Cash Is King, Even at Copenhagen Although apparently brief, the suspension of the Copenhagen climate conference after a walkout by the Group of 77 developing countries confirms that the talks are as much about money as about healing the world's climate. It's not just that the G77 wants the Kyoto limits on the emissions of developed countries enforced, while leaving their own emissions uncapped; it also wants the developed world to kick in sizable sums--much bigger than the 2.4 billion Euros per year offered by the EU--to cover the improvements in energy efficiency and renewable energy that would enable them to tackle the growth of their own emissions. There's a solid argument there, though it is not the guilt-based logic of "carbon debt" that I explored a few weeks ago.

An op-ed in the Saturday Wall St. Journal got me thinking about this issue over the weekend, before the G77 delegates walked out of the COP-15 session in Copenhagen. This commentary by a Berkeley physics professor and author of "Physics for Future Presidents" was bursting with enough ideas to stimulate a dozen blog postings, but its key insight was that even the massive cuts in US emissions proposed for mid-century would be of little or no consequence in curbing global emissions that are increasingly concentrated in the developing world. He suggests that the emissions of developing countries will count the most, and that these countries will only adopt emission cuts that provide clear economic benefits to them. In that context and under the current Kyoto-based framework, the strongest argument for imposing deep cuts on the US and EU is not the reduction of our own emissions--which would have a minimal direct impact on the expected increase in the earth's temperature--but the role of these cuts in creating a market for offsets generated by investments in emission-reduction projects in the uncapped developing world via the Clean Development Mechanism, or CDM. Unfortunately, this logic has already led to notable distortions of the intent of the CDM.

There has to be a better way. As Dr. Muller notes, "A dollar spent in China can reduce CO2 much more than a dollar spent in the US." Yet US voters won't countenance providing that dollar out of guilt, nor will they acquiesce to a scheme that makes China and other developing countries more competitive at their expense. Paradoxically, even domestic measures such as European feed-in tariffs and the proposed federal Renewable Electricity Standard embedded in the Waxman-Markey climate bill could create such an outcome, if Chinese and Indian green technology firms come to dominate developed country green energy markets. There are already indications of this happening in the German solar market.

Instead of the technology transfer we've been talking about for more than a decade, what may be needed is a new mechanism that actually creates markets in the developing world for clean energy hardware and know-how produced in the developed world, so that these projects create jobs and wealth in the US and EU, rather than threatening them. I'm not sure precisely what form such a deal might take, but at a minimum it should incorporate both open access to developing country markets and uniform legal protection for the physical and intellectual property of the developed-country companies making these investments.

The best thing that could come out of today's disruption at Copenhagen would be the cancellation of the big heads-of-state photo-ops planned for the final days of the conference and a determination to put the delegates back to work crafting a new agreement that creates the right recipe for focusing the lion's share of climate investments on the rapidly growing emissions of the third world, rather than on the shrinking emissions of the EU and the plateaued GHG output of the US. That would be something worthy of bringing the world's leaders together to sign.

Labels: cdm, cleantech, climate change, cop-15, copenhagen

  ¶ 10:36 AM

  Oil's Place in a Kerry-Lieberman-Graham Climate Bill The inclusion of support for expanded US oil and gas drilling in a Senate climate proposal issued yesterday is bound to puzzle many readers. If the emissions from oil are responsible for a major portion of human-induced global warming, how can increasing our production of it contribute to reducing US emissions, as the three Senators involved suggest? The answer requires a clear understanding of where most of the emissions in the oil value chain take place. It also invokes a broader view of climate and energy security that recognizes that oil is not as close to being replaced by renewables as we'd like to think, and that in the absence of higher domestic output, our oil imports could continue to increase, with consequences--and emissions--beyond our control.

The proposed framework from Senators John Kerry (D-MA), Joe Lieberman (ID-CT), and Lindsey Graham (R-SC) was released in the form of a letter to President Obama, outlining the parameters of a climate bill that would include emissions caps and market mechanisms--presumably cap & trade--plus support for nuclear power, clean coal, and oil and gas drilling, along with other provisions to protect consumers and promote job creation by helping manufacturers become more energy-efficient. In the absence of its details, the proposal looks broadly similar to other climate measures, including Waxman-Markey and Kerry-Boxer, but without treating domestic producers of conventional energy as undesirable elements. The trio behind this initiative is also interesting, adding Sen. Lieberman's long-standing credibility on cap & trade (3 previous Senate bills) and the bi-partisan participation of Sen. Graham.

To understand what support for domestic oil drilling is doing in a climate bill, however, you have to look at oil's continuing role in our primary energy mix and the distribution of emissions associated with its production, refining and use. Start with primary energy, with oil accounting for 37% of last year's total US energy consumption, in the form of 19.5 million barrels per day (mbd) of crude oil and refined products. Biofuels can't replace oil anytime soon, and even at its maximum extent in 2022, the entire Renewable Fuels Standard would only displace the energy equivalent of about 1.4 mbd of oil, or roughly 7% of current consumption. Nor can wind and solar power do the job; they will be fully engaged in reducing the average emissions of the US electricity mix, only about 1% of which is generated from oil. Some of that green power will eventually find its way into electric vehicles, which do displace oil, though these aren't likely to make up more than a small fraction of the US car fleet for decades. In any case, the emissions from biofuels and electric vehicles may not be that much less than from oil use.

The inescapable conclusion is that the US will continue to burn oil for a long time. The quantities will decrease as efficiency and substitutes ramp up, but not fast enough to back out all of the oil we import for a very long time, let alone all petroleum from all sources. And that's where the energy security aspects emphasized by the three Senators come in; if we're going to need oil for years to come, as much of it as possible should be produced here.

Then there are the emissions from that oil. When assessed on a full lifecyle basis, most of the emissions from petroleum occur when it is used, not when it is produced. That's even true for oil derived from oil sands, which entails significantly higher upstream emissions than for the conventional oil output this framework would promote. Depending on the crude oil source and the products involved, well-to-wheels analysis suggests that 80-90% of emissions occur at the point of use, with production, transportation and refining accounting for the much smaller remainder. As a result, the point of maximum leverage on the emissions from the oil value chain is not exploration & production, which accounts for only a few percent of emissions, or refineries that are already 90% efficient, on average, but the cars and other vehicles and devices in which we consume it. The most effective strategies for reducing oil-based emissions thus involve vehicle dieselization, hybridization, downsizing, and other efficiency measures, along with non-efficiency conservation, including carpooling, telecommuting, virtual meetings, etc.

Moreover, since climate change is inherently global in nature, it doesn't matter whether the upstream emissions associated with oil occur in the Gulf of Mexico, the Persian Gulf, or anywhere else, except to the degree that domestic conventional oil might displace oil from higher-emitting unconventional sources elsewhere. But while the sources of the oil and refined products we use are largely irrelevant from a climate change perspective, they are most certainly relevant to our energy security. Increasing domestic oil production would pay big dividends in tax revenue, job creation, and the reduction of both our trade and fiscal deficits. (Disclosure: My personal investment portfolio includes oil stocks.)

The Houston Chronicle quoted Senator Graham as saying, "There will be no bill with Lindsey Graham's vote if it doesn't have meaningful offshore and onshore exploration." If he represented Alaska, Louisiana or Texas, you might attribute that sentiment to a desire to protect his home state's energy interests. Instead, it reflects a practical reality that seems to have escaped many in the administration, who appear to equate all oil from all sources with environmental and economic ills, rather than realizing that while we all know we need to use less oil for many reasons, that doesn't preclude us from using more of the enormous oil endowment with which the US has been blessed. If we use it wisely, domestic oil can provide a necessary bridge to the clean energy future we all want, and in a manner that is consistent with reducing global greenhouse gas emissions. I don't know whether these three Senators have found the recipe for breaking the Senate impasse over climate change, but this proposal could represent just the kind of grand compromise on energy and the environment that we have needed for a long time.

Labels: cap-and-trade, climate change, diesel, energy independence, hybrid, offshore drilling, oil production, waxman-markey

  ¶ 2:12 PM

  Reconciling Emission Baselines As the nations represented at Copenhagen debate proposals for reducing their absolute emissions or carbon intensity, I was reminded that we shouldn't just focus on the percentages being offered, but also on the reference year emissions on which these proposals are based, since these aren't necessarily comparable. That's particularly true for the US and EU, which have consistently referred to 2005 and 1990 base years, respectively. This distinction is crucial in understanding how much of what each party might commit to has already been achieved and how much remains to be accomplished.

Start with the EU, which has proposed a reduction of 20% versus its 1990 emissions levels. Based on a recently-issued report by the European Environment Agency, the 27 countries constituting the European Union today have already reduced their emissions by 10.7% as of last year, compared to 1990. According to this report their collective emissions in 2005 were 9.3% below 1990, so that 20% figure for 2020 really translates to roughly 12% below 2005--and only a bit more than 10% below where they are now--which is substantially less than the 17% reduction that the US has put on the table. However, the US proposal should also be put into context, because of the divergent emissions trends of the two regions since 1990, which was the base year for the Kyoto Protocol that has guided EU policy in the intervening years, but which the US never ratified.

Between 1990 and 2005 total US greenhouse gas emissions increased by 16.5%. After counting net emissions including all sources and sinks--mostly natural processes such as forestry that absorb these gases--the increase was about 14%. So either way, that 17% cut that US negotiators were authorized to take to Copenhagen is really 1990 less about 3-5%. At the same time, 17% vs. 2005 is no slam dunk, even if it appears that the recession helped ax 2% of our emissions as of last year, and this year could be down a bit more. A recovering economy will use more energy and emit more GHGs, even if only from the work commutes of millions of re-employed people.

While I don't expect nearly as much controversy over the choice of baseline years as surrounded the Kyoto negotiations, 1990 and 2005 represent very different worlds, with the former largely pre-dating the collapse of the high-emission Soviet bloc economies, giving rise to all those Russian "hot air" allowances and a major portion of Germany's cuts post-reunification, along with a big shift in UK power generation away from coal and toward natural gas. Although the EU has certainly instituted comprehensive policies to reduce its emissions, including a cap on industrial emissions and a union-wide Emissions Trading System, a large chunk of the reductions for the current membership were achieved before any of these policies went into effect, through the rationalization of the inefficient economies of formerly-communist Central and Eastern Europe. 1990 looks even less relevant to the current economies of large developing countries like Brazil, China and India.

On the other hand, while 2005 has much to recommend it as probably the most recent year for which fully-audited emissions data are available globally, it also represents nearly the high-water mark of a world of easy money and massively-globalized supply chains that may never return in quite the same form. Choosing it might also appear to let the US off the hook for a decade of relative inactivity on climate change, though that ignores the fact that our actual emissions have grown by much less than the 33% business-as-usual increase that was expected in the late 1990s, presumably because of the discipline imposed by the steadily-rising energy prices that accompanied our bubble economy of recent years.

Whatever emerges as the baseline for an agreement or framework coming out of Copenhagen, it ought to be a single year that provides both ease of comparison and a reasonable congruence with the realistic starting point for any actions that countries will commit to undertaking in the years ahead.

Labels: climate change, cop-15, copenhagen, emissions, EU, greenhouse gas, kyoto

  ¶ 1:43 PM

  The Copenhagen Scenario It wasn't supposed to turn out this way. When delegates to the climate conference in Bali in December 2007 agreed on a two-year roadmap culminating in Copenhagen this week and next, they were widely understood to be buying time for the US to elect a new administration committed to much stronger action on climate change, for the remaining scientific uncertainties to be resolved, and for the large developing countries to be brought around to make binding commitments regarding their own growing emissions. Yet while progress has been made on all three fronts, the changes over the last couple of years have manifested in ways that still don't quite deliver the scenario necessary to set up Copenhagen to deliver on all of Bali's promises.

As I noted during the run-up to last year's election, both major US political parties chose nominees who had made climate change a central issue of their campaigns. Neither an Obama administration nor a McCain one was going to look much like its predecessor on this issue. Yet we've also seen that the partisan differences on climate change reflect deeper underlying concerns about the impact of greenhouse gas regulations on parts of the economy that aren't evenly distributed across the states, some of which rely much more than others on the production or consumption of the highest-emitting fuels, particularly coal. Those economic concerns loom larger after what we've been through in the last year or so. Together with the inability of recent Congresses to refrain from festooning every piece of major legislation with grab bags of peripheral regulations and pork, this resulted in a badly flawed House bill on cap and trade--and much else--and a Senate counterpart that is starting to look dead on arrival. With President Obama needing to arrive in Copenhagen armed with more than empty promises, we now get an anything-but-coincidental Endangerment Finding that could end up reducing emissions in the most costly way imaginable.

Then there's the science and even the climate itself, which has hardly cooperated in the two years since Bali. While this decade is still on track to be the warmest on record globally, 2008 was the also coolest year since 2000, and despite some rebound 2009 won't set any new records. And just when the science was looking settled, the emails and computer files hacked--or leaked--from a major climate research center in the UK have raised concerns about the peer review of papers questioning the consensus view, and about the processing of raw data for the "climate proxies" used to recreate historical conditions before the century or so that they have been observed accurately--data that incidentally provide key inputs to the climate models predicting the temperature and other outcomes from steadily increasing levels of CO2 and other greenhouse gases in the atmosphere. The likelihood that the timing of this leak is no more coincidental than that of the EPA's finding doesn't alter the need for these questions to be assessed by someone besides the scientists whose work was involved.

Then there are the large, rapidly growing emissions from China, India and other developing countries, especially when changes in land use are taken into account. As I mentioned the other day, China's announcement that it would reduce the carbon intensity of its economy as it grows is a big first step, but it also falls into the category of things necessary, but not sufficient, to induce the US to commit to deep absolute cuts, particularly in light of polling that suggests the US public is less worried about climate change than it was when the economy was booming a couple of years ago--again, no coincidence.

When I return from my current travels I'll be watching the news from Copenhagen with great interest. I expect to post more on this subject, as developments warrant.

Labels: bali, climate change, copenhagen, waxman-markey

  ¶ 4:36 PM

  Green Energy and Productivity In the last year or so the rationale for renewable energy has evolved from emphasizing mainly energy security and climate change to focusing on the creation of "green jobs" and the development of an industry that many perceive as the "next big thing": a new global growth wave along the lines of information technology and telecoms. Unfortunately, neither of these newer justifications withstands serious scrutiny. I've devoted several postings to the shortcomings of the green jobs angle, which founders on the mistaken notion that we should want an energy sector any bigger than the minimum necessary to furnish the energy needed by the rest of the economy. The IT analogy looks harder to dismiss, because it capitalizes on our innate affinity for technology, the newer and trendier, the better. I share that bias and have been fascinated by the technology of alternative energy since my undergraduate years. Yet as inherently cool as the devices for deriving energy from wind, tides, solar radiation, biomass, and exotic forms of nuclear energy are, that doesn't automatically set them up to be the next world-transforming and wealth-creating industry in the manner of IT in the 1980s and '90s.

Understanding where this analogy fails requires delving into the drivers of the IT revolution. It wasn't just that technology was improving by the quantum leaps in processing power and decreased cost described by Moore's Law. Nor was it merely the result of nebulous "market forces", though the market's ability to deploy capital nimbly to the cleverest entrepreneurs helped a lot. Fundamentally, IT took off and continues to grow because it spurred breathtaking improvements in productivity and innovation, not just within the computer industry itself, but more importantly across the entire economy. IT enabled the automation of numerous manufacturing processes, the discovery and exploitation of vast new energy resources, and the launch and sustained growth of entirely new industries, including cellphones, personal electronics and the Internet. Yet while renewable energy holds great potential for reducing our emissions and our unhealthy reliance on imported oil, it cannot offer the kind of productivity revolution that IT delivered.

Start with the fact that most forms of alternative energy are still uneconomical without government incentives or mandates. If you doubt that, recall that new US installations of wind power, which is generally regarded as the most cost-competitive of the newer alternative energy technologies, were on the verge of grinding to a halt when it appeared that the Production Tax Credit might not be renewed at the end of 2008, and again when the markets for translating those tax credits on future earnings into current cash froze up earlier this year. The wind sector only revived when the government provided a substitute Investment Tax Credit and made it available in the form of direct grants from the Treasury.

Now, there's a strong argument that these incentives are necessary to compensate for the inherent advantages of fossil fuel-based power generation that doesn't pay for the environmental externalities it creates. However, that doesn't alter the fact that the expansion of this industry is not being driven by the underlying wealth-creating force of productivity improvements, but by government funding and regulations. Thus much of the growth of the alternative energy sector comes at the expense of other parts of the economy, or of larger deficits that impair the long-term health of the economy. That might be necessary, but it won't create vast new wealth in the way that IT did.

In fact, as long as wind, solar and other forms of renewable energy require government support or mandates such as Renewable Portfolio Standards to keep them growing, they will tend to reduce the overall productivity of the economy by embedding higher energy costs into everything we do, whether those costs are reflected directly in higher energy prices or indirectly in higher taxes or bigger deficits. Meanwhile, less glamorous technologies associated with energy efficiency offer genuine productivity improvements today and well into the future, though probably still on a smaller scale than those wrought by IT, since energy accounts for only about 8% of GDP. I'd put the electrification of transportation into this efficiency category, too, once the cost and capability of batteries improve enough to make them attractive without massive subsidies.

Renewable energy looks likely to continue its impressive growth, building new companies and making fortunes for some entrepreneurs. It has great potential to contribute an important share of our future energy mix. Unlike IT, however, this transformation will largely be limited to the energy sector, with relatively little impact beyond it. Devices that consume electricity won't run any better on green electrons than on any other kind, and engines won't suddenly begin performing at higher levels on renewable fuels--in fact, the opposite is often the case. So rather than sugar-coating the green energy proposition with inflated claims that are likely to lead to disappointment later, a dose of stoicism seems to be in order, here. If accelerating the growth of renewable energy is the right thing to do for the planet and for our energy security, and if its long-term benefits outweigh the costs, we should dispense with the hype suggesting it will make us all rich and just get on with it.

Labels: alternative energy, energy productivity, green jobs, nuclear, renewable energy, solar power, wind power

  ¶ 10:23 AM

  Half a Loaf When I wrote Monday's posting mentioning the impending conflict between the government's requirement to increase the volume of biofuels blended into gasoline and the current approved maximum ethanol blending limit of 10%, I was unaware that the EPA was about to issue a response to the industry group that had requested a waiver to increase that limit to 15%. But while the letter the agency sent to Growth Energy yesterday deferred any ruling until mid-2010, it gave a clear indication that the EPA is considering splitting the baby, in the form of an increase for part of the fleet: those cars built in 2001 or later. Sometimes such a quasi-Solomonic decision reflects wisdom and flexibility; at other times it elevates compromise above common sense. I'm sure you won't be surprised to learn that I suspect this case falls into the latter category.

First, we should applaud the EPA for declining to be stampeded by an interest group into making a decision before its own test results are all in, particularly concerning the impact of blends containing higher proportions of ethanol on the durability and emissions (air pollutants, not CO2) of a representative cross-section of the US vehicle fleet, which numbers roughly 240 million passenger cars and light trucks/SUVs. The agency is right to insist that the science should be clear before the blending limit is increased. Unfortunately, there's more than science involved.

If any group outside the energy industry ought to have a clear understanding of the consequences of fragmenting the marketplace through the creation of Balkanized environmental specifications for fuels, it ought to be the EPA, since they and their state regulatory counterparts have presided over just such a system in the last couple of decades. This is why gasoline blended for use in Oregon or Washington can't be sold in California, and gasoline blended for rural areas can't be sold in metropolitan areas that have been designated as "non-attainment" areas for ozone and other pollutants. This has a direct impact on consumers by raising the cost of suppliers' inventories and deliveries to areas with divergent specifications, and more significantly by delaying the response to local supply outages. If the EPA is seriously considering establishing two blending standards for ethanol, it would further fragment the fuels market, not along geographic lines, but down to individual service stations, because the likelihood of them all carrying Unleaded Regular (E10), Unleaded Regular (E15), Mid-grade (E10), Mid-grade (E15), and so on, in addition to diesel and eventually E85 and whatever else they dream up is essentially zero.

Let's rewind the tape for a moment to recall how the situation the EPA is attempting to address arose in the first place. When the Congress set the new Renewable Fuel Standard as part of the Energy Independence and Security Act of 2007, it was obvious to all involved that even if US gasoline sales had continued to grow at 1-2% per year, as they consistently had prior to the Great Recession, we would rapidly reach the point at which the quantity of ethanol mandated for use would exceed 10% of our annual motor fuel use--long before the mandate reached its 36 billion gallons per year (gpy) target in 2022, including a billion gpy for biodiesel. That wasn't deemed to be a problem, since E85 sales were expected to take off in a big way, soaking up all that extra ethanol. In fact, before it started to shrink the gasoline pool looked like it could accommodate the entire 35 billion gpy of ethanol with an E85 sales percentage as low as around 18%. Today you'd probably have to bump that up to nearly 25%. Unfortunately for this scenario, E85 sales are not on any kind of trajectory to reach that threshold.

One E85 website reports that 2,211 gas stations around the US sell E85. Finding reliable statistics on actual E85 sales is time-consuming, but if all these stations sold at the current Minnesota average of around 4,000 gallons per month, then total US E85 sales are just over 100 million gpy. That's less than 0.1% of US gasoline sales, or just about enough to absorb the output of one typical ethanol plant. These figures also suggest that the roughly 6 million "flexible fuel vehicles" apparently on the road today are consuming E85 less than 10% of the time, either because of availability, or because the average discount between E85 and gasoline is typically much less than the 25% or so necessary to compensate for its lower energy content. And availability is a function of the significant expenses involved for service stations in either converting an existing tank and pumps for a higher-volume product to E85, or investing in additional tanks and pumps--including the downtime involved in such a project.

In other words, the ethanol industry (and the EPA) are in a bind now because the strategy for increasing ethanol use hinged on the expansion of sales for a new blend of ethanol and gasoline that is incompatible with existing service station infrastructure and with most vehicles on the road, and their best solution to the breakdown of that strategy appears to involve introducing yet another new blend of ethanol and gasoline that is incompatible with existing service station infrastructure and many cars on the road. Using this logic, the answer to the financial crisis would have been to launch another wave of new financial derivatives and sub-prime loans. Perhaps it's time for a simpler answer: If the tests by the EPA and DOE indicate that a significant number of vehicles could be harmed by a 15% blend of ethanol in gasoline, or that such a blend would increase local air pollution, then surely it is time to call a halt to the annual increases in mandated ethanol use until a more practical solution can be found.

Labels: blend wall, e85, EPA, ethanol

  ¶ 11:04 AM

  Unrealistic Goals A couple of stories over the long weekend highlighted growing disconnects between major elements of energy and environmental policy and what is actually possible in the real world. The first concerns China's gambit that committing to a carbon-intensity target that could be met with initiatives already under way might be sufficient to induce the US and EU to sign up for deeper cuts in actual emissions--and incidentally release a flood of "carbon debt" payments from the OECD to the developing world. Meanwhile a pair of articles on ethanol highlight the infeasibility of the biofuel mandates established by the US Congress a few years ago and about to be embedded in new EPA regulations. In both cases, practical reality is at odds with the aspirations of regulators in ways that threaten to undermine support for less ambitious but more achievable efforts.

The Copenhagen climate meeting, officially the 15th Conference of the Parties to the UN Framework Convention on Climate Change, begins in one week. Politicians and diplomats have been scrambling to avert the possibility that after two years of work on the details of the framework set in Bali, the meeting might conclude without producing an agreement that could take the place of the Kyoto Protocol, which expires in 2012. Last-minute actions by the world's two largest emitters may have rescued the conference from this fate, in the form of a pledge by President Obama that the US will reduce its emissions by 17% below 2005 levels by 2020 and a commitment by China to reduce its emissions per unit of economic activity by 40-45% below 2005 levels. But while this might save Copenhagen from irrelevance, it illustrates how far the available degrees of freedom for action in countries that must keep their economies moving forward fall short of what would be required to halt the accumulation of greenhouse gases in the atmosphere and begin to reverse it.

As it is, President Obama is taking a considerable risk in offering emission cuts that have not been approved by Congress, which might not be inclined to stick out its neck quite so far going into a tough mid-term election that will hinge on the economy and employment. While China's offer represents a serious first step, a similar focus on "carbon intensity" by the previous US administration was met with derision by environmentalists. The problem is that the level of emissions this would yield if China's economy continues to grow at 8% per year or more is incompatible with scenarios for limiting peak CO2 concentrations in the atmosphere to 450 parts per million and eventually restoring them to pre-industrial levels. If we can't avoid blowing past the 450 ppm limit that was the basis of the Bali framework, then growing efforts to shift the official goalpost back to 350 ppm--a level we passed in 1988--look like King Canute ordering the tide not to rise. Expect a great deal of attention to be focused on these numbers in the next couple of weeks.

The disconnect on US ethanol policy is even more pronounced, because the current path can only be sustained for a few more years. An op-ed in Saturday's New York Times reminds us of the shortcomings of our current reliance on ethanol produced from corn, while comments by the CEO of Shell, a major investor in next-generation biofuels, makes it clear that the extremely ambitious targets for cellulosic ethanol and other non-food-based biofuels that the Congress mandated in the Energy Independence and Security Act of 2007 are extremely unlikely to be met. And even before that shortfall becomes serious, the nation's distilleries will exceed the capacity of current US motor gasoline sales to accommodate all the ethanol they can produce, unless the government also lifts the 10% blending limit.

While we can argue about whether that ought to happen, the bigger issue is that these two developments expose the failure of the key assumptions under which the Congress crafted the Renewable Fuel Standard: E85 has turned out to be a dud in the marketplace for good reasons--consumers have figured out that a fuel that costs more dollars to go fewer miles is a bad deal--and it turns out to be really hard to make fuels on a large scale or at an affordable cost from non-food biomass. The appropriate response when your expectations of the future turn out to be so badly wrong would be to freeze the status quo in place while revamping the standard to reflect more realistic assumptions, not to enshrine the false assumptions in new EPA rules that will drive up fuel costs for consumers without doing a thing to improve the environment.

Labels: cellulosic ethanol, China, copenhagen, emissions, ethanol

  ¶ 1:15 PM