningfully help address the issue of global warming.
Ethanol production must be at the core of any green initiatives designed to reduce foreign oil dependence, create economic opportunity, and address climate change by changing how Americans fuel their cars.”
I disagree with @nathanschock. Asking for one billion dollars to continue operating sounds like a bailout to me.
Image: Aunt Owwee at Flickr under Creative Commons
“Only in blends up to 10%. Some may be able to handle up to 20% or 30%. But going beyond that, unless the vehicle has been built to be able to use high concentrations, is courting trouble.”
You’re talking about one guy, but you’re using a half-lie, so who’s the liar?
ANY fuel injected car made in the last 10 or so years is able to run straight from ethanol just by letting all the extra fuel being delivered by the oxygen sensor readings. But you’ll be limited on not hitting the topmost of power-output due to the injection never being meant to deliver all that fuel. (you’re limited by your injection’s programming and/or injectors size/flow)
It’s kinda bad to have a car where you can’t hit the floor once in a while, but wide-open-throttle was never a sign of economy or environment concern either. So just putting E85 in a gasoline-only car is not a smooth solution, but it is still possible.
If you want to convert your car to E85 all you have to do is open your fuel injectors by 30% approx., you can use your stock ones just widened by electrolysis and you’re good to go. (warning: older cars may have to have an E85 approved fuel pump) That’s DEFINITELY not a big change under the hood and works on all cars.
In fact, often cars have injectors large enough to be able to run on E85 with just a simple IC reprogramming, no mechanical change is required.
So, one can state: any car can run on E85 with little to no changes.
Lint: by putting conditions on what kinds of cars can run on E85 you are proving my point. It is not a half-lie to say that “But going beyond that, unless the vehicle has been built to be able to use high concentrations, is courting trouble.”
Here is a quote from James D. Halderman, an ASE-certified master technician, a member of the Society of Automotive Engineers, and the author of 12 textbooks on cars:
http://www.daytondailynews.com/news/content/oh/story/wheels/2008/10/18/MPSWLS1018DDNStraightTalk.html
“CAUTION: Never use E85 in a vehicle that is not designed to use E85. Major damage can occur to the fuel system components, which could cost thousands of dollars to repair.”
Go ahead: use E-85 in your own car. I’m not going to stop you. But I am also not going to advise people to try E-85 in their vehicles unless they check out what it may do to their particular car (which, in some cases, may be nothing) … and whether their car would still be under warranty if something goes wrong.
Ronald S:
Your figures on oil and gas subsidies are way off. You take the very lowest estimates by Friends of the Earth and EIA which are way under the majority of other estimates. The most accurate methods for figuring energy subsidies are at Earthtrack. Their method averages a range of high and low studies. In 2006 they say Oil and Gas got $39 Billion (52%); Coal got $8 Billion; Nuclear got $9 Billion; Mixed Renewables got $6 Billion; and Big Oil got most of the $6 Billion worth of Ethanol Blending subsidies:
http://www.earthtrack.net
Urban Lehner says:
“Whenever ethanol subsidies are discussed and the 51 cent blenders credit in particular, I would argue that this is not a subsidy to the ethanol industry but rather it is another subsidy to the oil companies. It is my understanding that the blenders credit accrues to the people that do the blending of the ethanol which is primarily the fuel distributors (oil companies). The purpose of the blenders credit was to help offset the additional investment for them to store, blend, and distribute ethanol blended fuels. I have yet to see “blender credit income” on an income statement from my local ethanol plant. It does indirectly benefit my ethanol plant by opening up markets for more ethanol. But make no mistake; this blenders credit provides an incentive for the oil companies to utilize more ethanol, because they can make a lot of money doing it.”
http://www.dtnprogressivefarmer.com/dtnag/common/link.do?symbolicName=/ag/blogs/template1&blogHandle=editorsnotebook&blogEntryId=8a82c0bc1cb6339b011cc2cfc5af0095
A Greenpeace study puts oil and gas subsidies between $15 Billion and $35 Billion a year:
http://cleantech.com/news/node/554
The Cato Institute estimates Big Oil subsidies at between $78 Billion and $158 Billion a year:
http://www.treehugger.com/files/2008/07/hidden-big-oil-subsidies-stop-them.php
Clifford D. May says:
“Former CIA director James Woolsey estimates that U.S. oil companies receive preferential tax treatment worth more than $250 billion a year — and that doesn’t include the military costs necessary to keep oil supplies flowing around the world.”
http://www.unionleader.com/article.aspx?headline=Clifford+D.+May%3A+OPEC’s+sheiks+must+think+Americans+are+stupid&articleId=99df355b-cedf-44eb-8bf1-66b277bd3262
Jeff Baker,
I did not “take the very lowest estimates by Friends of the Earth and EIA”, I mentioned the EIA (and noted that I thought their estimates were too low) and cited the actual FoE estimates, not the low end of any range from them. The FoE study is a forward-looking analysis, counting the major subsidy and tax-programs supporting U.S. oil production, and is therefore appropriate for comparing against the value of the volumetric ethanol excise tax credit.
But I’m delighted that you’ve cited Earth Track’s stimates, as I have great respect for their work.
Two things: First, I guess you missed on the Earth Track website the two reports that Doug Koplow, President of Earth Track, wrote that were highly critical of current support programs for ethanol and biodiesel. The most recent one can be downloaded from here:
http://www.earthtrack.net/earthtrack/library/BiofuelsUSupdate2007.pdf
In that study, which considers a wider range of support programs for ethanol than just the VEETC, Koplow arrives at a total estimate of subsidies to ethanol of $1.05 to $1.25 per gallon, or $1.45 to $1.75 per gallon of gasoline equivalent (i.e., adjusting for its lower heat value).
Nowhere will you find in any of Earth Track’s studies on ethanol any statement supporting Urban Lehner’s view that the VEETC is a subsidy to the oil companies. Indeed, the VEETC is the largest element in Earth Track’s ethanol-subsidy estimates. Pure and simple, the VEETC is a tax credit that, while paid to blender, basically allows ethanol producers to sell their product at a higher price than they would be able to otherwise.
The Renewable Fuels Association — no friend of the oil industry (or so they say) — has fought vigorously to retain and extend it. If the oil companies and not the ethanol industry were the main beneficiaries, why would it bother? The RFA and others in the industry also defend the $0.54/gallon import tariff on Brazilian ethanol because they say that it is necessary in order to compensate taxpayers for the fact that Brazilian ethanol is also eligible for the VEETC. But if the VEETC were only benefiting oil companies, why should the domestic ethanol care?
And are you going to tell us that you would be happy for Congress to let the VEETC expire? Somehow I doubt that. Or, is your (and the rest of the industry’s) real agenda to get the VEETC for corn-ethanol converted to a producer payment, like the $1.01 producer tax credit that will go into effect for cellulosic ethanol at the beginning of next month?
Let’s return to the question of the value of government support for the oil industry. Of the various estimates you cite, only Earth Track’s allow for an apples-with-apples comparison with ethanol. Greenpeace’s estimates include such items as government expenditure for “construction and protection of the nation’s highway system.” Well, if that counts as a subsidy for petroleum, then it should also count (suitably pro-rated) as a subsidy for other transport fuels, including fuel ethanol. The source you cite for the Cato study is a secondary one. My reading of it is that Cato calculated that the US spent between $30 billion and $60 billion a year safeguarding oil supplies in the Middle East during the 1990s; the higher numbers ($78 to $158 billion) are from some other source, not attributed. (It could be the 1998 study by the International Center for Technology Assessment, which also counted road-building costs, as well as externalities such as noise pollution, which again are equally applicable to cars run on biofuels as to cars run on petroleum fuels.) Your quote of Clifford D. May quoting former CIA director James Woolsey as saying that U.S. oil companies receive preferential tax treatment worth more than $250 billion a year seems to be a case of Chinese whispers. Woolsey said nothing of the sort. What he said, in testimony before the Senate Committee on the Judiciary on 28 February 2006 was that: “[W]e continue to borrow a billion dollars every working day, about $250 billion per year, to import oil ….” That is not the same as a “preferential tax treatment worth more than $250 billion a year”.
http://judiciary.senate.gov/hearings/testimony.cfm?id=1770&wit_id=5227
The question of whether, and how much, of the cost the U.S. military presence in the Middle East can be attributed to protection of oil-supply lines, and of U.S. oil supply in particular, is a contentious one. But lets take Earth Track’s estimate of $39 billion a year as the best estimate of subsidies to the oil industry that includes some of that cost. Whereas the FoE estimate ($10 billion per year) relates to support for domestic production of oil and gas, Earth Track’s applies to total supply of oil consumed by the United States, which is a much large number. According to the EIA, it was 7.55 billion barrels in 2007, or 317 billion gallons:
http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbbl_a.htm
Dividing $39 billion by 317 billion gallons (i.e., ignoring natural gas production) yields a subsidy rate of $0.123 per gallon. That is far less than the rate of subsidization of ethanol and biodiesel, each of which exceeds $1.00 per gallon.
Happy Holidays.
I’m not sure I support this sort of bailout or not. Throwing money at problems seems to be the only way the economic crisis is being handled right now.
That being said, I like any perspective on the economic crisis that introduces an element of hope. As a psychologist, my take on this phenomenon is that it is psychological, based on fear.
The loss of the economy, as we knew it prior to this recent crash, involves a grieving process that I believe will culminate with recovery.
The catalyst for that recovery is hope. Follow the message contained in these songs and you’ll understand what I mean.
Everything is Fallin’ Apart
Dr BLT
words and music by Dr BLT copyright 2008
http://www.drblt.net/music/EveryThingIsDemo2.mp3
Dr BLT altered cover of Blue Oyster Cult classic
http://www.drblt.net/music/DontFearDem2.mp3
and as I said in my totally original Dr. BLTune…
Spread Some New Year Cheer
Dr BLT
copyright 2007 Frosty Rock Records
http://www.drblt.net/music/SpreadDemo2.mp3
BTW, great predictions for a…
Future 2 Behold
Dr BLT
words and music by Dr BLT copyright 2008
http://www.drblt.net/music/future3.mp3
If pure unadulterated Ethanol were available at the pumps, how long would it take Asian manufacturers to provide the super-charged, high performance engines to take advantage? I think not long! They(Asians) are much more flexible than GM, who can’t seem to get the “Volt” off the drawing board, in spite of their EV-1 experience! The Asians have put to market many electric and gasoline/hybrids, and VW has withdrawn a diesel/electric hybrid,plug-in, while Americans dilly dally, burning up the last of Saudi Oil, at manipulated prices, while the rest of the world converts to other fuels, other life-styles not requiring so much personal mobility, and the price of Beef, which requires copious amounts of fuel to produce, goes up each day! A breaking point approaches! We will ether have to Shiite or get off the pot! and soon! Oil broke $78.00 bbl today, and rising, exponentially, like an ominous tsunami over our economy! Ethanol may be part of the answer, but it is much more effective, over-all, in fuel cells driving electric motors than in piston engines.