Monday, December 24, 2012

Time for realism on renewable fuels

This month, the Environmental Protection Agency upheld its requirement for blending ethanol into gasoline. Though not unexpected given the strength of renewable fuel interests, this decision ignored the pleas of 10 governors, almost 200 members of Congress and many Michigan businesses. With drought destroying much of America's corn crop this summer and Thanksgiving dinners costing significantly more since 2005, the downsides of renewable fuels became all too clear. Responsibility now falls to Congress to roll back the unrealistic renewable fuel goals set in the Energy Independence and Security Act (EISA) of 2007.

To understand how we got to this unhappy place, a bit of history is needed. Renewable fuels such as ethanol and biodiesel have long been hailed as alternatives to America's reliance on petroleum. The fuels bolster crop farmers' incomes and claim to protect the planet by recycling carbon from the air. As prices at the pump climbed over the last decade, biofuel proponents rallied support for a mandate to replace petroleum with home-grown biofuels.

In response, Congress created the Renewable Fuel Standard (RFS) in 2005, which increased the amount of ethanol blended into the gasoline supply each year. Initially, the target was 7.5 billion gallons for 2012. That would have been a safe goal, one that could be met by blending ethanol into gasoline at levels below the 10-percent limit compatible with most of the millions of engines already in use.

But that target wasn't enough for some interests, who worked on Capitol Hill to exploit ongoing concerns about rising oil prices and energy security.

With ink barely dry on the original RFS, biofuel boosters teamed up with energy security hawks and several green groups to promote a bigger and bolder mandate. Pitching a grand plan for "growing energy" as a win-win solution, they worked with allies in Congress to craft complex requirements for a vastly expanded RFS, giving biofuel producers and financiers a massive guaranteed market that more than quadrupled the original target.

The result was an ambitious EISA goal for 15 billion gallons of renewable fuel in 2012 -- a milepost on the road to 36 billion gallons by 2022. Last year's RFS requirement consumed 40 percent of the total corn crop, significantly impacting food prices and hampering world hunger efforts. Such targets go well beyond the safe level for blending ethanol into gasoline and distort the price of corn, putting many poultry and livestock farmers at risk.

Beyond corn-based ethanol, the RFS calls for the use of cellulosic ethanol made from non-food crops and wastes. Proponents claimed the fuel was so close to commercially ready, that after a few years of public support, it would be competitive with petroleum. Technology and market realities have proven those presumptions wrong. Cellulosic ethanol is still not viable on a meaningful scale. Regulators waived the cellulosic portion of the RFS down to only 10 million gallons in 2012, a far cry from the 500 million gallons called for by Congress. Moreover, the climate disruption risk of both corn ethanol and much of the promised cellulosic fuel turns out to be worse than most environmentalists wanted to believe.

It's now clear that the expanded RFS targets were a dangerous overreach. Congress should strike its 2007 RFS provisions, reverting to the original and more sensible 7.5 billion gallon goal. Doing so still provides a guaranteed market for truly competitive advances in biofuels and will make more of America's harvests available for traditional food and feed markets.

In short, coupling the geopolitically unstable oil market to weather-sensitive agricultural markets is a bad bet for consumers, doing little for energy security while risking food security, harming the environment and raising costs throughout the economy. It's time for Congress to correct its costly blunder and scale back America's renewable fuel goals to prudent and realistic levels.

This piece ran as an op-ed in The Detroit News, December 24, 2012. 

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