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Fresh debate focuses on eliminating blending/consumption mandates or replacing them with non-corn-based targets

Biofuels have become almost a dirty word, thanks to the government's dealings with respect to corn ethanol.  Deep in campaign donations from farm lobbyists, federal politicans have sprinkled billions in subsidies on the corn farmers that helped pay their way into office.  Many have argued these subsidies have cost the consumer both in direct taxes and by raising the cost of corn-derived food products at the supermarket.  Still other critics accuse the government of greenwashing, pointing out that corn ethanol has actually been shown to increase greenhouse gas emissions, not cut them.

I. RIP "Dirty" Corn Ethanol Subsidy

In the end, it appears the critics prevailed.  The federal government is at last axing the $6B USD in annual federal subsidies it had previously been bequeathing on corn farmers and ethanol production facilities.

As the Congressional year ended, corn ethanol's supporters failed to muster the support necessary to push through a new subsidy to replace the previous subsidy that was voted out over the summer.

Corn ethanol handouts
The handouts are finally at an end for corn ethanol. [Image Source: AP]

Tom Buis, CEO of Growth Energy, an ethanol trade group, clearly wasn't thrilled with the decision, but in an interview earlier this month he claimed the ethanol industry would survive without government handouts stating, "The blenders' tax credit initially helped the ethanol industry develop. But today, we don't have a production problem, we have a market access problem.  Without the tax credit, the ethanol industry will survive; it will continue to reduce our dependence on foreign oil, create jobs and strengthen our economy."

By some estimates the total gifts to corn ethanol business totalled $45B USD since 1980.

The subsidy cut -- approved by a 73-27 Senate vote in June -- also is accompanied by the end of a tariff on the importation of Brazilian ethanol.  Brazil has an excess of sugarcane ethanol, but the U.S. government had previously penalized this fuel stream as a means of allowing U.S. ethanol producers to escape competing on the free market.

The ethanol debate has divided both political parties and even set federal representatives within certain corn-producing states against each other.

For example Sen. Debbie Stabenow (D-Mich.), whose state is the nation's 11th-largest corn producer -- with 11,000 corn growers using 4 percent of the state's land (2.45 million acres) to produce 315 million bushels in 2010 -- was among those who voted against cutting the subsidy, attacking the plan.  

By contrast Michigan Reps. Gary Peters (D-Bloomfield Township), Mike Rogers (R-Brighton), John Conyers (D-Detroit), Tim Walberg (R-Tipton), and Bill Huizenga (R-Zeeland) joined California's Darrell Issa (R-San Diego) and Loretta Sanchez (D-Orange County) in attacking higher ethanol blends in a letter "E15 is not ready for prime time".

II. The Next Front: Cutting Mandatory Blending Targets

The letter alludes to the next major front in the debate -- the question of mandatory ethanol consumption targets and fuel blends.

Many states have already forced gas stations to vend a blend of fuel that's 90 percent gas and 10 percent ethanol.  But this blend is insufficient to fulfill the federal mandates of 15 billion gallons of biofuel to be consumed by 2015 and 36 billion gallons by 2022.  These mandates were pushed through by the administrations of Presidents George W. Bush (R) and Barack Obama (D).

The U.S. Environmental Protection Agency has called for using a higher E15 blend (15 percent ethanol, 85 percent gas), while offering non-E15 options and warning stickers for drivers of older vehicles.  Both the EPA and automakers agree that E15 use could do great harm to older engines.  However, the automakers and the EPA dispute its effect on more modern engines.  Automakers say E15 can still cause significant harm to some modern engine designs, while the EPA claims the automakers don't know what they're talking about and that it's own testing has proven E15 use in modern vehicles to be safe.

But the E15 scheme has been shelved indefinitely thanks to a 285-136 vote in the U.S. House of Representatives.

The house is now debating whether to roll back biofuels targets and/or the existing ethanol blending mandates.  Downsides to such actions are that other biofuels such as algae and cellulosic ethanol -- which lack the compelling negatives of corn ethanol -- could be harmed.  A repeal could also create uncertainty in the fuel market, causing deleterious financial effects.

III. Moving Towards Better Biofuels

An alternative could be to scale back targets, focusing solely on more promising technologies like cellulosic ethanol and algae, while scrapping any sort of federal mandate for corn ethanol.  Interestingly such an idea has support from some environmental lobbies who aren't a fan of corn ethanol.  

Environmental advocacy Friends of the Earth's biofuels policy campaigner Michal Rosenoer cheered the decision to kill the subsidy, stating, "The end of this giant subsidy for dirty corn ethanol is a win for taxpayers, the environment and people struggling to put food on their tables."

His group supports focusing federal funding on "better" biofuels.

One particularly promising biofuel is algal oil.  

Algae biofuel
Algal oil is a promising corn ethanol alternative, offering a higher octane biofuel.
[Image Source: Jacopo Werther]

While pure-ethanol vehicles can have a better performance power-wise than pure-gasoline vehicles thanks to higher fuel compression ratios, availability mandates mixed vehicles that can burn both pure gasoline or pure ethanol.  These dual-mode engines offer the worst of both worlds, in terms of inferior gasoline performance, while falling short of the promised ethanol performance.

By contrast, algal fuel can be produced in a higher octane blend which mirrors standard gasoline.  Thus lesser engine modifications are necessary even for pure supplies.  Additionally, for blends the performance losses would be lessened.

The U.S. military has been doing some excellent pioneering work in terms of reducing the cost of algae biofuels.  A year ago algae biofuel cost $424 USD/gallon, this year it costs $26.67 USD/gallon.

Algae biofuel production is inherently scalable, although it works best in relatively frost-free climates like Florida and the American southwest.  Aside from the cost of the glass tanks, harvesting/processing equipment, and bioengineered algae strains, the only additional costs involved are the certain fertilizers/growth additives used to accelerate the growth of the oily algae.

Algae's biggest weakness is that it doesn't have the millions in special interest money backing it hat corn ethanol has.  Thus even as corn ethanol has some firm advocates on The Hill, algal biofuel is just starting to be considered.

Source: The Detroit News

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Sugar instead of corn syrup?
By ipay on 12/26/2011 2:18:11 PM , Rating: 5
So, does this mean that we can go back to sodas made with sugar instead of high-fructose corn syrup? I managed to get hold of some "legacy" Dr. Pepper, and it tastes a lot better than the corn syrup formula.

RE: Sugar instead of corn syrup?
By woody1 on 12/26/2011 2:57:53 PM , Rating: 2
Kindly explain your logic on how this will affect the use of sugar in soft drinks. Also, see the thread above.

RE: Sugar instead of corn syrup?
By V-Money on 12/26/2011 3:21:20 PM , Rating: 2
There isn't any logic to it, but since it was brought up (twice now), am I the only one that prefers soda made from corn syrup? I've tried the "throwbacks" and I've drank various soft drinks (same brands as here) from other countries (made with sugar), and quite frankly, I think they suck.

RE: Sugar instead of corn syrup?
By ipay on 12/26/2011 3:58:26 PM , Rating: 5
You can have it. I've tried them side-by-side, and to my taste buds, the corn syrup formula sucks.

By Skywalker123 on 12/26/2011 6:52:33 PM , Rating: 2
No matter if they are made with sugar or corn syrup they are nutritional garbage. Colored sugar water.

RE: Sugar instead of corn syrup?
By LRonaldHubbs on 12/26/2011 11:29:59 PM , Rating: 2
Nope, I agree with you. I did a blind taste test of Mtn Dew vs Mtn Dew Throwback and liked the corn syrup version better.

RE: Sugar instead of corn syrup?
By tastyratz on 12/27/2011 10:51:26 AM , Rating: 1
don't forget the throwback's made from "real sugar" just means not corn sugar. The majority of our usa sugar is from beets, not cane. Real cane sugar which *also* is not highly refined has a very distinctive and superior taste.

I wonder if the levied tarriffs which the corn industry lobbied for importation of sugars could also be re-visited as well on this same subject? The reason the nasty hfcs can be had so much cheaper is not because they actually ARE cheaper, it's because the industry taxes the alternatives so much they can not compete.

But hey, America doesn't have an obesity problem as it is, right?
This will not fix the issue, but hfcs is another nail in the coffin. also before you spout and believe the "corn sugar" commercials or read the hfcs composition as similar to modern corn sugar, realize the glucose and fructose molecules are unbonded in hfcs vs sugar. That makes a big difference in the way they are processed.

RE: Sugar instead of corn syrup?
By ipay on 12/26/2011 3:23:01 PM , Rating: 5
Ummm, the government stops subsidizing the corn crop, which artificially reduces the cost of corn syrup, so sugar becomes cost-competitive again?

RE: Sugar instead of corn syrup?
By sigmatau on 12/26/2011 8:12:57 PM , Rating: 2
Actually you really didn't think about the whole situation. Ethanol production from corn increases the price of corn because we not only have demand for corn for food but also for fuel. If you reduce or eliminate the subsidy to ethanol manufacturers, that means they will have to raise the price of their fuel to make the same amount they made when they had the subsidy.

What happens when you raise prices? Demand goes down. So if you have a lower demand for ethanol, that means there will be a surplus of corn for food.

What happens when there is an increased supply with no change in demand? You get lower prices of corn used for food.

So what happens when you have one product, corn syrup, that actually gets cheaper, relative to its competitor, sugar, that didn't have a change in price?

That's right folks, you get a higher demand from the soda makers for corn syrup.

RE: Sugar instead of corn syrup?
By ipay on 12/26/2011 10:58:36 PM , Rating: 5
Actually, you didn't think about this long-term. On a short-term basis, there will be a surplus of corn syrup due to the existing oversupply of corn. That won't last for long, however.

On a more long-term basis (one or two growing seasons), farmers won't plant as much corn because the government isn't paying them to do it. Lower demand + excess supply = unprofitable crop, which will result in decreased production.

The corn syrup manufacturers have to compete with other corn consumers (ethanol, canned corn, nachos, grits, etc). The reduced supply coupled with competition will drive up the cost of corn syrup, removing its artificial price advantage against sugar.

RE: Sugar instead of corn syrup?
By woofersus on 12/27/2011 1:25:10 AM , Rating: 3
You are correct that a long term decrease in quantity demanded will likely result in an adjustment to quantity supplied, but supply and demand always seek equilibrium. It doesn't make sense to argue that a decrease in quantity demanded will eventually cause a boomerang effect and result in prices actually going up. It's just a partial compensatory effect. It's not like corn is an expiring technology that will eventually become rare enough to raise the price, as collectors buy up the last of the corn on the market.

The reason corn syrup is the sweetener of choice in food manufacturing is because it's been cheaper than cane sugar in this country for a long time. (well before the blend/consumption mandates) A change that ultimately results in lower corn prices just exacerbates that difference.

Besides all that, it's not just corn subsidies or a lack thereof that caused corn syrup to be a dramatically cheaper ingredient. It's also the longstanding US sugar import program. In order to protect a small sugar industry in this country, we have tariffs that keep the price of imported cane sugar very high. (It's around 72% more expensive here than the world average) We also spend billions in subsidies on the small, inefficient (compared to cane sugar) beet sugar farming industry in Florida in order to keep them afloat. I won't go into a discourse on all the implications of this program, but this particular scenario is a great example of the law of unintended consequences when it comes to regulations and protectionist trade policies.

RE: Sugar instead of corn syrup?
By gstrickler on 12/27/2011 3:28:58 PM , Rating: 2
Corn syrup, specifically HFCS is cheaper that cane/beet sugar (sucrose) because:

1. We have been paying corn farmers a subsidy, making corn artificially lower priced.
2. We put a quota on the amount of sucrose each sugar producing state can sell. Anything they sell in the US above quota that is penalized with an additional tariff, artificially raising the cost of sucrose. Any excess can be sold outside the US with no additional tariff, thus making selling more sucrose in the US even less practical.
3. We put a high tariff on imported sucrose.

In short, we've artificially limited the supply of sucrose in the US and artificially raised the price of sucrose in the US, while artificially increasing the supply and lowering the price of corn syrup and HFCS in the US.

The US is the only country in the world to use a significant quantity (per capita) of HFCS, because on the world market, sucrose is cheaper. Corn syrup/HFCS in the US is a completely artificial market. End the subsidies, quotas, and tariffs, and sucrose will be cheaper and companies will switch back to it instead of the HFCS that is a major contributing factor to diabetes and obesity in the US.

RE: Sugar instead of corn syrup?
By woody1 on 12/27/2011 1:56:11 PM , Rating: 2
Farmers in the Midwest generally produce either corn or soybeans (usually alternating crops every year to preserve the soil). The demand for soybeans isn't likely to change, so the vast majority of those farmers will continue to grow corn every other year.

The reduction in ethanol demand is likely to push corn prices down. Corn is a commodity with many different uses (fuel, sugar, livestock feed, chemicals, drugs, etc.) Farmers will sell the corn at the best price they can get. There will likely be some fluctuations in production, but generally, the result will be lower priced corn syrup and therefore more incentive to use it as a cane sugar substitute (not less).

RE: Sugar instead of corn syrup?
By mindless1 on 12/27/2011 8:33:15 PM , Rating: 2
I'd call one growing season (all it'll take, no point to growing without the incentive even once) the short term.

RE: Sugar instead of corn syrup?
By SPOOFE on 12/26/2011 3:26:31 PM , Rating: 2
It does indicate a sort of political momentum against the corn lobby; nix or reduce a few more of their subsidies and maybe we'll see sugar making a comeback.

RE: Sugar instead of corn syrup?
By Basilisk on 12/27/2011 3:31:33 PM , Rating: 3
As my tired old brain recalls it, sugar dissolved from the soft drink market as much [or more?] because of international politics. The Cubans weren't suffering enough under Castro, so our government shutdown sugar imports from there (and eventually everything else save refugees).

The results were expanded tooth decay in the USSR [jk] -- which imported ridiculous amounts of sugar to aid Cuba's economy -- and the invigorated destruction of the Everglades from increased and irresponsible farming of sugar sources in southern Florida -- the latter despite ample sugar supplies from the Caribbean basin (which domestic sugar producers lobbied for quotas on).

Yeah, to many of us soft drinks taste considerably better with sugar. Ya choose your poisons.

RE: Sugar instead of corn syrup?
By gstrickler on 12/27/2011 4:35:29 PM , Rating: 3
All evidence that protectionist policies don't work, and can have severe consequences for decades. Stop the subsides, eliminate the domestic quotas. Only use quotas or tariff's to fight subsidies given by other countries producers (i.e. to keep a "level playing field").

Just so I'm clear...
By protosv on 12/26/2011 3:05:57 PM , Rating: 2
But the E15 scheme has been shelved indefinitely thanks to a 285-136 vote in the U.S. House of Representatives.

Does this mean that under the current situation, there will be no mandated push to use E15, but there will still be a requirement to blend E10 gasoline, depsite the fact that this will now cost more for everyone? How is it possible that Congress would be able to cancel the blender's credit (a good thing), but still mandate the use of ethanol in fuel? (a bad thing). Is that even legal?

RE: Just so I'm clear...
By CityZen on 12/26/2011 6:54:43 PM , Rating: 2
Remember that they also ended the tariff on the importation of Brazilian ethanol, so (imported) ethanol may actually cost LESS now

RE: Just so I'm clear...
By RamarC on 12/26/2011 8:09:19 PM , Rating: 2
i've got no issue with e-85 if it lowers the cost of fuel AND it's not forced on the public. finding non-ethanol-deriched gas is next to impossible in my area. hopefully, i can finally reach my expected performance/mileage even if it costs 8c/gal more.

RE: Just so I'm clear...
By Dorkyman on 12/26/2011 10:13:23 PM , Rating: 2
I have a BIG issue with E85, and with E90 for that matter. I would not have any issue with the states individually deciding what percentage, if any, to allow. If states stick with E90, fine. If they decide to drop ethanol altogether, fine. We'll get better gas mileage.

With no thanks to Messiah in the White House, our dependence on aOPEC oil has already dropped to 50%. With a new administration and renewed domestic production, we can drop our dependence much further, regardless of ethanol.

RE: Just so I'm clear...
By Targon on 12/27/2011 6:23:48 AM , Rating: 2
I have big issues with states forcing Ethanol down our throats without letting us decide if we want the garbage or not. I agree that it is far better to let states decide this sort of thing, but it is still BAD due to most states running a deficit yet still forcing stupid crap down our throats(which SHOULD cost the state money).

E10 already reduces fuel economy, E15 would be worse, and giving consumers the right to choose not to lower our fuel economy in the name of questionable benefits to pollution levels SHOULD be required.

Has anyone proven that in modern engines that E10 actually has a positive environmental impact? I'd rather get 5 miles per gallon better fuel economy by dropping Ethanol, since that would probably be better on the environment.

RE: Just so I'm clear...
By mugiebahar on 12/27/2011 10:07:43 AM , Rating: 2
not what your saying is wrong, I just want to separate the issue foreign oil dependance and Oil price for anyone who reads the threads. They are not one in the same here, Because of the free market. Even if we stop our dependance we won't be getting cheaper gas anytime soon. I think we should put real effort in finding a real solution long term to lower dependance, lower prices all the while using responsible actions (using some type of blends) to help the environment.

RE: Just so I'm clear...
By Natch on 12/27/2011 11:45:56 AM , Rating: 2
Fellas, a quick reminder. E10 is the current blend of gasoline (10% Ethanol). E15 is what the EPA is pushing (15% Ethanol).

E85, on the other hand, is 85% ethanol, and 15% gasoline. You're confusing E85 with E15.

E85 can only be burned in engines that are designed for it, since they require a coating to protect any aluminum parts that would come into contact with the higher ethanol blend fuel (since ethanol tends to "eat" aluminum, over time). In fuel dispensers, they coat the parts in nickel (not sure about engines).

The really screwed up part of all this is that the government is calling for higher gas mileage figures from automobiles, at the same time they're talking about mandating E15 blend gasoline, which would actually DROP the mileage you'd get from an engine! Talk about your Catch-22's!!

RE: Just so I'm clear...
By PaFromFL on 12/27/2011 8:08:28 AM , Rating: 2
Hopefully, the repealed subsidy is a sign that a majority of voters are now aware of the many drawbacks of corn ethanol. Why else would politicians finally ignore the bribes and kickbacks from the corn lobbyists? The lack of a subsidy will impact the pocketbooks of even more voters. On a side note, I'm a huge fan of Mountain Dew Throwback and suspect that high fructose corn sweeteners increase the risk of obesity and diabetes.

By sprockkets on 12/26/2011 1:25:31 PM , Rating: 1
This mean less incentive for 10% ethanol in fuel? Sugar will make a comeback to soft drinks (one can only wish)?

By woody1 on 12/26/2011 1:47:12 PM , Rating: 2
Huh? How does cutting ethanol subsidies relate to the use of sugar in soft drinks? If anything, cutting ethanol subsidies will lower the cost of corn syrup, thus increasing the incentive of soft drink makers to use corn syrup vs cane sugar. Those sweet soft drinks are messing up your thinking.

By Totally on 12/26/2011 1:57:13 PM , Rating: 2
Apparently your sarcasm detector is out of calibration. I suggest you take call it in for repair at 1-888-QUIKFIX

By chromal on 12/26/2011 2:01:14 PM , Rating: 2
Well, there's the federal corn-based ethanol subsidies, and then the general corn subsidies. The former raises the price of corn, the latter lowers it. I don't much care for either.

By woody1 on 12/26/2011 2:54:24 PM , Rating: 1
SO: Maybe your OP just wasn't funny and/or was incoherent.

RIP E85?
By Gunbuster on 12/26/2011 4:04:56 PM , Rating: 3
Does this mean no more E85? Seems like even with the govenment subsidy it never sold for 20% under regular gas price that one would need to even make up for the 15-30% worse mileage you get on it.

I laugh every time I see that stupid flexfuel badge on a GM car.

RE: RIP E85?
By Rukkian on 12/27/2011 4:33:22 PM , Rating: 2
I actually have one of those cars you laugh at, and there have been times it actually made sense, when gas prices rose close to $4/gallon here, and E85 was $.95 less, it was actually worth, and I put it in for a few months. Outside that, I just laugh at the gas stations that actually put it on their signs and the idiots that use it just "save a buck".

biodiesel is worse than ethanol
By Cl1ffClav3n on 12/26/2011 4:46:45 PM , Rating: 2
The Navy paid $430 a gallon for Solazyme algae diesel oil for its recent ship stunts and $149 a gallon for algae kerosene for its recent airplane stunts-- fuels that normally cost the military less than $3 a gallon in bulk. I say "stunts" because that is what RAND said in its Jan 2011 study ( that said the US Military is wasting vast sums of money duplicating meaningless demonstrations that have already been done by industry for 55 different biofuel blends. The issue is not making the fuel, it's making it economically. To see how we are doing, consider that Solazyme is receiving another $21 million in subsidies from DOE, so the real cost of the fuel is still far higher, and that Honeywell UOP was just awarded a DOE contract for $1.1M to produce a mere 100 gallons of biofuel sometime in 2012--that is $11,000 a gallon.

If you think corn ethanol is bad, consider biodiesel. Rapeseed, the most common feedstock, consumes more than 10 times the water per energy yield than corn ethanol. Peak oil is a myth that ignores the exponentially increasing global petroleum reserves and focuses only on the falloff of US oil production due to the development of competing cheaper foreign oil sources (e.g., Venezeuala just surpassed Saudi Arabia in proven reserves). However, peak water is a reality based on diminishing aquifers and has already happened in much of the world. Saudi Arabia and Australia are among scores of countries already dependent on desalination for most of their water supply. A liter of corn ethanol contains barely enough energy to desalinate the water required to crow the amount of corn it took to make that liter, and that leaves no energy for any other use. A liter of biodiesel from any feedstock will only desalinate about 1/10 of the water required to grow it. Guess what--biofuel is not sustainable as well as not economical.

Corn syrup
By Realist60 on 12/27/2011 10:15:09 AM , Rating: 2
To the posters that believe corn syrup prices will rise, I hope you realize that the food and beverage industries use around 350 million bushels, which sounds like a lot until you see that its only 2.5% of total annual corn production.
If corn isn't grown, then soybeans will replace it, and our exports to China will increase significantly.

By btc909 on 12/27/2011 12:34:34 PM , Rating: 2
Ethanol does wonders to plug up your throttle body. It's even worse if your engine is direct injected. I got sick of paying a dealer $200+ so learned how to use Seafoam. No I don't run cheap gas. Generally I use Shell, Chevron, and sometimes Mobil.

Food demand up.
By JonnyDough on 12/27/2011 10:02:31 PM , Rating: 2
Corn prices can bring more money for the government by selling food to nations that are struggling with mouths to feed. When petroleum prices skyrocket and people have no money for automobiles and gas, they still need food. Just watch, we'll have the whole world eating out of our hands. Literally.

By inperfectdarkness on 12/29/2011 10:53:11 AM , Rating: 2
...all i REALLY want to know is if we can get an alternative fuel with 100+ octane that will run in ALL existing IC engines with very little modification; and will cost ~$2.00/gallon.

if we can do that--and in sufficient quantities to power the entire transportation infrastructure in the US--then i'm happy. and i DON'T think that's an unreasonable expectation.

older vehicles
By Screwballl on 1/3/2012 11:12:17 AM , Rating: 2
...while offering non-E15 options and warning stickers for drivers of older vehicles. Both the EPA and automakers agree that E15 use could do great harm to older engines.

What they fail to mention is "older vehicles" include those not marked and manufactured with the "Flex Fuel" designation. This means many newer vehicles up to 2009 model year still can have engine parts damaged by using ANY Ethanol, including the current E10. Since most states have Ethanol requirements, it is at the point where we have no choice since there are almost no fuel stations that do not carry non-Ethanol gasoline. Florida requires it in ALL grades at all gas stations, except those designated for marine (or off road) use. Since there are almost none for "off road use", that means none available for non-FlexFuel designated vehicles, thus increased repair bills once parts start failing, and they will.
The ONLY benefit I see for this E15 is the option for a pump or two specifically designated for non-Ethanol fuel. I know if I had that option with my 2004, I would be using non-Ethanol 100% of the time, but I do not have that choice.
The problem is when 100% of all stations have Ethanol blends, then the "stickers" for older vehicles are useless since there is no alternative stations available.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer

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