Ethanol has to tread lightly to survive
Sometime by next summer at the latest, the Environmental Protection Agency is likely to set the fate of the ethanol industry when it decides whether corn-based ethanol has a small enough carbon footprint to continue being sold under a government mandate known as the Renewable Fuels Standard.
That's because the same 2007 energy bill that set the mandates for ethanol use by oil companies also requires ethanol to use produce at least 20% less greenhouse gases than gasoline. It's called the Low Carbon Fuel Standard.
Meeting the standard is hardly the only problem the biofuels industry faces. In an economy that has depressed fuel prices, more than a tenth of the U.S. ethanol industry and a third of the biodiesel plants are idle, Monte Shaw, executive director of the Iowa Renewable Fuels Association said at the group's annual summit in Des Moines, Iowa, Tuesday. And as the ethanol industry's capacity has expanded, it is coming close to being able to provide 10% ethanol for all of the nation's gasoline, bumping up against an EPA limit of 10% ethanol in gasoline that the industry wants raised to perhaps 15%.
Yet the Low Carbon Fuels Standard is a major hurdle.
"It compels the EPA to look at both the direct and indirect effects of ethanol in greenhouse gas emissions," says Brian Jennings, Executive Vice President of the American Coalition for Ethanol in Sioux Falls, South Dakota.
That means that EPA could also look at whether or not converting land in the U.S. to corn production for ethanol, instead of for food or feed alone, means that more greenhouse gases will be released if rainforest is destroyed somewhere else in the world to grow food to replace what is lost for ethanol production.
"EPA has struggled on how to quantify this and whose model is right," Jennings said during an interview in Des Moines Tuesday, where he spoke at the Iowa Renewable Fuels Association summit.
"If the rule comes out and it applies the indirect land use in a way that disqualifies corn ethanol from the Renewable Fuels Standard, the practical result is that we [the United States] would be forced to use more petroleum," Jennings said.
If corn ethanol doesn't qualify for the Renewable Fuels Standard, would it shut down the industry?
"It would come close," Jennings said. "The Renewable Fuels Standard is about market certainty and this would pull the rug out from that market certainty."
Jennings contends that ethanol production is getting more efficient, at a time when oil companies have to find their raw material for gasoline in ever more expensive and energy-intensive sources such as the oil sands of Alberta, Canada.
A recent analysis by University of Nebraska researchers published in the Journal of Industrial Ecology, shows that greenhouse gas emissions from ethanol production are 48% to 59% less than from gasoline.