US biofuels: “Just throwing money out the window”

In its investigation into the explosion of corporate lobbyists swarming around the US Climate Bill last year, the Centre for Public Integrity noted that “agriculture-based alternative fuels were especially well represented among the new lobbying entrees”.

In fact, the CIJ pointed out, the agriculture industry is the fourth largest industry lobby on climate in the United States, with about 80 businesses and trade organizations registered.

The number of lobbyists representing agriculture has more than doubled in Washington in the last six years.

“We have a lot of power” in Washington  argues Russell Williams from the American Farm Bureau, one of the main agricultural lobbby groups. For the last few years, the Bureau has been “strongly and vocally” supporting the use of tax credits for the U.S. ethanol industry.

But now a new report seriously undermines the need for continuing those subsidies and questions whether they are effective in the fight against climate change.

The Baker Institute Policy Report on “Fundamentals of a Sustainable US Biofuels Policy” argues that US policymakers need to reconsider the unintended consequences of federal subsidies and tariffs that go to domestic ethanol producers.

The US produces just over 10 billion gallons of ethanol a year, of which 6 billion gallons goes to replace MTBE (methyl tertiary-butyl ether).

So, ethanol is only displacing about 185,000 b/d of gasoline – a tiny proportion of the 9 million b/d that the US uses – or roughly 2 per cent of the US gasoline supply.

Yet the US spent $4 billion in biofuel subsidies during 2008 to replace this 2%. So the average cost to the taxpayer of those “substituted” barrels of gasoline was roughly $82/bbl, or $1.95/gal, on top of the retail gasoline price.

What’s more the ethanol industry is soaking up the renewable grants: over three quarters of all funds allocated by the federal government for US renewable energy developments – as laid out in the EPA Act 2005 goes to ethanol.

The reason that ethanol industry is receiving all this money is to reduce the climatic impact of transportation. However the Baker Institute says that repeated “ studies demonstrate that the production and use of ethanol are not carbon neutral … the preponderance of evidence shows that existing biofuels offer no improvements over traditional gasoline, once land use changes and emissions of nitrous oxides emitted during production are taken into account.”

The study concludes that US produced corn-based ethanol should “not be credited with reducing GHGs when compared to the buring of traditional gasoline”, and therefore “legislation giving preference to biofuels on the basis of greenhouse gas benefits should be avoided.”

“We need to set realistic targets for ethanol in the United States instead of just throwing taxpayer money out the window,” said Amy Myers Jaffe, one of the paper’s several authors.