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Biofuel Furor

Will power plants get caught in ethanol’s food fight?

Fortnightly Magazine - August 2008

collapsing dollar and restrictive agricultural policies around the world.

Dinneen also pointed to the promise of advanced biofuels such as cellulosic ethanol for easing food-fuel tensions. Several commercial cellulosic plants are contributing to that promise, he says, such as one under construction in Georgia by Range Fuels that will use wood and wood waste from the state’s pine forests and mills. A demonstration-scale facility is expected to be completed this year by Verenium in Louisiana that uses plant matter and farm scraps such as sugarcane bagasse and wood chips as feedstock to produce cellulose ethanol. Also, he noted that advanced biofuels are required to meet a 50 percent reduction in greenhouse gas emissions.

But Charles T. Drevna, president of the National Petrochemical & Refiners Association, disagreed, testifying that recent reports confirm biofuels mandates have led to price increases for food, especially soybeans, corn and wheat. Furthermore, cellulosic ethanol, he says, is costly and not yet commercially available. And while EPAct included a cellulosic ethanol mandate of 250 million gallons starting in 2013, the U.S. Food and Drug Administration predicts only about 213 million gallons will be available in that year.

Bucking the trend of campaigning against biofuels, on May 12, 2008, Minnesota Gov. Tim Pawlenty signed a bill increasing that state’s current 2 percent biodiesel mandate to 20 percent by 2015. It marks the largest biodiesel mandate in the country. But before being enacted, the bill ran into the same legislative food fight as stirred on Capitol Hill.

The Minnesota legislation fosters using nontraditional feedstocks to fulfill its mandate by requiring 5 percent of the feedstock come from nontraditional state agricultural resources, including algae, waste oils and tallow, as well as those being researched such as cuphea (an oilseed plant that can grow on marginal soils) and industrial hazelnuts. But the bill contains the nation’s first ban on use of palm oil. It states that virgin palm oil cannot be used to produce biodiesel to meet the mandate, which was included to help assure that Minnesota does not contribute to environmental destruction and rainforest clearing associated with palm-oil production.

Economic Impacts

For better or worse, fuel policies for electric generation and transportation seem to be intertwined—with the stakes getting higher as energy prices continue their ascent.

In September 2007, the EIA responded to a request for analysis by U.S. Senator James Inhofe (R-Okla.) of a “25 by 25” legislative proposal combining the requirement that a 25 percent share of electric sales be produced from renewable sources by 2025, with a requirement that a 25 percent share of liquid motor transportation fuels also be derived from renewable sources by 2025. The electricity requirements would be implemented as a renewable portfolio standard (RPS) and the motor fuels standard as an RFS.

While realizing long-term uncertainty in making any such projections, EIA found that to comply with such mandates, it would be necessary for electricity and motor fuels producers to dramatically increase their use of technologies that play a relatively small role in today’s energy markets. For example, the amount of qualifying renewable generation needed