Solutions elusive for renewable fuels subsidy, forum speakers say

A combination of dramatically changed market conditions and competing subsidies and penalties has created problems with the federal renewable fuel standard (RFS) program, some speakers at a Brookings Institution discussion of the program suggested. But others were equally adamant that the program is working 10 years after it was established under the 2005 Energy Policy Act.

“There hasn’t been much impact on prices,” said Bruce Babcock, who holds the Cargill Energy economics chair and directs the Bio-Based Energy Center at Iowa State University. US food prices have risen slightly in the last 10 years as commodity prices have doubled because the latter are a small portion of the former, he noted.

Babcock said it might be more instructive to look beyond fuel ethanol at other events in the last 10 years—such as droughts in the US Southwest in 2011 that decimated cattle herds and in the Midwest the next year which reduced corn crops—that would have happened anyway. “Ethanol facilitated US exports of gasoline,” he contended, then quickly added, “That might have happened without ethanol too.”

The questions grew more acute as panelists began to consider fuel ethanol and greenhouse gas emissions. “It takes more energy to produce biofuels than fossil fuels,” said Timothy D. Searchinger, a research scholar at Princeton University’s Woodrow Wilson School of Public and International Affairs. “When you burn ethanol, you’re putting 50% more carbon into the atmosphere. In the case of corn ethanol, it’s more than double.”

Emissions credits under the RFS have been based on more plants being grown, he told attendees at the Oct. 16 event. “But there’s no direct offset because the land in Iowa would have been used to grow corn anyway,” Searchinger said.

Other credits were assigned for dubious reasons, such as those that said raising less corn for food meant fewer humans and livestock would eat it, implying a GHG reduction, he noted. “Biofuels are an extraordinarily inefficient way to try and reduce carbon emissions,” Searchinger said.

More efficient methods

“Economists pretty much agree that a more efficient way to reduce GHG emissions is through a carbon tax or cap-and-trade system,” said Christopher Knittel, who directs the Massachusetts Institute of Technology’s Center for Energy and Environmental Research. “That makes us very unpopular at parties here in Washington and elsewhere.”

He said one reason ethanol is about 2.5 times less efficient than a carbon tax is because it addresses a motor fuel’s ingredients instead of trying to affect people’s behavior by making them drive less. “In some ways, the policy may be worse than doing nothing—spending $90 to save $40,” Knittel said.

The RFS tried to address fuel formulations without adequately considering engine design and refueling systems, he observed. “We’ve basically spent the last 10 years dealing with only one, instead of all three, chicken-or-egg questions,” he said. “Also, if cellulosic ethanol is the ultimate goal, it’s not working to have so much research and development concentrated on corn ethanol.”

“The bigger question is the effects on food and fuel prices going forward,” said Terry Dinan, a senior advisor at the Congressional Budget Office. CBO’s research has found that repealing the RFS would have little impact on food prices, but making refiners and consumer meet 2017 RFS goals would push fuel prices upward, she noted.

“The big question is the emissions effects of advanced biofuels because that’s where the growth is going to be,” Dinan said. CBO also has found general policies would work better than specific mandates to reduce GHG emissions, she added.

Asked about ways the RFS could be improved, Knittel said he was pessimistic about using specific technologies but optimistic about a carbon tax and other broader measures. “In the end, markets are the most effective mechanism,” he maintained.

Searchinger had a different idea. “The most efficient technology for reducing GHG emissions may be using much more electricity in transportation,” he said.

Contact Nick Snow at

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