At the end of last year, the Volumetric Ethanol Excise Tax Credit (aka “Blender’s Credit) very nearly expired before congress passed a one-year, $6b extension to the subsidy. The near-collapse of the largest “renewable energy” subsidy on the federal books came as the backlash built against the EPA’s approval of E15 (15% ethanol) blends for certain vehicles, with a huge coalition of industries, environmentalists and budget hawks coalescing around the idea of ending government support for corn-based ethanol. That coalition lost some momentum as the VEETC was extended in order to drum up support for the controversial tax bill that was passed during December’s lame duck session. But now, SolveClimate [via Reuters] reports that the brewing deficit battles have put the Blender’s Credit back on the chopping block, as a new bill seeks to cut the wasteful, inefficient and unpopular (outside of farm states) subsidy.
Germany is in an uproar against ethanol. Last week, motorists celebrated a win against alcohol in their gasoline: Oil companies stopped the build-out of E10 gas stations. The matter still fuels the headlines. Over the weekend, German’s Die Welt newspaper shocked its readers with the news that the bio-benzene can ruin engines which supposedly are ok for the fuel.
“E10 is under suspicion to stress the engine oil harder than conventional fuel. This causes minimized viscosity and increased engine wear,” writes the paper. Supposedly, the stuff literally waters down the oil. Die Welt quotes Thomas Brüner of BMW who said: “The 10 percent ethanol increase the water in the engine. The water condenses and mixes with the oil. The oil gets diluted and ages faster.” Read More >
German motorists won an important battle against ethanol. They used a downright un-German tactic: Widespread insurrection. They simply won’t buy the stuff. An edict handed down from Brussels ordered that Super has to contain 10 percent of ethanol. An alliance from Germany’s ADAC autoclub to Greenpeace said the new gasoline is a work of the devil, it is liable to ruin cars, and the environment. That didn’t impress Brussels. But then, a buyer strike did set in. Read More >
The EPA’s decision to allow E15 ethanol in public pumps has been something of a lesson in the way politics can trump common sense. The decision was motivated by intense pressure brought to bear by the ethanol industry, which is facing a serious problem in the form of a “blend wall.” The industry first tried to get the EPA to approve the 15-percent ethanol blend before research was complete, and the agency’s approvals came first for 2007 model-year and later vehicles, and was expanded shortly thereafter to 2001 and later models. In the meantime, a number of industries have come out against E15, suing the EPA to stop the approval and calling for congressional hearings. Now, with few reasons left to support E15 outside of propping up the staggering farm-state ethanol industry and huge portions of the economy coming out against it, the House has voted “overwhelmingly” to ban E15 from America’s gas pumps.
Nothing makes this bloggers day like finding a story that highlights how the world of cars interacts with every facet of our national life… and few stories illustrate the universal impact of cars and fuels like the Atlantic’s recent piece on one man’s attempt to turn Afghanistan’s opium poppy crop into biodiesel. The plan was to help Afghanistan’s poorest farmers use poppy seeds to create biodiesel, but along the way the plan ran into the challenges of diplomacy, bureaucracy, foreign occupation, environmental issues and cultural conflict. In fact, all of the complexity and struggle involved with the military occupation of a foreign country come out in this fascinating piece, which begins:
Back in the fall of 2008, Michael Bester and a business partner, both Army veterans doing contract work in Afghanistan, hit on the equivalent of the counterinsurgency’s trifecta: a way to improve the lives of ordinary Afghans, eliminate the illegal opium trade, and take the Taliban’s money. “We had been in villages where children were dying because they didn’t have proper medicine, because they didn’t have refrigerators,” Bester told me. Light up the villages, and perhaps you could empower Afghans to resist the Taliban. And the fuel? Most any feedstock would work, but one compelling option was the ubiquitous poppies that stoke the Taliban’s lucrative drug trade. Why not turn them into biodiesel instead?
Make diesel, not drugs! Read the whole thing here.
The EPA has followed up its ruling allowing E15 ethanol blends (15% ethanol, 85% gasoline) to be pumped to vehicles built for the 2007 model-year and later, now allowing the corn juice-enhanced gasoline to be distributed to any vehicle built after 2001. EPA Administrator Lisa Jackson announced the decision to Bloomberg arguing
Wherever sound science and the law support steps to allow more home-grown fuels in America’s vehicles, this administration takes those steps
But, as is the case with most ethanol-related decisions, this has more to do with politics than science. After nearly ending the boondoggle known as the “Blender’s Credit,” which pays blenders for every gallon of ethanol they mix into America’s fuel supply, congress relented to lobbyist pressure and extended the $6b per year giveaway for another year. And with that financial incentive in place (along with a “renewable fuel mandate”) but little to no consumer demand to support it, blenders need to find ways to slip ever more ethanol into American gasoline. But, as a recent study proves, even E15 won’t beat the so-called “blend wall”: at best E15 gives the ethanol industry four years of taxpayer-fattened profits before it will be forced to come back and ask the government to yet again increase the amount of ethanol allowed in the gas supply.
Meanwhile, the auto industry that once saw ethanol as a prime opportunity for low-cost greenwashing has made an about-face and is suing to stop the spread of E15, arguing that its effects on engine life haven’t been adequately studied. And because ethanol offers little to no benefits relative to gasoline in terms of environmental or efficiency impacts, the fact that the EPA may be endangering automobile engines in order to keep an oversubsidized industry on (expensive) life support is beyond galling. It’s clear that, with the legislative and executive branches of government held in sway by ethanol-friendly farm states, motorists are now dependent on the court system to do the right thing and end government’s senseless love affair with ethanol.
Recently the ethanol industry has “suffered” from a problem that epitomizes the problematic nature of government subsidies. Known as the “blend wall” this obstacle was created not by negligence on the part of the industry, but by the fact that its lobbying efforts have been far more effective than its marketing efforts. The problem, in a nutshell, is that the 2007 Renewable Fuel Standard mandates a steady increase in the amount of ethanol blended into the national fuel supply, from 9 billion gallons per year (BGY) in 2008 to 36 BGY in 2022… but with gasoline consumption falling and with standard pump gasoline capped at a maximum of ten percent ethanol (recently raised to 15% for vehicles built after 2007), the industry that’s supposed to get America off gas needs more gas to blend its ethanol into. As a study in the American Journal of Agricultural Economics puts it
Total national consumption of gasoline in the United States has been about 140 billion gallons in 2010 and is expected to fall over time due to increasing fuel economy standards. Thus, at present, if every drop of gasoline were blended as E10, the maximum ethanol that could be absorbed would be 14 billion gallons. In reality, 10% cannot be blended in all regions and seasons. Most experts consider an average blend of 9% to be the effective maximum, which amounts to about 12.6 billion gallons. U.S. ethanol production capacity already exceeds this level. Thus, our ability to consume ethanol has reached a limit called the blend wall.
The solution: well, the EPA’s ruling allowing 15% ethanol blends was supposed to fix the problem, but according to this report, that “fix” would only buy some four years before the industry is back to bumping against the blend wall. The solution?
With ethanol as the primary biofuel and either blend limit (E10 or E15), a substantial increase in E85 would be required to fulfill the mandate.
EU car owners will get a new kind of gasoline – whether they want it, or not. Most don’t want it. They get it anyway. While US-automakers sue to stop ethanol blends, an edict handed down from Brussels demands that Super has to contain 10 percent of ethanol. An alliance from Germany’s ADAC autoclub to Greenpeace says the new gasoline is a work of the devil, it is liable to ruin cars, and the environment. Read More >
the political tail has wagged the scientific dog on ethanol ever since the farm lobby realized that ethanol could be the next corn syrup. With any luck, this lawsuit could just be the point at which science re-asserts itself.
The missing link: the automakers. Though auto manufacturers have been slowly climbing on board the anti-ethanol bandwagon, in no small part because large domestic OEMs like GM were once closely allied with the ethanol industry, it seems that the coalition to stop E15 is now complete. A new group known as the Engine Products Group, comprised of the Alliance of Automobile Manufacturers, The Association of International Automobile Manufacturers, the National Marine Manufacturers Association, and the Outdoor Power Equipment Institute, has filed a new petition to block the EPA’s E15 ruling.
Both the Senate and the House have passed a one-year extension of the Volumetric Ethanol Excise Tax Credit (aka “blender’s credit”), the Small Ethanol Producer Credit and the ethanol import tariff and the Alternative Vehicle Refueling Property Tax Credit, as part of a tax bill that now needs only the President’s signature to become law. The full suite of ethanol subsidies were extended at their current levels, despite an attempt to lower the blender’s credit to 36 cents per gallon instead of 45 cents per gallon. These subsidies will cost in the neighborhood of $6b next year, keeps cheaper Brazilian ethanol out of the US market, and may inspire a WTO complaint with Brazil. And, as Senator Diane Feinstein (D-CA) puts it:
The ethanol industry is the only one to ever receive the triple crown of government intervention. Ethanol use is mandated by law, its users receive federal subsidizes and domestic production is protected by tariffs. That policy is not sustainable.
And she’s not kidding: even with these subsidies in place, ethanol plants are still losing money on each gallon they produce… and analysts are predicting record-high grain prices after the extension is signed. What’s not to love?
Senate Democrats confirm that an extension of the full 45 cents/gal tax credit and 54 cents/gal import duty has been included in the Senate version of a Bush Tax Credit extension, prompting an angry response from the Brazilian sugar cane ethanol lobby. With Brazilian subsidies set to drop by nine cents per gallon, the Brazilian Sugarcane Industry Association (UNICA) claims that the American subsidy is no longer an “offset” but a full-fledged barrier to trade. UNICA’s President Marcos Jank tells brighterenergy.com
It is clear that the United States is not committed to open and fair trade in clean energy, particularly ethanol. We will have exhausted all options to resolve our differences through informal dialogue and the U.S. legislative process. It will then be time for the WTO to resolve this matter in accordance with applicable international rights and obligations.
Previously it was reported that the ethanol Blender’s Credit would be extended at a lower rate of 36 cents/gal, but with the tax credit extension debate snowballing into a lame duck slugfest, it seems that the subsidy extension was included to bring farm-state legislators on board. In addition to pissing off the Brazilians and possibly sparking a WTO battle, a full five-year extension of ethanol subsidies and tariffs at the current rate will cost the government no less than $31b. But don’t start planting corn yet… House Democrats seem set on scuppering the Senate’s tax credit extension deal (even though they support the ethanol extension). If they keep anything from passing during the lame duck session, the subsidies will expire completely, forcing the industry to champion new legislation. The battle rages on…
The ethanol industry might have enjoyed a small popularity bump when NASCAR switched to E15 (15% ethnol blend) gas, but it’s facing one of its biggest tests yet, as the so-called “blender’s credit” draws within a month of its expiration date. And the signs aren’t looking good for the most important subsidy in the ethanol playbook. Bloomberg reports that 17 Senators from both parties are pushing to end the 45 cent-per-gallon tax credit for ethanol blenders (and 54 cent-per-gallon import duty), and they’re opposed by only 13 Senators openly pushing for renewal. Plus, they’ve got a pretty strong argument:
If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use. We cannot afford to pay industry for following the law
It is not a good policy to have these massive subsidies for first generation ethanol. First generation ethanol I think was a mistake. The energy conversion ratios are at best very small… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president
Al Gore reveals [via MSNBC] that politics, not science, made an ethanol believer out of him. More than anything else, the admission underlines how badly ethanol can lose the war of ideas and still be heavily subsidized without fear of political attack. After all, what Presidential hopeful (read:every member of Congress) wants to shut down the biggest pork trough in Iowa, a state that just happens to be the first primary of the race for the White House? Heck, Al Gore probably had to lose his favorite weedwhacker to ethanol gum before he came out against the stuff. But just because your representative won’t vote against ethanol, doesn’t mean you can’t… surf over to pure-gas.org for a list of ethanol-free gas pumps near you.
We’ve been tracking mounting opposition to E15 ethanol for some time now, and when the EPA approved the 15-percent corn juice blend for vehicles made in 2007 or later, we saw the opposition begin to crystalize. Now, the Detroit News reports that a number of oil, food and other interest groups have filed suit in a D.C. Circuit appeals court, seeking to halt the EPA’s approval of E15. According to the DetN
They believe the “EPA has unlawfully interpreted the statute to achieve a particular outcome,” but EPA administrator Lisa Jackson said it was based on “sound science.”
Considering the approval was apparently based on study results from a mere 14 vehicles, it sounds like the industry groups might have a solid point here. Especially when you realize that a major motivation for E15 approval is from the fact that blenders couldn’t sell enough E10 to meet government mandates. As the video above (from June of this year) proves, the political tail has wagged the scientific dog on ethanol ever since the farm lobby realized that ethanol could be the next corn syrup. With any luck, this lawsuit could just be the point at which science re-asserts itself.