Mileage Mandates and Biofuels Aren’t Silver Bullets

By Commentary Michael G. Frodl and John M. Manoyan
The United States got on the right path right after the Arab oil embargo shocks of the 1970s by focusing on higher mileage requirements for cars and trucks. But the drop in oil prices in the 1980s drove the nation off course. In addition, Detroit’s lobbying of Congress to get personal vehicles disguised as trucks — which were exempted from the mileage rules for cars — opened the door to the golden age of the sports utility vehicle and as a result the mileage targets became an empty promise. Consumption of gasoline just steadily grew.

Even if Congress had not created the SUV loophole, we would have eventually seen consumption of gasoline continue to increase despite mileage targets, but perhaps not as fast. One of the perverse and unintended consequences of “energy efficiency” as first conceptualized and implemented in the 1970s and 1980s was that, over time, instead of Americans driving the same distance in the same sized cars for less, they would eventually spend the money to drive farther in larger vehicles as the cost of operating those vehicles dropped.

A similar phenomenon also took place in the home building sector — instead of Americans living in the same amount of space with the same amount of heating, cooling and electrical appliances, many spent the same money or more to live in bigger houses that sucked down even more current to power more heating, cooling and appliances.

Proponents of energy efficiency are painfully aware of this, but they do not like to alert their audiences to such perverse consequences. Yet it’s true. This doesn’t mean we shouldn’t demand energy efficiency of our vehicles, simply that if all we do is to improve that efficiency incrementally and slowly, we won’t solve the challenge of making a big dent in gasoline consumption because after a while we’ll be consuming a lot more gasoline than before.

Putting aside the fancy and misleading “fleet” accounting meant to meet Department of Transportation regulations and satisfy the laws on the books, many vehicle models today get less mileage than in the 1970s. A law passed in 2007 finally strengthened the CAFE (corporate average fuel economy) standards but the U.S. automotive industry is years behind those of Japan and Europe.

The nation has wasted a lot of time not just with mileage requirements but also with funding inappropriate alternative fuels.

Washington tried to solve two problems at once by proclaiming that corn-based ethanol could serve as a realistic substitute to regular gasoline that is refined from crude. Since the Carter years, producers of ethanol-blended gasoline have received a subsidy or tax credit. This incentive, known as the Blender’s Tax Credit, is currently valued at $0.51 per gallon of pure ethanol that is used in blending.

Ethanol imported into the United States is subject to two customs duties: an ad valorem tariff rate of 2.5 percent and a secondary tariff of $0.54 per gallon. The Ethanol Import Tariff of 1980 imposed the $0.54 per gallon tariff on imported ethanol. The rationale behind the tariff on imported ethanol was to presumably offset the Blender’s Tax Credit incentive for ethanol-blended gasoline. Unless imports enter the United States duty-free, the tariff effectively negates the incentive for those imports.

It gets worse. The Energy Policy Act of 2005 established the Renewable Fuels Standard (RFS) which directs that gasoline sold in the United States contain specified minimum volumes of renewable fuel. The Energy Independence and Security Act of 2007 sets a new RFS that starts at 9 billion gallons of renewable fuel in 2008 and rises to 36 billion gallons by 2022. Of the latter total, 21 billion gallons of renewable fuel in U.S. transportation fuel is required to be obtained from advanced biofuels. The term “advanced biofuel” means renewable fuel, other than ethanol derived from corn.  

Putting aside that crops-based ethanol contains by volume only about two-thirds the energy or BTUs that even low octane gasoline does, the really troubling fact is that corn-based ethanol is in a class by itself. If you add up all the energy you need to expend in order to make it (for felling trees, tilling ground, growing the crop, harvesting the corn, moving it to the plant, processing it), corn-based ethanol actually consumes more energy than it provides the end user and a full accounting would similarly show that there is little, if any, net carbon footprint reduction and thus, not even a true, net environmental gain.

At least in the United States, this fuel is expensive, inefficient and therefore uncompetitive. Consider that if all the automobiles nationwide were fueled with 100 percent ethanol, about 97 percent of U.S. land area would then be needed to grow the corn feedstock. There are also additional costs through unacceptable environmental damage, estimated at $0.25 per gallon of ethanol, because of accelerated soil erosion and groundwater use.

The economics works out somewhat differently in other countries, notably Brazil, where there are different labor, land, and other input costs. For example, Brazil uses sugar cane instead of corn.

Given the glaring inefficiencies, it is hard to justify why Washington imposes corn-based ethanol. It does so not to benefit the American people, but to secure the support of corn growers through a subsidy that is disguised as an energy measure.  

To make matters even worse, Washington slapped on a protectionist tariff that prevents much of the more cheaply produced crop-based ethanol from abroad from being imported to the benefit of the American consumer. Much cheaper sugar-cane based ethanol from Brazil has largely been shut out of the U.S. market.

There is also talk about how cellulosic ethanol is going to be better and more cost effective — without hidden subsidies to farmers. Cellulosic ethanol is postulated on the use of specialized enzymes (such as the ones found in the digestive tract of goats) that will digest not just the fruit of a corn stalk — the sugar portion in the kernel — but all the rest of the organic material, including the husks and stems. That in theory would lead to tremendous efficiencies and things such as switch grass and even wood could then be used to make fuel.

But we are not there yet, despite what advocates are saying. There is not a single functioning, industrially-scaled-up, cellulosic ethanol plant running in the United States or anywhere else in the world. And if one gets built abroad first, you can bet that U.S. corn farmers defending their ethanol subsidy will make sure Congress extends a prohibitive tariff if the current one doesn’t already apply.

Moreover, all bio-ethanol fuel (corn, sugar cane, switch grass, wood, and other) is corrosive, in part due to the water content. Its transportation and storage requires specially made tanker trucks, pipelines and tanks that won’t rust — so it cannot be simply moved or stored with the same infrastructure that is used today by gasoline. That is a not insignificant added cost of bio-ethanol fuel.

Another concern is that farmland that is converted to growing corn for fuel is not growing corn or other crops for food, be it for human consumption or food for farm or range animals that are destined for our benefit. Americans have already seen a spike in the costs of bread and milk, and it’s not unrelated to corn ethanol government-mandated targets. Developing countries that are dependent on cheap exports of surplus U.S. grain harvests are facing famine anew because of the government-mandated corn ethanol targets. Even the UN and charities responsible for feeding the poor have issued formal reports indicting U.S. and European Union bio ethanol policy for this unintended consequence.

Even if perfected cellulosic ethanol fuel were introduced today and if food costs didn’t spike, we’d have to ask ourselves how much of our landscape would we want to recommit to agriculture. An automobile industry based to any large extent on even cellulosic ethanol would be obliged to convert a large proportion of existing farmlands over to production of fuel crops and not food. By some estimates, more than 25 percent of corn growing has been converted from corn for human consumption to corn for ethanol, and converting to cellulosic ethanol from switch grass would require even larger surface areas.

Conservationists should be up in arms about quick conversion back into farmland of millions of acres that were gradually returned to forest in the past century. That original conversion of farmland back to forest was the result of gas-fired automobiles which removed the demand for horse-driven carriages and by extension, for straw farms to feed horses.

Today, North America has grown back its forests to a level closest to that when the continent was first seen by European settlers. But if we decide to make fuel out of food, we’ll have to make farmlands out of forests again. The endangered species alone that were finding native habitat return are colliding head on with the farmers wanting to expand bio-ethanol production. Forests act as carbon sinks and slow down global warming.

The United States cannot continue to ignore the many serious unintended consequences on the food supply, the dwindling habitat for endangered species, and the reduction of carbon sinks for the atmosphere, especially when bio-ethanol is not providing more energy security or energy independence.                 

John M. Manoyan is a chemical engineer, nuclear physicist and is now an investment advisor in San Francisco. Michael G. Frodl is a tax attorney, former chairman of the Environmental Law Committee of the Bar Association of Washington, D.C. and an advisor on emerging risks. They are the cofounders of the Forum for Environmental Law, Science, Engineering and Finance. Their personal views do not represent those of FELSEF.

Topics: Energy, Alternative Energy

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