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U.S. Biofuel Expansion Cost Developing Countries $6.6 Billion: Tufts

by Marlo Lewis on October 12, 2012

in Features

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U.S. biofuel expansion has cost developing countries $6.6 billion in higher food costs, estimates Tufts University economist Timothy A. Wise in Fueling the Food Crisis, a report published by ActionAid. A 10-minute video interview with Wise about his research is available here.

The 2007 Renewable Fuel Standard (RFS), established by the Energy Independence and Security Act (EISA), exerts long-term upward pressure on grain prices by diverting an ever-growing quantity of corn from food and feed to auto fuel. This is great for corn farmers but not good for U.S. consumers and harmful to millions of people in developing countries, many of whom live in extreme poverty.

“Commodity prices are a small percentage of the retail price of food in the US” because “we heavily process our food,” notes Wise. In contrast, in developing countries, ”commodity prices are a bigger percentage of the retail price, in part because people buy whole foods more often than processed foods.” Even small commodity price increases ”can have a big impact on local market prices in developing countries.”

As it happens, during the same period that U.S. ethanol production and corn prices increased, many developing countries became more dependent on grain imports to feed their people and livestock. The recent drought-induced spike in U.S. corn prices is “just the latest episode in a devastating, protracted global food crisis that has pushed millions into poverty and hunger around the globe over the past 6 years,” argues the ActionAid report.

To assess the impact of biofuel expansion on developing countries, Wise used a conservative estimate of ethanol’s contribution to corn prices and multiplied that by the quantity of U.S. corn imported by those countries. A summary of key findings follows:

  • Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.
  • Thirteen developing countries incurred per-capita impacts greater than Mexico’s (where tortilla prices have risen 69% since 2005), and they include a wide spectrum of large and small countries from all regions of the developing world – Colombia, Malaysia, Botswana, Syria.
  • North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest – Tunisia, Libya, Syria, Iran, Yemen – also suffered high impacts, highlighting the link between rising food prices and political instability.
  • Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs. In 2010-11 alone, U.S. biofuel expansion cost Guatemalans $28 million – an amount nearly equivalent to U.S. food aid to Guatemala over the same period.
  • Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.

Why Can’t We Get All Our Electricity from Wind?

by Marlo Lewis on October 4, 2012

in Features

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Wind energy advocates often point out that a State, the U.S., or the entire world has enough wind energy to supply all of its electricity needs many times over. Writing in Scientific American, for example, Mark Jacobson and Mark Delucchi note that the world in 2030 is projected to consume 16.9 trillion watts (terawatts, or TW) of power, with about 2.8 TW consumed in the U.S. Total wind flows worldwide generate about 1,700 TW, and accessible wind resources total an estimated 40-85 TW. 

Based on such math, the American Wind Energy Association (AWEA) argues, for instance, that Arizona has enough wind to meet 40% of its electricity needs, Michigan wind resources could meet 160% of the State’s electricity needs, and wind in Oklahoma could provide nearly 31 times the State’s electricity needs. Yet despite ratepayer subsidies, special tax breaks, and renewable energy mandates and goals in 37 States, wind supplied 2.2% of total U.S. electric generation in 2010. Why don’t we get lots more of our electricity from this ’free,’ ‘non-polluting’ ‘renewable’ source?

The chief impediments are wind energy’s inherent drawbacks. First, wind energy is intermittent — at any given time the wind may blow too hard or too soft or not blow at all. Second, wind is non-dispatchable. When Shakespeare’s Owen Glendower boasted, “I can call spirits from the vasty deep,” Henry Hotspur replied: “Why, so can I, or so can any man; but will they come when you do call for them?” Like Glendower’s spirits, the winds answer to no man. The wind is not ours to ’dispatch’ as electricity demand rises or falls. 

There are three main ways of compensating for wind’s intermittency and non-dispatchability — pumped storage (pump water uphill when there’s too much wind relative to demand; let it run downhill and drive turbines when there’s too little wind), natural gas backup generation, and wind dumping (idle the turbines when demand is low). Incorporating those techniques to keep supply in balance with demand adds to the cost of wind electricity, which is typically more costly than coal- and gas-generated electricity even without storage and backup.

What’s more, according to a new Reason Foundation/Independence Institute report, the storage, backup, and idling costs become prohibitive as wind’s share of total generation increases beyond 10-20%. [click to continue…]

EPA Celebrated Child-Killer Who Preyed on Hispanics for Hispanic Heritage Month

by Hans Bader on October 1, 2012

in Blog

This September, the “EPA honored Hispanic Heritage Month by promoting a Marxist mass murderer,” Che Guevara, who killed many Hispanics. Che Guevara was the Cuban “revolutionary” and henchman of Fidel Castro. Guevara murdered children and political dissidents and imprisoned suspected homosexuals in labor camps, and called himself “Stalin II” (after Joseph Stalin, the Soviet dictator who tortured, murdered and starved to death more than 20 million people, especially ethnic minorities, like Ukrainians, Kazakhs, and Crimean Tatars). What’s next? Will the Education Department celebrate the bloodthirsty African dictator Idi Amin, who killed more than 300,000 Ugandans, as part of Black History Month? (Under the Obama administration, the Education Department has shown contempt for civil liberties like due process and free speech.)

As Buzzfeed noted at the time:

The Environmental Protection Agency commemorated the start of Hispanic Heritage Month with a picture of Che Guevara and a bit of plagiarism. An internal email . . .  distributed to agency employees . . . this Saturday, featured [an] image of a horse and buggy passing a billboard of the Marxist revolutionary, in addition to a listing of facts about Hispanic culture. . .that text and the photo appear to be lifted word-for-word and without attribution from the website Buzzle.com.

The EPA doesn’t just celebrate killers.  It also kills jobs.  NFIB lists the “EPA’s top 5 job killers,” recent rules that will wipe out hundreds of thousands of jobs, and likely cost over $1 trillion.  Some of the most costly new regulations will have no discernible public health benefit at all.

It’s not just businesses and workers that will suffer under Obama Administration policies, but also consumers.  Obama earlier admitted that “under my plan of a cap and trade system, electricity rates would necessarily skyrocket.”

Is the EPA Listening? We Need a Waiver on Ethanol

by Ashlee Smith on September 19, 2012

in Blog

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Although harvesting season for corn is ongoing, there isn’t much hope from the Agriculture Department for a strong season. We know that production levels are already down 13 percent from 2011. Adding to the hurt caused by this year’s devastating drought on corn is the Renewable Fuel Standard (RFS). Under the Clean Air Act the RFS requires that in 2012, refiners sell 13.2 billion gallons of corn ethanol – this number equates to roughly 4.7 billion bushels of U.S. corn.  Corn estimates were down to 10.8 billion bushels last month; right now that means that at least 40 percent of corn production is being forced into the ethanol market.

The decline in corn production is already leading to rising prices in various farming sectors — cattle, swine, poultry — that use corn as feed. These economic effects will be intensified by the diversion of corn supply by ethanol requirements. This has prompted Congress, National Associations, and now individual state Governors to urge the EPA to permit a waiver for ethanol requirements in 2012-2013 under the Renewable Fuel Standard.

In Governor Deal’s August 20th letter to EPA Administrator Lisa Jackson describes the importance and scale of the livestock agriculture to the Georgia economy:

As Georgia’s largest industry, agriculture accounts for over 15.7 percent of the state’s economy in terms of sales and output and represents 11.2 percent of the state’s value added production. Georgia agriculture has an annual impact of $68.9 billion on the state’s economy and provides 380,000 jobs to citizens of the state.  Poultry and livestock are critically important components of the state’s economy, representing over 50 percent of Georgia’s farm gate value, while broilers alone account for over 40 percent of farm gate value. From a national perspective, Georgia ranks first in broiler production and third in value of eggs produced. For Georgia, the poultry industry alone accounts for over $20 billion in annual economic impact, and an estimated 98,000 jobs depend on poultry directly or indirectly.

He also points out the grueling effects the Renewable Fuel Standard will have on not only Georgia, but the whole country coupled with this drought:

According to the University of Georgia, the state’s poultry producers are spending $1.4 million extra per day on corn due to the drought and the upward pressure on corn prices caused by the demand created by the RFS for ethanol. This translates to over $516 million per year if these market conditions continue. These additional input costs are not sustainable, and I urge you to consider all options available to the agency to provide some relief in the coming year.

The ultimate impact on consumers in Georgia and throughout the United States in the form of higher food prices must also be fully considered. A recent analysis confirmed that food inflation, particularly for those food categories most impacted by grain costs, has risen much faster than overall inflation since 2005. The reality of this current crisis is that consumers will have to pay more for protein and other food items, or they will simply not be able to afford certain food items.

As I have outlined, Georgia is experiencing severe economic harm during this crisis, and important economic sectors in the state are in serious economic jeopardy. This harm is precisely of the type, character and extent that Congress envisioned when it granted EPA authority to waive RFS applicable volumes in both the original RFS enacted in 2005 and in the substantial revisions made to the law in 2007 by the Energy Independence and Security Act.

Other states such as; Arkansas, Texas, North Carolina, and others have also filled letter with Administrator Jackson.

On August 20th the EPA opened a 30 day comment period for the public on the waiver requests specifically from the Governors of Arkansas and North Carolina. This week, the comment period was extended another 30 days. After the comment period ends, EPA is afforded time to consider the public’s input. As a result, EPA won’t have to make a decision until after the election. How convenient.

[click to continue…]

Ethanol Mandate Waiver: Decks Stacked Against Petitioners

by Marlo Lewis on September 10, 2012

in Blog, Features

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The Governors of Georgia, Texas, Arkansas, Delaware, Maryland, New Mexico, and North Carolina have petitioned EPA Administrator Lisa Jackson to waive the mandatory ethanol blending requirements established by the Renewable Fuel Standard (RFS). The petitioners hope thereby to lower and stabilize corn prices, which recently hit record highs as the worst drought in 50 years destroyed one-sixth of the U.S. corn crop. Corn is the principal feedstock used in ethanol production.

Arkansas Gov. Mike Bebe’s letter to Administrator Jackson concisely makes the case for regulatory relief:

Virtually all of Arkansas is suffering from severe, extreme, or exceptional drought conditions. The declining outlook for this year’s corn crop and accelerating prices for corn and other grains are having a severe economic impact on the State, particularly on our poultry and cattle sectors. While the drought may have triggered the price spike in corn, an underlying cause is the federal policy mandating ever-increasing amounts corn for fuel. Because of this policy, ethanol production now consumes approximately 40 percent of the U.S. corn crop, and the cost of corn for use in food production has increased by 193 percent since 2005 [the year before the RFS took effect]. Put simply, ethanol policies have created significantly higher corn prices, tighter supplies, and increased volatility.

Agriculture is the backbone of Arkansas’s economy, accounting for nearly one-quarter of our economic activity. Broilers, turkeys, and cattle — sectors particularly vulnerable to this corn crisis — represent nearly half of Arkansas’s farm marketing receipts. Arkansas poultry operators are trying to cope with grain cost increases and cattle familes are struggling to feed their herds.

Section 211(o)(7) of the Clean Air Act (CAA) authorizes the EPA to waive all or part of the RFS blending targets for one year if the Administrator determines, after public notice and an opportunity for public comment, that implementation of those requirements would “severely harm” the economy of a State, a region, or the United States. Only once before has a governor requested an RFS waiver. When corn prices soared in 2008, Gov. Rick Perry of Texas requested that the EPA waive 50% of the mandate for the production of corn ethanol. Perry, writing in April 2008, noted that corn prices were up 138% globally since 2005. He estimated that rising corn prices had imposed a net loss on the State’s economy of $1.17 billion in 2007 and potentially could impose a net loss of $3.59 billion in 2008. At particular risk were the family ranches that made up two-thirds of State’s 149,000 cattle producers. Bush EPA Administrator Stephen Johnson rejected Perry’s petition in August 2008.

In the EPA’s Request for Comment on the 2012 waiver petitions, the agency indicates it will use the same “analytical approach” and “legal interpretation” on the basis of which Johnson denied Perry’s request in 2008. This means the regulatory decks are stacked against the petitioners. As the EPA reads the statute, CAA Section 211(o)(7) establishes a burden of proof that is nearly impossible for petitioners to meet. No matter how high corn prices get, or how serious the associated economic harm, the EPA will have ready-made excuses not to waive the corn-ethanol blending requirements. [click to continue…]

Should We Fear the Methane Time Bomb (Part Deux)?

by Marlo Lewis on August 31, 2012

in Blog, Features

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Climate alarmists have long warned that warming of the Arctic could melt frozen marine and permafrost sediments, releasing methane trapped in peat bogs and ice crystals (clathrate hydrates, see photo above). Methane is a potent greenhouse gas that packs 21 times the global warming punch as CO2 over a 100-year time span and more than 100 times the CO2-warming effect over a 20-year period.

So the fear is that methane emissions from the thawing Arctic will accelerate global warming, which in turn will melt more clathrates and methane-bearing sediments, which will produce still more warming, in a vicious circle of climate destabilization. In a previous post, I offered a skeptical perspective on this doomsday scenario.

This week the journal Nature published a study raising similar concerns about the potential for significant releases of methane from the Antarctic ice sheets. The study’s 14 authors, led by Jemma Wadham of the University of Bristol in the UK, estimate that about 21,000 petagrams (gigatons) of organic carbon (OC) are buried in sedimentary basins under the East and West Antarctic ice sheets – more than 10 times the estimated magnitude of OC stocks in northern permafrost regions. Microbial production of methane from OC (a process known as methanogenesis) is common across many cold subsurface environments, and may have been at work for millions of years beneath the Antarctic Ice Sheets.  [click to continue…]

U.S. Court of Appeals: Food, Fuel Groups not Injured by EPA’s Approval of E15, Hence Lack Standing to Sue — Huh?

by Marlo Lewis on August 17, 2012

in Blog, Features

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Today, the D.C. Circuit Court of Appeals found in a 2-1 decision that automakers, petroleum refiners, and food producers lack standing to challenge the Environmental Protection Agency’s (EPA’s) approval of E15 — a blend of gasoline and 15% ethanol — for motor vehicles manufactured after 2000.

Petitioners argued that the EPA acted illegally. Section 211(f) of the Clean Air Act (CAA) prohibits the introduction of new fuels and additives into the U.S. motor fuel supply unless the manufacturer demonstrates that such fuels or additives “will not cause or contribute to a failure of any emission control device or system” of any motor vehicle, motor vehicle engine, nonroad vehicle, or nonroad engine manufactured after model year 1974. By the EPA’s own admission, E15 can contribute to emission failures in vehicles manufactured between 1975 and 2000. Petitioners argued that CAA 211(f) gives the EPA no authority to grant a “partial waiver” for the sale of new fuels or additives to a subset of vehicles (e.g., model years 2001 and later).

Chief Justice David Sentelle and Judge David Tatel held that petitioners lack standing to sue. According to Sentelle and Tatel, petitioners could not show that the EPA’s approval of E15 would likely cause a ‘concrete’ and ‘imminent’ injury to any automaker, refiner, or food producer.

I’ll grant that the automakers’ asserted injury may be ‘speculative’ or ‘conjectural.’ However, it is hard to fathom how the EPA’s approval of E15 would not impose substantial costs on both petroleum refiners and food producers. The switch from E10 to E15 means a 50% increase in the quantity of ethanol blended into the nation’s motor fuel supply, potentially increasing ethanol sales from 14 billion gallons a year to 21 billion gallons. Since nearly all U.S. ethanol today comes from corn, the switch to E15 could substantially increase demand for corn, corn prices, and the quantity of corn diverted from feed and food production to motor fuel production.

Sentelle and Tatal argued that refiners and food producers are not injured because the EPA is merely giving refiners the ‘option’ to blend and sell E15, not forcing them to do so. But this is a distinction without a difference. As the justices acknowledge, the Renewable Fuel Standard (RFS) will soon require refiners to sell more ethanol than can be blended as E10. Thus, if the EPA waiver is upheld, refiners will have no real choice but to blend and sell E15, and this will impose substantial, predictable costs on both refiners and food producers. Their injury is concrete and imminent. The Court, therefore, should have reviewed the case on the merits and struck down the waiver as exceeding the EPA’s authority under CAA Section 211.

Judge Brett Kavanaugh’s dissent is so powerful and convincing that I will be surprised if the case is not appealed and overturned. Excerpts from Kavanaugh’s dissent follow.   [click to continue…]

Pressure Grows on EPA to Suspend Ethanol Mandate

by Marlo Lewis on August 13, 2012

in Blog, Features

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The worst drought in 50 years has destroyed one-sixth of the U.S. corn crop. The USDA’s World Agricultural Supply and Demand Estimates (WSDE) report, released Friday, projects the smallest corn crop in six years and the lowest corn yields per acre since 1995.

As acreage, production, and yields declined, corn prices spiked. Last week, corn futures hit a record high of $8.29-3/4 per bushel.

If corn prices remain  high through 2013, livestock producers who use corn as a feedstock will incur billions of dollars in added costs. “These additional costs will either be passed on to consumers through increased food prices, or poultry farmers will be forced out of business,” warn the National Chicken Council and National Turkey Federation.

Even before the drought hit, corn prices were high. Prices increased from $2.00 a bushel in 2005/2006 to $6.00 a bushel in 2011/2012, notes FarmEcon LLC. A key inflationary factor is the Renewable Fuel Standard (RFS), commonly known as the ethanol mandate. Since 2005, the RFS has required more and more billions of bushels to be used to fuel cars rather than feed livestock and people.

Suspension of the mandate would allow meat, poultry, and dairy producers to compete on a level playing field with ethanol producers for what remains of the drought-ravaged crop. That would reduce corn prices, benefiting livestock producers and consumers alike.

EPA Administrator Lisa Jackson has authority under the 2007 Energy Independence and Security Act (EISA) to waive the RFS blending targets, in whole or in part, if she determines that those requirements “would severely harm the economy or environment of a State, a region, or the United States.” The pressure on her to do so is mounting. [click to continue…]

When Drought Strikes, Should U.S. Policy Endanger Hungry People?

by Marlo Lewis on July 20, 2012

in Features

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The question answers itself. Of course not. But that is the effect of the Renewable Fuel Standard (RFS), more commonly known as the ethanol mandate.

Under the RFS (Energy Independence and Security Act, p. 31), refiners must sell specified amounts of biofuel each year. The “volumetric targets” increase from 4.0 billion gallons in 2006 to 36 billion gallons in 2022. The amount of corn ethanol qualifying as “renewable” maxes out at 15 billion gallons in 2015. Already, ethanol production consumes about 40% of the annual U.S. corn crop.

By 2022, 21 billion gallons are to be “advanced” (low-carbon) biofuels, of which 16 billion gallons are to be made from plant cellulose. But with cellulosic ethanol proving to be a complete dud, corn growners and ethanol producers are lobbying to redefine corn ethanol as ”advanced.” If they succeed, mandatory sales of corn ethanol could significantly exceed 15 billion gallons annually.

In any event, the RFS sets aside a large and increasing quantity of the U.S. corn crop each year for ethanol production regardless of market demand for competing uses — and heedless of the potential impacts on food prices and world hunger. No matter how much of the U.S. corn crop is ruined by drought, no matter how high corn prices get, no matter how many people in developing countries are imperiled, the RFS requires that billions of bushels of corn be used to fuel cars rather than feed livestock and people. This is crazy. [click to continue…]

Ethanol Added $14.5 Billion to Consumer Motor Fuel Costs in 2011, Study Finds

by Marlo Lewis on July 19, 2012

in Features

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Today, FarmEcon LLC released RFS, Fuel and Food Prices, and the Need for Statutory Flexibility, a study of ethanol’s impact on food and fuel prices. FarmEcon prepared the study for the American Meat Institute, California Dairies Inc., Milk Producers Council, National Cattlemen’s Beef Association, National Chicken Council, National Pork Producers Council, and National Turkey Federation.

The study argues that the Renewable Fuel Standard (RFS), commonly known as the ethanol mandate, is detrimental to both non-ethanol industry corn users and food and fuel consumers. The program should therefore be reformed. The RFS has “destabilized corn and ethanol prices by offering an almost risk-free demand volume guaranty to the corn-based ethanol industry.” Consequently, food producers who use corn as a feedstock “have been forced to bear a disproportionate share of market and price risk” when corn yields fall and prices rise. This has become painfully obvious in recent weeks as drought conditions in the Midwest depress yields and push corn prices to record highs.

Appropriate reform* would assure food producers ”automatic market access” to corn stocks “in the event of a natural disaster and a sharp reduction in corn production.” Ethanol producers should “bear the burden of market adjustments, along with domestic food producers and corn export customers.” The study also recommends that the RFS schedule ”be revised to reflect the ethanol industry’s inability to produce commercially viable cellulosic fuels.”

Pretty tame stuff. An argument for flexibility to avoid the RFS’s worst market distortions and the cellulosic farce rather than an abolitionist manifesto. Nonetheless, the study paints a fairly damning picture of the RFS as a whole:

  • Increases in ethanol production since 2007 have made little, or no, contribution to U.S. energy supplies, or dependence on foreign crude oil. Rather, those increases have pushed gasoline suplies into the export market.
  • Current ethanol policy has increased and destabilized corn and related commodity prices to the detriment of both food and fuel producers. Corn price volatility has more than doubled since 2007.
  • Following the late 2007 increase in the RFS, food price inflation relative to all other goods and services accelerated sharply to twice its 2005-2007 rate.
  • Post-2007 higher rates of food price inflation are associated with sharp increases in corn, soybean and wheat prices.
  • On an energy basis, ethanol has never been priced competitively with gasoline.
  • Ethanol production costs and prices have ruled out U.S. ethanol use at levels higher than E10. As a result, we exported 1.2 billion gallons of ethanol in 2011.
  • Due to its higher energy cost and negative effect on fuel mileage, ethanol adds to the overall cost of motor fuels. In 2011 the higher cost of ethanol energy compared to gasoline added approximately $14.5 billion, or about 10 cents per gallon, to the cost of U.S. gasoline consumption. Ethanol tax credits (since discontinued) added another 4 cents per gallon. [click to continue…]

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