Policy Challenges Facing the Ethanol Industry in 2009 Brian Jennings, ACE Executive Vice President, March 19, 2009
Issues to Cover Low Carbon Policies and Ethanol a) Lifecycle Carbon Footprint of Ethanol b) California Low Carbon Fuels Standard c) RFS 2 Rule d) Climate Change Legislation E10 Blend Wall a) E15 Waiver & Midlevel Ethanol Blends b) Blender Pumps Tax Credit and Tariff. Getting Involved and Staying Involved plus bonus slides.
Source: EPA RFS2: Four Separate Volume Categories 3
Corn Sustainability Improvements 1987 2007 Land Use Soil Loss Irrigation Energy Climate Amount of land to produce one bushel of corn Soil loss per bushel, above a tolerable level Irrigation water use per bushel Energy used to produce one bushel Emissions per bushel 37% 69% 27% 37% 30% Source: Field to Market
19% Reduction 28% Reduction Ethanol has a Lower Carbon Footprint 52% Reduction than Gasoline 86% Reduction Gasoline Corn Ethanol Cellulosic Ethanol Petroleum Current Average Natural Gas Biomass Sources: Wang et al, Environ. Research Letters, May 2007; Wang et al, Life-Cycle Energy Use and GHG Implications of Brazilian Sugarcane Ethanol Simulated with GREET Model, Dec. 2007. Biomass
Sustainable, Efficient Corn Ethanol Net energy ratio values from 1.29 to 2.23 Improvements in in LCA GHG Emissions of Corn Ethanol Liska et al Journal of Industrial Ecology Feb 09 Corn ethanol systems reduced GHG emissions by 48% to 59% compared to gasoline, which has a GHG intensity of 92 gco2e MJ.
Indirect Land Use Change Controversial and unreliable computer generated predictions. Policy ahead of science. Biased. Being selectively enforced against biofuels but not other fuels. Have practical effect of disqualifying clean fuels from low carbon programs.
Amazon Deforestation on Decline while Biofuels Production on the Rise Brazilian Deforestation and Global Ethanol Production Square Miles Deforested 12,000 10,000 8,000 6,000 4,000 2,000 0 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Million Gallons Ethanol 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Deforestation Ethanol Production Source: IEA; Butler, Mongabay.com (FAO, NISR)
Cost of producing oil from future sources is on the rise Oil getting more expensive, carbonintensive, and unsustainable
Status of low carbon policies California LCFS targets only ethanol for indirect effects. Public comment due before April 23. www.arb.ca.gov/regact/2009/lcfs09/ RFS2 Rule currently using ILUC metric. Proposed rule to be published soon. 1400+ pages. Public will have 60 days to comment. Climate Change in Congress House to move more quickly than Senate. House by Memorial Day. Speaker Pelosi wants bill by end of 2009. Stand alone or part of energy bill?
E10 Blend Wall
E15 Waiver to EPA on March 6, 2009 Pursuant to Section 211(f)(4) of the CAA, we request approval for use of an ethanolgasoline blend containing up to 15 percent ethanol by volume.
E15 Benefits and key talking points Jobs create more than 100,000 jobs annually Makes cellulosic and advanced biofuels more likely to be commercialized Consumer Choice Supported by Science
Momentum in our favor Underwriters Laboratories (UL) on 15% ethanol Ford Motor Company on E15 EPA, USDA, Congress on E15
Ford endorses efforts to increase base level blends up to E15 and collaborate with key stakeholders to overcome challenges with introducing these higher levels of ethanol in the base fuel blend used by all vehicles in the near term. Source: Letter from Susan Chischke, Ford Group Vice President, Sustainability, Environment and Safety Engineering to Jeff Broin, CEO of POET, February 20, 2009
I believe we could go to E12, E14, or E16 without causing any great problems in vehicle operation. The Honorable Jeff Bingaman, Chairman of the U.S. Senate Energy and Natural Resources Committee, February 12, 2009, New York Times. We d love to see 15 percent, and we can, we believe, move fairly quickly to move the blend rate to 12 or 13 percent in the interim The Honorable Tom Vilsack, Secretary, United States Department of Agriculture, March 10, 2009, Reuters. It seems to me we should be able to do that, Pelosi told reporters after speaking to the National Farmers Union. Asked about raising the ethanol cap, Pelosi said I hope so and pointed to the goal of More domestic fuel production. The Honorable Nancy Pelosi, Speaker of the House of Representatives, March 10, 2009, Reuters.
EPA working on blend wall Environment & Energy Daily Feb. 27, 2009 U.S. EPA could have a decision within months on whether it should allow higher levels of ethanol in gasoline, the agency's administrator said. Lisa Jackson said the issue is still under discussion in her agency and no final determination yet made. But she expects the decision could come within months. "It's right in front of us," Jackson said. Jackson said the ethanol blend wall was one of several issues she and Agriculture Secretary Tom Vilsack discussed in the early days of the administration. "I know it's a concern. The issue here is to be considerate of what effect the blend rate is having on the corn based ethanol business right now and whether or not there can be assistance," Jackson said.
Blender Pumps Separate hoses for flex fuel and standard fuel Contrasting labels for standard and flex fuel. Blue flex fuels Blends above E10 clearly labeled for flex fuel vehicles only Contrasting labels for standard and flex fuel. White standard fuels E10 87% Unleaded/13% E85 E30 65% unleaded/35% E85 E85 Unleaded
Federal Infrastructure Tax Credit Current limit of tax credit eligibility Proposed tax credit eligibility Current Proposed
Blender s Credit and Tariff Preference and effort to extend blender s credit beyond 2010, but need to consider options. Tariff. "...I know that the issue of Brazilian ethanol coming into the U.S. has been a source of tension between the two countries. It's not going to change overnight, but I do think that as we continue to build exchanges of ideas, commerce, trade around the issue of...[biofuel], that over time this source of tension can get resolved. President Obama in a meeting on March 14 between Brazil President Luiz Inacio Lula da Silva
Ethanol tax credits provide return on investment to taxpayers of Source: Contribution of Ethanol to the U.S. Economy LECG, Feb. 2009
Get involved, stay involved Soon to be unveiled E15 action center on www.ethanol.org Get Involved tab on www.ethanol.org
Ethanol Calculator www.ethanolfactor.org Barrel Blaster Game www.barrelblaster.net Ethanol.Right.Now Blog www.ethanol.typepad.com Ethanol Today Magazine www.ethanoltoday.com Ethanol Collective www.ethanolcollective.com
Bonus slides Food and Fuel Credit crisis
Texas A&M: Don t blame corn ethanol for food prices Corn prices have had very little effect on consumer food prices. Higher energy prices viewed as underlying force driving prices.
Wall Street Journal Oct. 17, 2008 The media is catching on
Source: CBOT Source: NYMEX Source: Bureau of Labor Statistics CPI-U for Urban Consumers
Food makers being disingenuous Steve Burd of Safeway, the 4 th largest U.S. food retailer, accused food makers of being disingenuous with consumers by not dropping their prices to reflect declining input costs. Source: Wall Street Journal, February 26, 2009
Grain Costs Down, Groceries Not March 2009. One large grocery company operating in Southern California has seen the wholesale price for a carton of Kellogg s Corn Pops rise about 17% since June 2008, despite a 52% plunge in corn prices from their peak that month. March 2, 2009.
USDA Sec. Tom Vilsack on Food Fuel Q) How to you answer criticisms that cornbased ethanol drives up food prices? A) If there were a direct correlation, then we would have seen a decline in food prices. Food prices are more directly linked to energy costs of a petroleum nature. Source: Q and A with USA Today March 16, 2009
What about credit crisis? Federal government is relying on TARP, Stimulus, and other provisions to get credit flowing again. Stimulus contains $150 M for USDA loan guarantees, through B&I program, support $2.9 billion in loans. President s budget includes loan funds to assist ethanol plants. But recognize that loan guarantees do no good if banks are unwilling to lend.