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Renewable-Fuels Standard Glitch

Anticipated rules from the Environmental Protection Agency could spell disaster for the advanced biofuels industry.
November 4, 2008

Last year’s Energy Independence and Security Act, by mandating the use of 21 billion gallons of advanced biofuels by 2022, was originally greeted as a boon for the environment and for a new industry that would make biofuel from nonfood sources. But now, some researchers and industry experts say that a provision of the bill could prove disastrous.

The law says, prudently enough, that advanced biofuels must emit 50 percent less greenhouse gas than conventional fuels. In calculating this, the Environmental Protection Agency (EPA) must take into account the emissions produced during the production and consumption of the fuel, which makes sense. But the EPA must also account for indirect emissions, and this is where the problems could start. Here’s an example of indirect emissions: suppose a farmer in the United States sets aside some land for growing biofuels that might otherwise have been used to grow hay for cows. That could increase the price of hay, leading another farmer to cut down some trees and use the cleared land to plant some alfalfa for hay. Suppose the trees were burned, releasing carbon dioxide. That would count as indirect greenhouse emissions.

The problem is, there is no way to measure these indirect effects. Who is to say that a farmer in Indonesia cut down some trees because another farmer in the United States planted switchgrass for making ethanol? The connection is tenuous–a result of complex market forces. The only way to calculate indirect emissions is to develop a simulation, a model that predicts how changing land use will affect the market, and how market changes will affect the behavior of farmers. Many guesses have to be fed into these models. For example, do we assume that farmers will cut down trees? Maybe they’ll drain swamps. Maybe they’ll just start using land that was already cleared, but hadn’t been planted because the market wasn’t good. Even if they do cut down trees, what they then do with the trees makes a big difference. If they burn trees, that increases emissions. If they use the trees for fuel instead of using another carbon-emitting fuel, the increased emissions will be less. If in cutting down those trees, other trees that would have been cut down are spared, then there might be no net increase in emissions, especially if farmers use the best land-management techniques.

The way that models are made could ultimately determine whether a given company’s biofuels will be labeled “advanced,” and therefore come under the umbrella of the mandates. The model’s assumptions can make or break companies that depend on the mandates to attract investment. Tens of billions of dollars could be on the line. What’s more, real environmental benefits could be squandered.

The EPA is expected to issue its rules for determining indirect emissions soon. In anticipation, seven scientists wrote an open letter to Stephen Johnson, the administrator of the EPA, warning that much work remains to be done to develop accurate models of indirect emissions. The scientists wrote that “EPA should delay rulemaking until the science is ready.”

If Johnson listens, the scientists will have to hurry. Too long of a delay, especially in the current economic climate, could also spook investors, delaying the funding required for biofuels plants, which will need to be built at a rapid pace between now and 2022 to meet the mandates.

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