Ethanol Smoking Gun?

This morning's Washington Post and Wall Street Journal include coverage of important new scientific findings concerning the greenhouse gas benefits of ethanol. They refer to two key papers published in Science on the land-use impact of biofuels. One of these, by Searchinger, Heimlich, et al, suggests that when the global land-use consequences of our diversion of grain into fuel production are considered, the greenhouse gas balance for corn ethanol shifts from a modest reduction to a net doubling, compared to the oil it displaces. And although ethanol from cellulosic sources appears to be less harmful, it may still contribute more to global warming than previously thought. This is a stunning finding, with implications for the entire US energy policy, which prior to the fuel economy and other efficiency provisions of the 2007 Energy Bill has been largely an ethanol policy.

These results are bound to generate controversy, and I would echo calls for them to be confirmed by thorough peer review and additional studies. If they constituted the only concerns about the consequences of conventional ethanol production, prudence would dictate a carefully measured response. However, it has become increasingly clear over the last two years, as US ethanol production and consumption have ramped up dramatically, that it is a mixed blessing, at best. Not only is it no silver bullet for our energy and environmental challenges, but it has also contributed to worrying levels of domestic and global inflation in wholesale and retail food prices.

Public support for ethanol rests on three main benefits: that it enhances energy security, reduces greenhouse gas emissions, and bolsters US agriculture. Of these three attributes, the third is the least ambiguous. Ethanol's energy security contribution turns out to be more a matter of engineering a shift from imported petroleum to the imported natural gas and fertilizer consumed in the cultivation and processing of corn into ethanol, along with a roughly 30% uplift from the solar energy captured by the crops. Its climate change benefits have been viewed as modest but still important, with a generally-accepted figure of a 20% reduction versus gasoline. The latest studies turn that assumption on its head, suggesting that the climate and energy benefits are not actually complementary, but rather trade the former off against the latter. If confirmed by further studies, this conclusion must surely undermine popular and political support for corn-based ethanol.

We haven't had many opportunities to test the relative priority of our concerns about climate change and energy security. The lengthy evolution of the Energy Bill in the Congress last year provided one such occasion, though, when supporters of turning coal into liquid fuels were unable to convince a majority that the energy benefits of this relatively-proven technology outweighed the approximate doubling of greenhouse gas (GHG) emissions it would produce, relative to petroleum products. It's ironic that the GHG outcome for corn ethanol--one of the big winners in the 2007 energy legislation--now looks as bad as coal liquefaction.

In light of the new findings, I believe the most prudent and appropriate course of action would be as follows:

1. Freeze the conventional biofuel portion of the national Renewable Fuel Standard (RFS) in the 2007 Energy Bill at the levels that were in place before its passage. That would re-set the RFS for 2008 to 5.4 billion gallons, rising to 7.5 billion gallons per year in 2012, compared with a requirement for 9 billion gallons this year, rising to 15 billion by 2015.
2. Cap the volume of conventional ethanol eligible for the $0.51/gallon blenders' credit at 7.5 billion gallons per year, effective immediately.
3. Transfer the excess conventional biofuel subsidy--the amount associated with annual conventional biofuel volumes over 7.5 billion gal/yr--to cellulosic ethanol and other advanced biofuels meeting the greenhouse gas savings standards set by the Energy Bill.

Taken together, these actions would provide corn ethanol producers with a modest amount of headroom for further growth, but without a higher mandate to force their output into the market. At the same time, it would offer even stronger support for organizations developing cellulosic ethanol and other advanced biofuels, which still face significant obstacles to commercial production. What we can't do, however, is to pretend that the latest findings--because they are so inconvenient--are somehow irrelevant. They are strong indicators of the need for a major course correction on our path toward energy security that is also compatible with a safer climate. Expect to hear a lot more on this issue in the weeks and months ahead.