CAP’s Jake Caldwell, Director of Policy for Agriculture, Trade and Energy provides his insight into the EPA’s decision to increase ethanol mixtures in gasoline.
After eighteen months of review, the Environmental Protection Agency (EPA) announced today that it is willing to approve higher blends of ethanol in newer vehicles, but will conduct ongoing testing to assess whether such a boost in ethanol blends is appropriate for 2006 model or earlier cars and trucks.
Today’s EPA decision is the correct one. The partial approval of higher ethanol blends is based on test results in newer vehicles and provides some much needed breathing room to allow producers, refiners, and consumers the option to blend more ethanol with gasoline and reduce our dependence on oil in the transportation sector.
But, we also need to stay focused on the other big factors governing ethanol policy in the United States.
EPA’s move to partially grant a waiver and allow the voluntary blending of fifteen percent ethanol and eighty-five percent gasoline — E15 — is in response to an ethanol industry petition led by Growth Energy that seeks to avoid the “blend wall” by ensuring additional capacity for ethanol use in U.S. motor vehicle fuel. EPA is also proposing a labeling system on fuel pumps to enable consumers to choose the fuel and blend of their choice for their vehicle.
Now, we need action from Congress and the White House on the remaining pieces of the ethanol policy puzzle, namely: promoting advanced biofuels that deliver measurable lifecycle greenhouse gas emissions reductions, eliminating the current 54 cent import tariff on imported biofuels, boosting biofuel distribution infrastructure, and phasing out the existing blender’s credit in favor of a variable and performance-based producer tax credit.
EPA’s approval of E15 in newer cars is not without controversy. Automakers and small engine manufacturers worry the new blend may corrode rubber engine components and attract water to fuel. Livestock producers and the food industry have raised concerns regarding the impact of additional ethanol production on feed and food prices. Public health advocates and environmentalists have noted the potential for increased smog and environmental degradation from increased corn and ethanol production.
These are legitimate concerns and deserve careful attention. For the most part, today’s EPA waiver approval reflects a cautious approach and importantly, a willingness to constantly monitor and review the science and impacts of today’s decision going forward. Initially, today’s action will affect only eighteen percent of the vehicles in the U.S., and EPA has pledged to await further testing results before expanding eligibility for E15.
Thanks to the Renewable Fuel Standard (RFS), the “blend wall” is real. Recent corn price spikes (a 50 percent increase since June) are also placing additional pressure on the traditional ethanol industry and inflating operating costs. The RFS implements the mandate imposed by Congress in the 2007 energy bill that requires biofuels production to grow to 36 billion gallons by 2022. Significantly, 21 billion gallons of this total must come from advanced biofuels. Traditional biofuels such as corn will account for only 15 billion gallons. Any additional biofuels must achieve greenhouse gas emissions reductions of 20 percent less than the gasoline being displaced by biofuels.
Despite the difficult market and volume challenges facing corn-based ethanol, this announcement is clearly a “win” for the ethanol industry. The combination of Congress’ RFS mandate to produce 36 billion gallons of biofuels by 2022 and, now, the boost in the ethanol blend to E15 for late-model cars and trucks, should allow sufficient flexibility in the industry to support reform of key aspects of overall biofuels policy.
One idea: Eliminate the 54 cent import tariff that raises costs to all consumers, and shift the 45 cent blender’s credit to a variable and performance-based producer tax credit that rewards advanced biofuels’ producers for lifecycle greenhouse gas reductions. A new performance-based producer tax credit will save taxpayer’s money, reduce the deficit, and help ensure the most innovative and efficient biofuels make it into the tanks of our cars and trucks sooner, rather than later.
Biofuels are not the only solution to our transportation fuel challenges, but they have an important role to play. With the appropriate incentives, biofuels can play a direct role in diversifying our energy sources, creating jobs in rural communities, and cutting our dependence on oil. Today’s EPA announcement can be a springboard for a more comprehensive biofuels policy. We should take this opportunity to build on a solid industry foundation and chart a new course for biofuels in the United States.
– Jake Caldwell
JR: I am less sanguine about this move than Jake, because I have more doubts that we will soon get a sufficient quantity of next-generation biofuels that truly have lower GHGs emissions when all impacts are accounted for. What do you think?
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