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On Saturday (December 4, 2010), the Senate defeated a package of tax policy extensions, including a year extension of the Volumetric Ethanol Excise Tax Credit (VEETC) at $.36 per gallon, a 20 percent reduction from current levels.  In response, a diverse coalition of organizations issued a joint press release applauding the vote on the VEETC and explaining why the tax credit should not be renewed.

Here’s what the participants said:

 “A reduction in the corn ethanol tax credit is a small step in the right direction for animal agriculture and America’s taxpayers.  Burning a substantial portion of our food and feed as fuel is not a sustainable answer, in the long term, to solving this nation’s fuel needs.  Continuing to divert a significant portion of our corn crop into our fuel tanks will continue to increase costs for the meat and poultry industry and will result in higher food prices for consumers.” 
– J. Patrick Boyle, President and CEO, American Meat Institute

“The ethanol tax credit should be allowed to expire on schedule at the end of 2010.  In this period of huge deficits, there is no justification for the government’s losing billions of dollars in tax revenue to prop up an industry that already has a market required by law”
– George Watts, president of the National Chicken Council

“The VEETC will cost $4.75 billion next year alone, more than 2 times the roughly $2.25 billion in tax incentives for all other renewables in the tax extenders package. Not only is the VEETC bad fiscal policy, but it’s sucking all the oxygen out of our federal budget for renewables. This environmentally destructive handout to the oil industry means doing more harm than good when it comes to investing in clean energy and must be eliminated.”
– Nathanael Greene, Director of Renewable Energy Policy, Natural Resources Defense Council

“The blender’s credit and import tariff on foreign ethanol have distorted the corn market, creating needless volatility in the cost of animal feed.  Feed accounts for 70 percent of the total cost of raising a turkey, and corn is the single-largest ingredient in turkey feed.  The turkey industry has endured the deepest cutbacks of any in animal agriculture – a decrease in turkeys raised of more than 6 percent since 2007 levels and a near 9 percent reduction from 2008 levels – to adjust to these increased input costs. More importantly, the turkey industry eliminated nearly 3,000 jobs vital to rural America in 2008 and 2009 alone.”
 – Joel Brandenberger, president of the National Turkey Federation

“The federal government faces a projected deficit nearing $1.4 trillion next year, and yet some in Congress insist upon continuing to shell out billions through refundable tax credits to the ethanol industry. The time has come for Congress to end this wasteful practice and reduce burdens on taxpayers.”
 – Andrew Moylan, Director of Government Affairs, National Taxpayers Union

“While we believe a 20 percent reduction in the corn ethanol tax credit is a step in the right direction, spending $3.8 billion next year alone for conventional biofuels is still too much.  Today’s vote gives the Senate another chance to get this policy right, by further reducing or eliminating both the corn ethanol tax credit and import tariff.  We look forward to working with Congress to promote the development of truly sustainable advanced biofuels.”
– Geoff Moody, Manager, Federal Affairs, Grocery Manufacturers Association

“A growing choir of voices agrees: the Senate must pony up and end the subsidy for dirty corn ethanol for good.  When people across the country are having a hard time putting food on the table, welfare to millionaires and polluting corporations alike is unacceptable.   It’s impossible to justify wasting billions of taxpayer dollars on an industry that is bad for the environment and bad for the economy.”
– Kate McMahon, Biofuels Campaign Coordinator, Friends of the Earth

“With the national debt fast approaching parity with the GDP, now is not the time to renew a wasteful subsidy for even one year. Nor should tax policies vital to the nation’s economic recovery be held hostage to a special-interest giveaway. The November elections were a rebuke to fiscal irresponsibility in Washington. The lame duck Congress can show that it got the message by letting the VEETC meet its statutorily appointed fate.”
– Marlo Lewis, Senior Fellow in Environmental Policy, Competitive Enterprise Institute

“It makes no sense to spend billions of dollars a year on a fuel that does little to reduce America’s dependence on oil but does a lot to exacerbate soil erosion, water pollution and habitat destruction across the Corn Belt,”
– Craig Cox, Senior Vice President, Environmental Working Group
 
“Congress needs to scrap plans to extend VEETC.  This is an outdated and wasteful policy that does nothing for our energy security or environment.  With all the other critical funding needs facing the country, giving the oil industry billions of taxpayer dollars to follow the law just doesn’t make sense.”
 – Brendan Bell, Union of Concerned Scientists

“Reducing the corn ethanol tax credit is a step in the right direction.  However, allowing the ethanol tax credit to expire at the end of 2010 creates greater certainty for the grain industry. Other grains, including wheat, may increasingly be in shorter supply as the nation continues losing wheat acreage and market volatility remains high,”
– Robb MacKie, president and CEO, American Bakers Association

“Organizations from vastly different sides of the political spectrum have come together and said in a clear voice: it’s time to stop – not slow down – this policy of throwing billions of taxpayer dollars at an activity that serves little, if any, public benefit.  By creating huge incentives for corn to make its way to ethanol plants rather than be available to consumers and livestock, we are sacrificing our nation’s food independence while doing nothing to reduce our nation’s energy independence.  The time to stop this insanity is now.”
– Rob Vandenheuvel, Milk Producers Council

 “The American Frozen Food Institute commends the Senate for rejecting the continuation of a special-interest tax break that saddles food producers with higher costs and drives up prices for consumers in the check-out aisle.”
– Kraig R. Naasz, president and CEO, American Frozen Food Institute
 
“The wasteful and environmentally-damaging subsidy for corn ethanol should expire, as scheduled, at the end of 2010. The broad alliance calling for ending this taxpayer giveaway underscores the fact that it is the right thing to do for our nation’s fiscal health, our environment, and our food security.”
– Sara Chieffo, Deputy Legislative Director, League of Conservation Voters

“We welcome continued scrutiny of this wasteful tax subsidy, which in appropriately supports the water pollution and high-volume water use associated with corn ethanol production. Clean Water Action will continue to support energy choices that make protection of water resources a priority.”
– Lynn Thorp, National Campaigns Coordinator, Clean Water Action

“It’s time for the subsidy party for ethanol to end. Instead of giving taxpayers a lump of coal by wasting billions of dollars more on this failed policy, lawmakers should concentrate on ways to eliminate wasteful spending.”
 – Steve Ellis, Vice President, Tax Payers for Common Sense

In “Nations that Debate Coal Use Export It to Feed China’s Need,” New York Times reporter Elizabeth Rosenthal exposes a huge unintended consequence of Kyotoism’s assault on coal-fired power plants: U.S. and Australian coal companies are shipping their product to Asian countries, especially China, which in 2008 outstripped the United States as the world’s top emitter of carbon dioxide (CO2).  

Rosenthal explains why this situation drives climate activists up the wall:

Traditionally, coal is burned near where it is mined — particularly so-called thermal or steaming coal, used for heat and electricity. But in the last few years, long-distance international coal exports have been surging because of China’s galloping economy, which now burns half of the six billion tons of coal used globally each year.

As a result, not only are the pollutants that developed countries have tried to reduce finding their way into the atmosphere anyway, but ships chugging halfway around the globe are spewing still more.

This is “carbon leakage” with a vengeance. “Leakage” refers to emissions that migrate overseas as domestic firms offshore production and jobs to countries with less restrictive controls on carbon-based energy. Up to now, nearly all the discussion has focused on “energy-intensive, trade-intensive” industries such as producers of iron, steel, aluminum, copper, cement, glass, ceramics, and paper. Such energy-intensive manufacturers can pick up and leave if domestic climate policy puts them at a competitive disadvantage, and climate campaigners don’t want to be blamed for destroying American jobs.

Policymakers have not considered coal industry jobs in this context, however, because coal mines are pretty much stuck where they are. Besides, Al Gore and the Repower America campaign say we should replace all U.S. electric generation with “zero-carbon” energy by 2018. Who needs coal!

In a House Ways and Means hearing last year on the Trade Aspects of Climate Legislation, not one witness mentioned that carbon policies, especially a de-facto ban on new coal-fired power plants, would ramp up coal exports to China, fueling industries that typically emit much more CO2 per unit of output than do their U.S. counterparts.

David Hamilton of the Sierra Club, for example, saw carbon leakage to China as a big problem, but did not say a word about his organization’s “Stopping the Coal Rush” campaign much less whether it might stimulate a surge in coal exports to the (ahem) People’s Republic. Sierra Club now regards this as a big problem, as Rosenthal reports: 

“This is a worst-case scenario,” said David Graham-Caso, spokesman for the Sierra Club, which estimates that its “Beyond Coal” campaign has helped to block 139 proposed coal plants in the United States over the last few years. “We don’t want this coal burned here, but we don’t want it burned at all. This is undermining everything we’ve accomplished.” [Emphasis added.]

This photo from the NYT article shows Australian coal waiting to be shipped to China:

Rosenthal quotes Vic Svec, senior VP of Peabody Energy, the world’s largest coal company, as saying, “Coal is the fastest-growing fuel in the world and will continue to be largely driven by the enormous appetite for energy in Asia.”

Here are some key facts she reports (in her words):

• This summer an Australian company signed a $60 billion contract with a state enterprise, China Power International Development, to supply coal to Chinese power stations beginning in 2013 from a vast complex of mines, called China First, to be built in the Australian outback. It was Australia’s largest export contract ever, the company said.
• For Australia, coal exports to China grew to $5.6 billion from $508 million between 2008 and 2009, government statistics show. While it still sends more coal to its longtime customers Japan and Korea, that balance could shift as Australian coal giants sink billions into new projects like China First.
• Last year, the United States exported only 2,714 tons of coal to China, according to the United States Energy Information Administration. Yet that figure soared to 2.9 million tons in the first six months of this year alone — huge growth, though still a minuscule fraction of China’s coal imports.
• The growth and shifts in coal exports to China are impressive, flowering even during the recession. Seaborne trade in thermal coal rose to about 690 million tons this year, up from 385 million in 2001.
• The price rose to $60 from $40 a ton five years ago to a high of $200 in 2008. Coal delivered to southern China currently sells for $114 per ton.
• China, which was a perennial coal exporter until 2009, the first year that it imported more than it sent out, is expected to import up to 150 million tons this year.
• Another emerging customer is India, whose coal imports rose from 36 million tons in 2008 to 60 million tons in 2009, the last full year for which data is available.

Energy Secy. Steven Chu kicked off a three-day federal “sustainability” symposium today by announcing that the Department of Energy will install solar rooftop water-heating panels on . . . the White House.

“Around the world, the White House is a symbol of freedom and democracy,” Chu told an audience of federal employees, according to Greenwire, the online energy & environment news service. “It should also be a symbol of America’s commitment to a clean energy future.”

Apparently, nobody interviewed in connection with the article sees anything goofy about the mighty DOE and the White House trying to save the planet one rooftop at a time. Nor anything comedic in talking about the future of presidential bath and shower water.

Chu’s announcement came one month after eco-activist Bill McKibben led a demonstration demanding that President Obama install rooftop solar panels. To show that if you will it, it is not a dream (okay, I’m editorializing here), McKibben presented White House officials with a solar panel from Jimmy Carter’s White House.  Initially, they rebuffed him. But now, they’ve taken one small symbolic step back to the … Carter administration. Of course, McKibben hails Chu’s pledge as a giant step for mankind.

“The White House did the right thing, and for the right reasons: They listened to the Americans who asked for solar on their roof, and they listened to the scientists and engineers who told them this is the path to the future,” said McKibben, the co-founder of the nonprofit 350.org. “If it has anything like the effect of the White House garden, it could be a trigger for a wave of solar installations across the country and around the world.”

Yup, hardly anybody “across the country and around the world” would be planting flowers or “installing” flower gardens  if the White House had not shown the way via those Rose Garden tours!

Apparently, nobody interviewed by Greenwire wanted to mention the elephant in the room, namely, that McKibben’s symbolic victory is a far cry from the political victory Team Obama and eco-campaigners boasted they would win by enacting cap-and-trade.

Ive got nothing against solar technology, which has come a long way since the Carter days. Nonetheless, outside of certain niche markets and applications, solar is not competitive with fossil energy or even with other so-called non-hydroelectric renewable energies. See slide #17 of the Energy Information Administration’s Power Point presentation on its 2010 Annual Energy Outlook report.

Yes, solar power has enjoyed a rapid growth spurt in Germany, but that is due market-rigging subsidies known as feeder tariffs. If an industry cannot sustain itself without special policy privileges, does it really deserve to be called “sustainable”?

Bob Barr, the 2008 Libertarian Party presidential nominee, had a piece in yesterday’s Huffington Post titled Extending Ethanol Tax Credit Makes Sense. It’s depressing to see such a high-profile libertarian completely sell out, and I hope he receives flack over this return to special interest politics, as just over a year ago he said “How about the still-active ethanol subsidy scam?“ Thankfully, the online comments from the left-leaning Huffington Post suggest few are buying into his spiel. If this was some ploy by the ethanol industry to gain support from free-marketers, let me suggest that will not succeed. The entire article is full of misinformation.

Barr attributes a “lack of public awareness,” and the tax credit’s apparent complexity to the trouble ethanol proponents are having in re-securing the tax credits.

I would think a lack of public awareness, if anything, would help the ethanol industry. If the public was even remotely aware of the extent to which government support for ethanol is bad policy, more people would be against it. Right now, all they’re seeing is the occasional advertisement featuring a bright yellow corn-stalk or blabber about how ethanol can’t spill in the gulf (unless we import it from Brazil, then of course the likelihood of a spill approaches 100%). I’d suggest that the ethanol industry get in touch with the sugar lobby for a few pointers on how to maintain horrendous policy.

Barr cites a 2010 CBO report, “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals“ and concludes that evaluating the benefits of ethanol is daunting and un-objective. Confident that no one will actually find the report and read even the summary, Barr is able to completely misconstrue the conclusions of the report (and he talks of ethanol opponents being disingenuous).

At the risk of repeating myself for the 10th time, let’s look at relevant quotes from the CBO report:

From the conclusions section of their summary:

The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol made from corn and $3.00 for cellulosic ethanol.

Taxpayers spend $1.78 to reduce consumption of one gallon of gasoline; approximately 66% of current gas prices. Sounds like a great deal to me.

Similarly, the costs to taxpayers of reducing greenhouse gas emissions through the biofuel tax credits vary by fuel: about $750 per metric ton of CO2e (that is, per metric ton of greenhouse gases measured in terms of an equivalent amount of carbon dioxide) for ethanol, about $275 per metric ton of CO2e for cellulosic ethanol, and about $300 per metric ton of CO2e for biodiesel. Those estimates do not reflect any emissions of carbon dioxide that occur when the production of biofuels causes forests or grasslands to be converted to farmland for growing the fuels’ feedstocks. If those emissions were taken into account, such changes in land use would raise the cost of reducing emissions and change the relative costs of reducing emissions through the use of different biofuels—in some cases, by a substantial amount.

Not cost effective at lowering emissions. The Waxman Markley cap-and-trade bill had permits set to be traded at $32. Equivalent carbon permits in the EU are selling for approximately $20. This means that other industries are capable of reducing their GHG emissions at a cost of 23-27 times less.

“In the future, the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included. To the extent that the mandates determine levels of production in the future, the biofuel tax credits would no longer be increasing production, but they would still be reducing the costs borne by producers and consumers of biofuels and shifting some of those costs to taxpayers.”

Given the Renewable Fuels Standard, the tax credit doesn’t do much other than secure (little) excess profit for the ethanol industry at taxpayer expense.

Continuing on, Barr discusses subsidies for the oil-companies and job losses. The oil company subsidies are mostly in the form of tax write-offs available to a wide sector of U.S. industry (good summary here) rather than just the oil companies. To the extent to which the oil companies do receive subsidies, they are larger on an absolute level but are dwarfed by all sectors of “renewable energy” (let us not forget that the ethanol industry relies on fossil fuels to produce ethanol) on a per unit of energy produced basis.

Job losses of over 100,000 are a complete falsehood perpetuated by the ethanol industry. See a study here; which explains that job losses are likely to be under 1,000 because of the RFS mandating ethanol production.

Finally, Barr requests a fair and comprehensive debate including the “philosophical pros and cons” of federal tax policy. Then sneaks in the fact that despite the VEETC the ethanol industry is a net contributor to tax revenue. This is probably true, though it ignores the numerous state level subsidies and the years and year of subsidies when net tax revenues were likely negative. Furthermore, the net tax revenue of the ethanol industry would likely be higher under a scenario where the U.S. taxpayers didn’t write a $6 billion check each year supporting them.

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. Let’s hope its not hurting Mr. Barr too much this week as he recovers from a disgraceful opinion piece.

Do green energy and green jobs mandates run counter to World Trade Organization rules?  Japan says “yes” in relation to Canada’s program for renewable energy generation and green jobs in Ontario. Japan is complaining to the WTO that Canadian measures that mandate domestic content requirements for renewable energy generation equipment are inconsistent with WTO rules because they discriminate against equipment produced outside of Ontario and also represent a subsidy prohibited by the WTO. The country has asked the WTO for a formal consultation with Canada on the issues it raises in its September 13, 2010 filing. Consultations are often the first step in trying to resolve an issue before a country opens an official case with the WTO’s dispute settlement body.

Primarily Japan’s complaint hits Canada’s domestic content requirements in its “feed-in tariff” (FIT) program for Ontario, which requires that the renewable energy equipment, such as solar panels, wind turbines, biomass, and waterpower generation equipment, be produced in Ontario in whole or in part. (Feed-in tariffs are renewable energy payments that electric grid utilities obligate themselves to pay to purchase electricity generated from renewable sources.)  Under the program guaranteed prices for renewable energy electricity production are provided through long-term contracts.

According to a provincial government backgrounder on FIT, the domestic content requirements are intended to support “new green jobs in Ontario”:

Domestic content requirements for both FIT and microFIT projects are intended to help support the creation of 50,000 new green jobs in Ontario. MicroFIT projects will help create new local businesses and green jobs as demand grows for technologies such as solar panels, wind turbines, biomass and waterpower generation equipment, and for Ontarians who can design, build, install, operate and maintain these technologies.

And the domestic content requirements can be very specific (and somewhat ridiculous).   Here, for instance, is the one for silicon ingots and wafers:

Silicon ingots and wafer, where silicon ingots have been cast in Ontario, and wafers have been cut from the castings by a saw in Ontario.

From my quick review of the Canadian program, Japan seems to have a real cause for its complaint. Other countries looking to follow Canada’s example for green jobs creation should be wary about including their own protectionist measures.

H/T/ Julie Walsh

Those amazing Idsos who run the Center for the Study of Carbon Dioxide and Global Change review a paper recently published in AMBIO: A Journal of the Human Environment by Mulder et al. (2010), who assess the energy return on water invested (EROWI) of several renewable and non-renewable fuels.

In the paper, provocatively titled “Burning Water,” the Mulder team find that “the most water-efficient, fossil-based technologies have an EROWI one to two orders of magnitude [10 to 100 times] greater than the most water-efficient biomass technologies, implying that the development of biomass energy technologies in scale sufficient to be a significant source of energy may produce or exacerbate water shortages around the globe and be limited by the availability of fresh water.”

The Idsos note that these findings “will not be welcomed” by those who promote biofuels as a means of combating the alleged national security risks of global climate change.

We often hear, for example, that climate change will increase the risk of “water wars” by intensifying summer heat and drought. There’s not much evidence to support this alarm. About 90% of global fresh water consumption is for agriculture. As British scientist Wendy Barnaby found to her surprise when she set out to research a book about the coming “century of water wars,” nations in water-stressed regions typically do not come to blows but instead cooperate and import “virtual water” in the form of grain, leaving more water available for drinking and bathing. Even in the water-stressed, conflict-prone, Middle East, nations do not go to war over water. Nonetheless, to the extent that water stress undermines stability and peace, government policies ramping up biofuel production are likely a “cure” worse than the supposed disease.

In addition, some biofuel policies can increase food prices and world hunger, fostering instability and strife, especially if scaled up enough to make a meaningful difference in global carbon dioxide (CO2) emissions.  

Princeton researchers Stephen Pacella and Robert Socolow estimate that avoiding 1 gigaton (gt) of carbon emissions per year by 2050, by replacing gasoline with biofuels, would require 250 million hectares of high-yield energy crop planations, “an area equal to about one-sixth of the world’s current cropland.”

Let’s put this in perspective. One gigaton of carbon = 3.67 gt of CO2. Achieving the EU/UN emission stabilization target of 450 parts per million would require global CO2 emissions to decline roughly 38 gt below the baseline (business as usual) projection by 2050. In other words, the 3.67 gt reduction in CO2 that Pacala and Socolow say we can get via biofuels would achieve less than 10% of the reduction required to meet the target. Not a whole lot of environmental bang for all that land area buck. Indeed, dedicating 250 million hectares to energy crop production would likely squeeze many species out of their habitats.

Source: Stephen Eule, Scale and Scope of the Challenge to Reduce Greenhouse Gas Emissions, Institute for 21st Century Energy, U.S. Chamber of Commerce, February 2009

Note also that significant research indicates that converting grassland and forest land into biofuel plantations increases net greenhouse gas emissions over many decades by releasing the carbon stored in forests and soils. Growing biofuel on 250 million hectares of land might very well emit more CO2 than the gasoline it replaces.

The larger point, though, as Dennis Avery explains, is that the world is not well-fed now, and the demand for food and feed on farmlands is expected to more than double by 2050. Requiring biofuel production on 250 million hectares would be a recipe for disaster. Putting the equivalent of one-sixth of current cropland off limits to food production represents a much bigger decline in global agricultural productivity than is anticipated from drought in high-end global warming scenarios. 

Warmists warn that climate change is a “threat multiplier” or “instability accelerant.” However, the national security risks of climate change policy likely exceed those of climate change itself. 

For further discussion, see my CEI paper, DOD Should Consider the National Security Risks of Global Warming Policies, and economist Indur Goklany’s comprehensive study, Trapped Between the Falling Sky and the Rising Seas: The Imagined Terrors of the Impacts of Climate Change.

* When I first posted this, I failed to notice that Pacala and Socolow were measuring emission reductions in tons carbon whereas Stephen Eule was measuring reductions in tons CO2.