Domestic Fuel

For those of you who still have President Obama’s State of the Union speech in your mind, then you may remember his call for the government to slash greenhouse gas emissions (GHG). He has followed through. Less than a week after the pronouncement, Obama has issued an Executive Order 13514 on Federal Sustainability for the federal government to slash GHG emissions 28 percent by 2020.

According to the White House, the federal government, which includes all of our armed forces, is the largest energy user in the U.S. The 28% reduction would decrease annual electricity use by 1.5% saving between $8 – $11 billion in energy costs through 2020. Just in 2008, the federal government racked up a $24.5 billion energy bill.

“As the largest energy consumer in the United States, we have a responsibility to American citizens to reduce our energy use and become more efficient,” said Obama as quoted in an article in Recharge. “Our goal is to lower costs, reduce pollution, and shift Federal energy expenses away from oil and towards local, clean energy.”

This goal will require the government to shift to clean energy sources such as solar, wind and geothermal, which will support job growth and technology development in the clean tech sector – another major goal of the administration. This move also signals Obama’s commitment to passing a comprehensive climate change package, which is currently stalled in the Senate.

In the meantime, departments will be required to develop sustainability plans that will include current GHG emission estimates and to ensure follow-through, achievement reports will be published online for the public to view and submit reponses.

The nation that leads the clean energy economy will be the country that leads the global clean economy and America must be that nation,” said President Obama tonight during his first State of the Union address. “I will not accept second place.”

There were several major focuses of his speech including the support of small businesses, building a stronger financial institution and the creation of new jobs, especially in the clean tech sector. “We need to put more Americans to work building clean energy systems,” said Obama. He also wants to give incentives to consumers who add energy efficiency technologies to their homes, the purchase of these will help to support clean energy industry, he explained.

Obama continued that the House has already passed a bill that will do some of these things, and expressed hope that the Senate would as well. “I want a jobs bill on my desk without delay.”

In anticipation for Obama’s support of clean tech jobs, Renewable Fuels Association (RFA) President, Bob Dinneen sent out a statement saying, “America’s ethanol producers stand with the President, ready to provide good paying jobs and economic opportunity in a cleaner and more sustainable manner. “In just the past 10 years, ethanol production has helped create hundreds of thousands of new jobs for engineers, construction workers, chemists, accountants, maintenance supervisors, and countless others. With new technologies on the precipice of commercialization, this industry is once again poised to bring unparalleled economic opportunity to small, rural communities all across the nation.”

Obama continued, “No area is more ripe for investments than energy…but to create more of these clean energy jobs, we meed more production, more efficiencies and more incentives. He then laid of some of the elements that are needed to create the clean energy industry including continued investments in advanced biofuels. Finally he said, “And yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy profitable energy.”
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One of the biggest challenges for our country lies in the issue of how to create effective public policies that will grow the biofuels industry and reduce our dependence on foreign oil. Dr. Antonio Bento, associate professor in the Applied Economics and Management Program at Cornell University, has been researching exactly how to do this and he shared his results during the AG CONNECT Expo last week.

First we must take a step back to take two steps forward. There are several policies in place that mandate the production of biofuels with the Energy Independence & Security Act having one of the greatest impacts. This act requires 36 billion gallons of biofuels by 2022 with 15 billion coming from corn-ethanol. Bento noted that the country is well on its way to meeting this goal yet surprisingly, “While a lot of public press has blamed the increasing food prices due to these mandates, we find very little effect. Indeed, we find the bulk of the increase in food prices comes from the fluctuation in crude oil prices and our dependence on foreign oil, and less on the land we are devoting for the production of biofuels.”

Speaking of land, Bento also notes that biofuels are disproportionately being blamed for indirect land use effects. This has to do with the fact his framework, unlike a lot of the other models out there, is really accounting for the dynamics. “In other words, we really account for the fact that overtime yields will improve, we account for the fact there’s multiple land use that could adjust and we account for the fact there will be technology progress in the industry,” said Bento.
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The Cash for Clunker’s program is in full swing yet keeps hitting potholes. Less than one week after it was launched, it ran out of money and the Senate/Congress passed another $2 billion for the program but to get the money, took it from current biofuels programs that were designated as part of the Recovery & Reinvestment Act. Now, the latest issue: researchers are saying that it is a very expensive way to cut carbon emissions.

A new UC Davis study, “The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program,” estimates that the Cash for Clunkers program is paying at least 10 times the ’sticker price’ to reduce emissions of greenhouse gases including CO2. With carbon credit programs still under development, they are currently predicted to sell for about $28 per ton. However, in the best-case scenario, the calculated per ton cost of the rebate (either $3,500 or $4,500) would be around $237 per ton, this according to UC Davis transportation economist Christopher Knittel.

“When burned, a gallon of gasoline creates roughly 20 pounds of carbon dioxide. I combined that known value with an average rebate of $4,200 and a range of assumptions about the fuel economy of the new vehicles purchased and how long the clunkers would have been on the road if not for the program,” Knittel said. “I even assumed drivers didn’t change their habits, although some analysts have suggested that the owners of new vehicles will drive more than they would have with their old cars.”

Apparently, the researcher was being generous, as Knittel notes that more likely scenarios would produce a cost of more than $500 per ton. Ouch. Can we say not an economical way to reduce CO2? But hey – everyone knows that while the “public” agenda was to help the environment, we all know if was really to help the bankrupt auto industry move cars. I think the government needs to get a speeding ticket for this program.

The newest member of the U.S. Senate says he is pro-ethanol. In an interview with MinnPost.com today, Senator-elect Al Franken (D-MN) expressed his support for ethanol.

“What we’re talking about here is the science of how ethanol affects our carbon footprint,” Franken said. “The science to me tells me it helps. I’ve looked at this a lot, and it seems to me that ethanol already helps our carbon footprint and it’s only getting more efficient in the way it’s produced. Corn ethanol is a step on the way to cellulosic ethanol, which is also going to benefit Minnesota. I’m in the pro-ethanol camp.”

Franken’s campaign website gives his views on renewable energy and the need for America to reduce its dependence on foreign oil.

I think we need a new “Apollo project” – this time to fundamentally change our energy policy and end our reliance on foreign oil.

This “Apollo project” should provide financial support for research into new forms of renewable energy and development of currently-identified sources to make them more efficient. Of course I’m talking about corn ethanol. But I’m also talking about cellulosic ethanol and other biofuels. I’m talking about solar power. And, especially here in Minnesota, I’m talking about wind power. We live in a windy state!

As we approach America’s independence day, the “energy security” benefit many organizations and government officials tout  may be overblown, according to a new study conducted by RAND Corporation. The study, “Does Imported Oil Threaten National Security?” evaluated the risks to national security associated with U.S. imports of oil and assessed the costs and benefits of policies to address these risks. The study was sponsored by the Institute for 21st Century Energy, which is affiliated with the U.S. Chamber of Commerce.

The RAND study evaluated several common concerns about U.S. dependence on imported oil, including:

•    the likely economic impact on the U.S. should a major drop in the global supply of oil occur,
•    attempts by oil exporters to manipulate exports to influence the U.S. or other countries in ways that  are harmful to U.S. interests,
•    the role of oil-export earnings in supporting terrorist groups, and
•    the costs of protecting the supply and transit of oil from the Persian Gulf.

The major finding of the study was that an abrupt and extended fall in the global oil supply and resulting higher prices would seriously disrupt U.S. economic activity, no matter how much or how little oil the U.S. imports. In addition, the study found that the U.S. current oil-export embargoes have been unsuccessful in advancing the foreign policy goals of oil exporters.

The study concludes with policy recommendations that should benefit, not harm the country as several of our current and proposed policies do. Click here to read the full report, “Does Imported Oil Threaten National Security?“

Lay down the red carpet. Former President Bill Clinton will be a headliner at this year’s Ethanol Summit in Sao Paulo, Brazil June 1-3, 2009. The conference is hosted by UNICA,vthe Brazilian Sugarcane Industry Association (UNICA), and is touted as one of the most important gatherings focused on biofuels in the world.

After eight years in the white house, President Clinton established the William J. Clinton Foundation with a mission, “to strengthen the capacity of people in the United States and throughout the world to meet the challenges of global interdependence.” The Foundation has grown to more than 1,400 staff and volunteers around the world.

So what’s the tie between Clinton and Biofuels? There are several: the Clinton Climate Initiative, the Clinton Hunter Development Initiative and the Clinton Giustra Sustainable Growth Initiative. The cross-over goals all the three campaigns are to fight worldwide climate change and develop sustainable growth, especially in Africa and Latin America.

There will be more than 90 speakers, in addition to Clinton, from every continent addressing challenges and opportunities during the summit. There will also be several panels and one will be moderated by The Economist. It’s not too late to update your passport and hop on a plane and engage in the worldwide discussion on biofuels.

For more information about the Ethanol Summit 2009, please visit: http://www.ethanolsummit.com.br/english

At the request of the Obama administration transition team, the Renewable Fuels Association last week submitted discussion ideas for an economic stimulus package partially designed to create green jobs and spur the green economy.

According to a statement from RFA, “Some have misconstrued this communication as a request for federal assistance or a bailout. To the contrary, the RFA recognizes that by stimulating increased production, innovation, and investment in new technologies and cellulosic feedstocks, a revitalized renewable fuels industry can help bail out the flagging US economy and lessen America’s dependence on foreign oil.”

RFA says the ethanol industry has helped support the creation of more than 238,000 “green” jobs last year alone as well as helping to revive struggling rural economies.

Organization representatives say they will continue to have discussions with the Obama team on how ethanol fits into a green stimulus package. “America’s ethanol producers share the vision of President-elect Obama of a domestic industry that is innovating to include ethanol production from a wide array of materials including switchgrass, wood chips, and municipal solid waste. That vision can only become a reality if today’s ethanol technologies and producers are successful.”

According to media reports, President-elect Obama will announce former Iowa governor Tom Vilsack as his choice for secretary of agriculture at a press conference scheduled for Wednesday. Obama also plans to announce his nomination of Colorado Sen. Ken Salazar as interior secretary at the same news conference.

Vilsack served two terms as governor of Iowa from from 1998 until 2006 and was a short-lived opponent of Obama’s in the presidential race. As governor, Vilsack was a strong supporter of ethanol and other biofuels as a way to help rural economies. The last Secretary of Agriculture from Iowa was Henry Wallace who served under Franklin D. Roosevelt from 1933 to 1941. Wallace was a plant geneticist who founded what is now Pioneer Hi-Bred.

As interior secretary, Salazar will head a department that oversees oil and gas drilling on public lands and manages the nation’s parks and wildlife refuges and will play a key role setting the new administration’s environmental, energy and land-use policies.

Salazar has also has been a strong supporter of biofuels, this year co-sponsoring the Open Fuel Standard Act, legislation would require that half of all new automobiles starting in 2012 be flex-fuel vehicles warranted to operate on gasoline, ethanol, and methanol, or be warranted to operate on biodiesel. Colorado Governor Bill Ritter will have to appoint a replacement to complete Salazar’s term in the Senate through 2010. Among the contenders is Salazar’s brother, John, who serves in the U.S. House of Representatives.

The Renewable Fuels Association wasted no time today in congratulating Barack Obama on his victory.

“Throughout this campaign, President-elect Obama has reiterated that American farmers and ethanol producers are a critical component of our national strategy to help reduce America’s dependence on foreign oil,” RFA said in a news release. “We look forward to working with an Obama Administration and members of Congress from both sides of the aisle to ensure the full potential of America’s home grown ethanol industry is realized.”

The Ethanol Promotion and Information Council is pleased with “the role energy independence played in the 2008 presidential election.” Executive director Toni Nuernberg says that in this time of great uncertainty, it is time for the country to work together. “Our fight for Energy Independence should rival the efforts and sacrifices expended at other critical moments in our nation’s history; times when Americans pulled together not only by rationing and conserving, but thinking creatively, experimenting to develop new innovations and efficiencies, abandoning tradition, and working side‐by‐side to get the job done,” Nuernberg said.

In his so-called “closing arguments” in the Wall Street Journal this week, Obama said he would “invest $15 billion a year over the next decade in renewable energy, creating five million new, green jobs that pay well, can’t be outsourced, and can help end our dependence on Middle East oil.” The ethanol industry is reading that as good news for the next four years.