Party time for the US ethanol industry

Bismarck once noted that “laws are like sausages: it’s better not to see them being made”. Were he around today, he might add that both laws and sausages are, in the US at least, based mainly on corn.

As I’ve just mentioned in a separate post, today is crunch time for the Waxman-Markey climate bill in the House, and so everyone’s watching the few remaining undecided Democrats, many of whom have big coal interests in their states. One set of Democrats that’s firmly in the ‘decided’ column, though, is the farm-lobby – who will be busting out cold beers and chucking ribs on the grill this weekend if the Bill passes. 

Not long ago, the farm lobby were adamantly opposed to the bill, which they feared could increase their input prices, especially fuel for on-farm energy use. Moreover, the mighty corn lobby was especially unhappy that it wasn’t invited to the cap and trade party, as National Corn Growers Association President Bob Dickey made very plain on May 18th:

“After reviewing the legislation, we can see the bill does not clearly provide for a mechanism by which corn growers can sell carbon credits on the market. We strongly believe the bill will increase input costs without specific opportunities to offset those additions. We cannot support the American Clean Energy and Security Act in absence of the provisions that we have explained in some length to the Committee.”

Well, that was then. The bill now includes an amendment submitted by House Agriculture Committee chairman Collin Peterson, which will:

  • create a market for agricultural offsets that allows the sector to take part in cap-and-trade;
  • have this market regulated by the US Department of Agriculture, not the Environmental Protection Agency; and
  • explicitly exempt agriculture from having an emissions cap of its own.

Oh dear. As Fiona Harvey notes in yesterday’s FT, the problem with crediting emissions savings from land use changes is that the numbers are so damn uncertain: “working out whether a given soil is storing or releasing carbon is a minefield. It requires complex evaluations of soil conditions carried out over long periods, and efforts to verify whether the farmer has implemented the relevant agricultural techniques”. 

There’s also the small matter that agriculture itself is responsible for 7% of US emissions, she notes – which makes it a shame that those emissions are explicitly excluded.

The bill also sweeps under the carpet the huge issue of indirect international land use changes arising from biofuels. Back in February last year, a major study from Princeton University found that if you take account of “the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels”, then

corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gasses for 167 years.  Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%.

So how does the bill deal with this? Ben Geman in the NY Times yesterday:

[The bill] contains a separate agreement that blocks EPA — for at least six years — from including emissions from international indirect land use changes when weighing biofuels’ carbon footprint under the 2007 Renewable Fuels Standard.

No wonder Bob Dickey now sounds more cheerful:

“We appreciate the dedication Chairman Peterson has shown to U.S. corn growers and the agriculture industry during this legislative process. He has been a true champion for our industry during negotiations.”

Indeed.