Just a few days after our previous post outlining the ethanol industry’s brave, unprecedented, legendary, and 100% voluntary decision to give up the ethanol tax credit, we see that there are still other subsidies that they are interested in keeping:
But the head of the Renewable Fuels Association—Bob Dinneen—says the industry will work to ensure that tax credits for cellulosic ethanol will continue past the end of 2012.
“We think that the production tax credit and the depreciation that is now allowed for cellulose needs to continue,” Dinneen says.
Extension of the cellulosic tax credits will send an important signal to the marketplace and encourage investment in the next generation of ethanol technology, Dinneen says.
And to those who consider it just another federal subsidy for ethanol…
“They need only look at the tax incentive for grain-based ethanol that has just expired–that demonstrates you don’t need a tax incentive forever,” Dinneen says.
“You need to encourage investment—convince the marketplace that there is going to be consistent government support that will allow the industry to get on its feet.”
Cellulosic ethanol has not yet been produced commercially, but according to the U.S. Department of Energy web site, several commercial cellulosic plants are under construction.
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Writing in The Hill’s Congressional Blog, lobbyist in chief for the ethanol industry Bob Dineen waxes poetic about the historic nature of the ethanol industry voluntarily giving up losing one of its subsidies, the Volumetric Ethanol Excise Tax Credit (VEETC):
With growing concerns about gridlock in Washington and greed on Wall Street, Americans are wondering whether anyone with a stake in public policies is willing to sacrifice their short-term advantage for a greater good.
Well, someone just did.
Without any opposition from the biofuels sector, the tax credit for ethanol blenders (the Volumetric Ethanol Excise Tax Credit – VEETC) expired on January 1.
In fact, American ethanol may well be the first industry in history that willingly gave up a tax incentive. Facing up to the fiscal crisis in this country, industry advocates have engaged in discussions with the Administration, Congress and our own constituents in an effort to frame forward-looking policies that balance the needs for deficit reduction and the development of clean-burning, American-made motor fuels.
Incentives should help emerging industries to develop and grow, not to be forever subsidized by the nation’s taxpayers. The Volumetric Ethanol Excise Tax Credit — which actually accrued to biofuels blenders, not producers – has helped the renewal fuels industry to stand on its own two feet. So now it is time for this subsidy to be phased out. [click to continue…]
The shale-gas revolution in the United States has led to massive increases in natural gas production, increasing our domestic supply and reducing prices. While global trade in natural gas exists, the infrastructure and volume is low enough such that there isn’t much of a single global price for natural gas (unlike oil, where there are a few prices which tend to stick close to one another). You can look at spot prices for various countries here, note the large disparity.
The shale gas revolution in the U.S. has been so enormous that infrastructure that was built with the expectation of importing natural gas is now being switched to export natural gas to other countries. Congressman Ed Markey (D-Mass.) is apparently concerned that producers of natural gas in the U.S. would like to export some of the excess to take advantage of higher prices in other parts of the world. Yet as Markey so often likes to point out, America has in recent decades consumed more oil than we produced. If other countries had decided 40 years ago to shut off their oil exports to keep domestic prices as low as possible, America would be a much different place today (and much worse off).
Believe it or not, low energy prices are good for countries other than just the United States. Trade helps make this possible, so its odd that Markey would want to restrict natural gas exports: [click to continue…]
From the 12/30/2011 Cooler Heads Digest:
This week the EPA finalized the 2012 biofuel volume mandates under the Renewable Fuel Standard, as established by the Energy Independence and Security Act of 2007. The controversial cellulosic “mandate” is currently set at 8.65 million gallons, down from an initial “requirement” of 500 million gallons as set by the EISA. In previous years, the EPA has held cellulosic requirements at levels greater than zero gallons, despite it being commercially unavailable. As a result, refiners have been required to purchase cellulosic “credits” from the EPA in lieu of purchasing the (nonexistent) cellulosic ethanol. Refiners expect to spend roughly $8 million complying with this bogus program in 2012 unless cellulosic ethanol finally materializes.
In related ethanol news, this week also marks the end of the ethanol tax credit (VEETC) and the corresponding tariff on ethanol imports. As the Wall Street Journal noted today: “Congress created ethanol subsidies in 1978, expanded them in a 1980 bill, and then rinsed and repeated in 1982, 1984, 1988, 1990, 1992, 1998, 2004, 2005 and 2007.” The more damaging mandate, the Renewable Fuel Standard, remains in effect.
The RFS will require oil refiners to blend 15.2 billion gallons of biofuels into our fuel supply this year, and will increase to 36 billion gallons by 2022. How this will be possible remains to be seen, as consumers have shown little interest in purchasing vehicles that run primarily on ethanol, and there are a number of difficulties in requiring that non-modified cars run on gasoline containing much more than 10-15 percent ethanol.
Yesterday the EPA finalized the 2012 mandate for blending biofuels into our nation’s transportation fuel supply:
The U.S. Environmental Protection Agency (EPA) today finalized the 2012 percentage standards for four fuel categories that are part of the agency’s Renewable Fuel Standard program (RFS2). EPA continues to support greater use of renewable fuels within the transportation sector every year through the RFS2 program, which encourages innovation, strengthens American energy security, and decreases greenhouse gas pollution.
The Energy Independence and Security Act of 2007 (EISA) established the RFS2 program and the annual renewable fuel volume targets, which steadily increase to an overall level of 36 billion gallons in 2022. To achieve these volumes, EPA calculates a percentage-based standard for the following year. Based on the standard, each refiner and importer determines the minimum volume of renewable fuel that it must ensure is used in its transportation fuel.
The final 2012 overall volumes and standards are:
Biomass-based diesel (1.0 billion gallons; 0.91 percent)
Advanced biofuels (2.0 billion gallons; 1.21 percent)
Cellulosic biofuels (8.65 million gallons; 0.006 percent)
Total renewable fuels (15.2 billion gallons; 9.23 percent)
In a nod to how hard it is to predict the future, the EPA has lowered the cellulosic biofuel mandate from 500 billion gallons to a less ambitious 8.65 million gallons, which is 1.7% of the original planned requirement. Of course, they have done the same in previous years and as of October no qualifying cellulosic ethanol had been sold to refiners. Naturally, refiners are not pleased that in 2012 they will possibly be spending up to $8 million in credits depending upon actual production levels of cellulosic ethanol:
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Buried deep in 2012 budget legislation was a paragraph or two that prevents the federal government from spending any funds enforcing the 2007 light bulb efficiency standards/ traditional light bulb “ban” through the end of September 2012. While this isn’t a technical repeal of the ban/efficiency standards, it will allow traditional 100 watt incandescent bulbs to continue to be sold through most of 2012 by those companies who aren’t put off by the negative public relations (green groups may well go on the offensive if national retailers continue to sell them) or potential legal liabilities. It isn’t clear yet the extent to which 100 watt traditional incandescent bulbs will be available for consumer purchase in 2012.
The delay/temporary repeal of the ban has some on the left angry, as Tim Carney notes, though I suspect they’d be angrier if this budget rider had been swapped for delaying implementation of some of the more expensive 2011-2012 EPA regulations, which certainly seemed like a possibility.
An actual argument over the pros/cons of this legislation has been had numerous times and neither side has budged (nor have sides budged over whether or not its okay to label this legislation a ban), so any continuation of that seems sort of pointless. However, I’d like to look at the Politico article that attempted to ding Republicans because “big business” is really upset about this recent turn of events: [click to continue…]
The Wall Street Journal ran an editorial commenting on the cellulosic ethanol mandate, which CEI has written extensively about in the past. They write:
Most important, the Nancy Pelosi Congress passed and Mr. Bush signed a law imposing mandates on oil companies to blend cellulosic fuel into conventional gasoline. This guaranteed producers a market. In 2010 the mandate was 100 million barrels, rising to 250 million in 2011 and 500 million in 2012. By the end of this decade the requirements leap to 10.5 billion gallons a year.
When these mandates were established, no companies produced commercially viable cellulosic fuel. But the dream was: If you mandate and subsidize it, someone will build it.
Guess what? Nobody has. Despite the taxpayer enticements, this year cellulosic fuel production won’t be 250 million or even 25 million gallons. Last year the Environmental Protection Agency, which has the authority to revise the mandates, quietly reduced the 2011 requirement by 243.4 million gallons to a mere 6.6 million. Some critics suggest that even much of that 6.6 million isn’t true cellulosic fuel. [click to continue…]
There have been a few news stories out of Durban suggesting that China (the worlds largest CO2 emitter) has turned a corner on carbon emissions and has tentatively agreed to limit them, with Bloomberg running an article titled “China Climate Plan Makes ‘Excited Buzz’ as U.S. Lags: UN Envoy.” What did China actually say?
Ron Bailey, Reason magazine science correspondent reports:
So here’s what China apparently wants the rest of the world to do: (1) agree that China’s greenhouse gas targets can be different from those imposed on rich countries, (2) agree that for the next 9 years rich countries will continue to cut their greenhouse gas emissions under the Kyoto Protocol while China’s continue to grow, (3) agree that no negotiations take place on targets until a scientific review is finished in 2015, and (4) agree that rich countries begin showering poor countries with $100 billion in climate reparations annually. If the rich countries will just do that, China will consent to begin negotiating some kind of “legally binding” treaty after 2020. Frankly, with these preconditions, it seems that China’s current position actually remains pretty much what it has always been: It will accept legally binding limits on its greenhouse gas emissions when Hell freezes over.
China’s best offer is to consider limiting emissions after 2020, still almost a decade away, and only if all the other countries continue to play this game until then. Who can blame them — they are rapidly industrializing and getting wealthier, which requires massive amounts of fossil fuels.
What if future negotiations aren’t successful? China is currently ‘negotiating’ with other countries regarding their annual emissions, it just so happens they are offering zero emissions reductions. Where is the evidence that they will agree to anything sufficient in 2020, when their per capita incomes will still be markedly lower than other developed countries?
It’s now all but certain that the ethanol tax credit will expire at the end of the year, and the ethanol producers continue to claim credit for “giving it up” despite that it was obviously lost due to larger political considerations, and the fact that they lobbied initially for its extension and then eventually for a substitute which would have still funneled money into their industry. The tariff on ethanol imports also expires at the end of the year, and is likely to expire, though a bill was just introduced to extend it. It has no chance of passing through normal legislative means but its not impossible for it to be attached to larger omnibus bills in order to appease ethanol interests.
There are a few problems here. First, restrictions on trade are not normally good, but the fact that much of ethanol consumption is due to the renewable fuel standard mandate (and not market forces) complicates things. If imports of sugarcane ethanol are merely going to cut down on corn ethanol consumption/production, then it seems that the removal of the trade barrier would be a neutral/good thing. However, if imports of sugarcane ethanol require that Americans purchase additional ethanol relative to a baseline with the tariff, then an argument could be made for keeping the tariff. There are also other longer term political considerations: if sugarcane ethanol is kept out, the corn ethanol folks might lobby to lift the cap on corn ethanol and allow it to qualify as an advanced biofuel. Or, Congress might scrap the advanced biofuel RFS altogether as cellulosic ethanol is yet to exist.
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The New York Times today ran its second editorial scolding the Obama Administration for its decision to delay a tightening of ozone standards in response to a lengthy article by John Broder who exhaustively detailed the big players in this decision and their thought processes. Though there are critiques of the science behind the evidence of harm from ozone concentrations of ~75 parts per billion, I’d like to focus on an outcome of the ozone tightening that the NYT implies is nothing but an industry talking point:
This page was not impressed by those arguments then and is no less skeptical of them now in light of John M. Broder’s exhaustive account in The Times on Thursday of the steps that led up to the decision. The article paints a picture of an aggressive campaign by industry lobbyists and heavyweight trade groups like the American Petroleum Institute that began soon after it became clear that Ms. Jackson was determined to tighten the rules governing allowable ozone levels across the country.
The standards governing ozone — the main component of harmful smog — are supposed to be set every five years. But because the standards proposed by the Bush administration in 2008 were seen as inadequate by the scientific community and had been challenged in court, Ms. Jackson decided to set her own standards, tough but achievable. Their health benefits would approximate their costs, and they would not begin to bite for several years, giving industry time to prepare. [click to continue…]
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