Why the RFS Is Vital

The House Energy and Commerce Subcommittee on Energy and Air Quality earlier this week held a hearing on implementation of the new Renewable Fuel Standard.
Rep. Stephanie Herseth-Sandlin (D-S.D.), Environmental Protection Agency Deputy Assistant Administrator Robert Meyers, Bob Dinneen with the Renewable Fuels Association, Nathanael Greene with the Natural Resources Defense Council, Randy Kremer of KL Process Design Group, and Dr. Mark Stowers with POET were among those who testified.
Stowers noted,

A strong corn to ethanol business and infrastructure is crucial to the development of cellulosic ethanol. Without it, cellulosic ethanol will be delayed. The corn to ethanol industry can provide existing grower networks, production knowledge, product, market and logistics knowledge to emerging cellulose producers and a distribution infrastructure. Financial lenders will support cellulosic ethanol provided there is a strong corn to ethanol industry.
“The RFS provides an important target for cellulosic ethanol – a real and attainable target. Continued support of the RFS will be important in demonstrating to the ethanol, transportation fuel and financial industries that there will be a market for ethanol.”

You can view the testimony on the Energy Committee Web site.
The testimony points up something that is being missed in the current debates over the merits of corn ethanol: corn ethanol producers such as POET are among the early adopters of advanced biofuel technology.
Robert Zubrin, author, and Gal Luft, executive director of the Institute for the Analysis of Global Security, wrote an interesting opinion piece in the Chicago Tribune this week.

It seems so obvious: With so much corn being turned into fuel, food shortages must inevitably result, and biofuel programs must be the cause. However, that’s completely untrue.
“Here are the facts. In the last five years, despite the nearly threefold growth of the corn ethanol industry (or actually because of it), the U.S. corn crop grew by 35 percent, the production of distillers grain (a high-value animal feed made from the protein saved from the corn used for ethanol) quadrupled and the net corn food and feed product of the U.S. increased 26 percent.
“Agriculture is not a zero-sum game. There are 800 million acres of farmland in the U.S., and only about 30 percent of it is actually being used to grow anything. As a result of the ethanol program, the corn price received by farmers doubled over the last five years, causing a huge increase in the amount grown in terms of acreage and yield.”

And farmer Matt Gerhold of Kirksville, Mo., added similar thoughts to the debate taking place on the Chicago Tribune web site.

Farmers have been entrusted with the resources to provide essentials for all of us: food and now fuel. It is a responsibility that has been earned. It is a responsibility that has never been waived despite our long history of unfounded complaints about how farmers do it and our refusal to pay break-even prices for it. In the history of the U.S, providing enough food for Americans is a job that has always been done even when farmers faced economic hardships.
“How much more food will farmers produce when ethanol is providing the finances to grow even more? More than enough.”

Can Stopping Ethanol Solve the Current Food Crisis?

President Bush spoke out last week on the global food crisis, suggesting that reducing trade barriers would help increase food supplies.

We’re also urging countries that have instituted restrictions on agricultural exports to lift those restrictions. Some countries are preventing needed food from getting to market in the first place, and we call upon them to end those restrictions to help ease suffering for those who aren’t getting food.
“We’re also urging countries to remove barriers to advanced crops developed through biotechnology. These crops are safe, they’re resistant to drought and disease, and they hold the promise of producing more food for more people.”

Richard North, a British parliamentary researcher and co-author of Scared to Death says essentially the same thing:

As well as liberalising trade, we need to encourage increased agricultural productivity.
“Only farmers can solve the global food crisis, and to help them achieve this we need to make them more efficient.”

The problem is illustrated most clearly by a chart sent to me by Richard Hamilton, CEO of Ceres, Inc. The average yield of agricultural producers around the world (gold bar) is less than half that obtained by producers in the United States (green).

It was put most succinctly perhaps by Clifford D. May, president of the Foundation for the Defense of Democracies:

“By all means, send food aid to those who are starving. But over the longer run, Third World farmers need to be helped to grow more of their own food — not to rely on charity from overseas.”

But what about the environmental impact of increasing agricultural production around the world. Is switching to energy crops such as switchgrass for biofuels better?

Indur M. Goklany, author of “The Improving State of the World,” doesn’t think so. On the Cato@Liberty blog, he writes:

Farmers will do what they’ve always done: they’ll produce the necessary biomass that would be converted to ethanol more efficiently. They’ll use their usual bag of tricks to enhance the yields of the biomass in question: they’ll divert land and water to grow these brand new crops. They’ll fertilize with nitrogen and use pesticides. The Monsantos of the world — or their competitors, the start-ups — will develop new and genetically modified but improved seeds that will increase the farmer’s productivity and profits. And if cellulosic ethanol proves to be as profitable as its backers hope, farmers will divert even more land and water to producing the cellulose instead of food. All this means we’ll be more or less back to where we were. Food will once again be competing with fuel. And land and water will be diverted from the rest of nature to meet the human demand for fuel.”

But U.S. farmers’ usual bags of tricks are pretty good.

A study by the U.S. Department of Agriculture and University of Nebraska, published in January in the Proceedings of the National Academy of Science, announced the results of five-year field trials for farm-grown switchgrass. The analysis shows that fertilizer, herbicide and fossil energy requirements were lower than expected based on the results from economic models. It also showed that farm-managed switchgrass grown on marginal land that is not useful for corn production outperformed natural switchgrass grown on prairie land in terms of harvest.

So yes, farmers will make individual decisions as to what to plant and grow. And energy crops will give them better options for marginal, ecologically sensitive land. And worldwide, farmers should be looking to adopt the same tools as American growers.

The 15 Percent Solution

Politicians are now beginning to call for a repeal of the Renewable Fuel Standard (RFS). Sen. Kay Bailey Hutchison (R-Texas) recently announced that she would introduce legislation to freeze the biofuel mandate at current levels, saying, “Expanding biofuels while refusing to take other measures, such as lifting the ban on oil and natural gas production in Alaska and the Outer Continental Shelf, is counterproductive.”

Texas Gov. Rick Perry (R) also asked for a 50 percent waiver of the RFS.

But will relaxing or freezing the RFS reduce food prices and quickly make more grain available? Will it make more fuel available? Unlikely.

New York Times blogger Mike Nizza gives a run down of the many factors behind the current rise in prices for grains. He includes the usual suspects — energy prices, droughts and increased demand from growing economies in Asia — and notes some longer term factors such as trade barriers. Nizza notes that the International Food Policy Research Institute attributes 25 to 30 percent of the global rise in grain prices to biofuels, and the UN Food and Agriculture Organization attributes 10 to 15 percent of the current rise in food prices to biofuels.

Allison Kilkenny of the Huffington Post puts the blame for rising food prices squarely on the rising price of oil:

There are food shortages because oil is nearing $120 a barrel. The necessary evil, oil, is the fuel behind all the food production in the world, so when the price soared over $100 a barrel, the poorest people took the brunt of the shock. In short, they ran out of food.
“Rather than branding biofuels the villain of the food crisis, the blame should be aimed at the persons pricing the oil.”

I’ve noted before that OPEC has not increased production to meet rising demand. It’s also true that oil companies have not expanded refinery capacity to meet demand. According to the Energy Information Administration, in 2006 oil companies planned to expand refinery capacity by 1.5 million barrels per day by 2012; but in 2007 oil companies cut expansion plans to 1 million barrels per day by 2012.

With high oil prices, reserves continue to decline. Economic consulting firm KPMG International polled financial executives from oil and gas companies back in April 2007, indicating then that oil reserves and prices were a problem. 34 percent of those polled said that declining reserves were a “major concern” for the industry, and 60 percent predicted that oil reserves would continue to decline, due to rising demand from emerging markets.

A big question out there is whether OPEC can open the spigots and bring energy supplies in line with demand. Even if they are able to do so, eventually, there remains a question about the ability of U.S. refiners to meet demand.

The need for alternative energy remains. And a few environmentalists still believe the RFS is the right policy for reducing greenhouse gases. See for example Nathanael Greene of the Natural Resources Defense Council: “The RFS just adopted is not perfect, but it is the first biofuels policy to mandate a shift in our production practices in a way that will address these challenges.”

Beyond this, the RFS was also intended to provide new incentives for increased agricultural production. Gordon Quaiattini of the Canadian Renewable Fuels Association points out:

Because of this new market and 21st-century agriculture practices — less fertilizer, less water, drought-resistant grains and increased yields on existing agriculture land — more crops are being planted and harvested, increasing supply at a time when, in the United States at least, a legislative cap actually restricts the amount of corn that can be directed toward ethanol production.”

And Colin A. Carter of the University of California at Davis and Henry I. Miller at Stanford University’s Hoover Institution argue that increased adoption of biotech agriculture can help break the competition between food and fuel.

A medium- and long-term benefit of high commodity prices may be that the governments in poor countries will be able to justify the testing and commercialization of critical gene-spliced food crops such as rice and wheat. Countries like China have this new technology ready to go, and the licensing of gene-spliced rice and wheat will quickly boost yields, and because of better insect, disease and weed control, reduce the costs of production.”

Questioning the Relationship Between Biofuels and Food Costs

A new study released by Texas A&M’s Agricultural and Food Policy Center undermines one of the key assumptions used in the studies that attributed a huge “carbon debt” to biofuels.
The assumption used by Searchinger et al. is that biofuel production increases the cost of all commodity grains, encouraging countries to convert additional land – such as rainforest, peat land, and savannah – to agricultural production.

The Searchinger paper calculates that agricultural production will have to increase in other parts of the world to compensate for U.S. production of biofuel using a model of world agricultural markets developed by Iowa State University’s Center for Agricultural and Rural Development (CARD) and the Food and Agricultural Policy Research Institute (FAPRI).

But other agricultural economists have recalculated the data using the same model and have drawn different conclusions. Richard K. Perrin, Jim Roberts Professor at the University of Nebraska-Lincoln, for instance, notes that “recent grain price increases are higher than could be expected from recent ethanol increases alone.”

The Texas A&M study now shows that higher energy costs are the key to changes in the U.S. agricultural industry and economy. In fact, the study says, higher agricultural production costs –- higher energy costs for tilling, harvesting and transporting –- will tend to reduce acreage. And U.S. farmers have indicated they will reduce acreage for corn this year, according to the USDA. They will look toward ways to increase yields per acre to maintain production.

Searchinger’s calculation of a “carbon debt” for biofuels ignored the contribution of high oil prices to conversion of rainforest and savannah to agricultural production. If oil prices carry even some of the carbon debt, it refutes his contention that, “Strange as it sounds, we’re better off growing food and drilling for oil.”

The Texas A&M study goes on to say that relaxing the RFS would not significantly lower corn prices. Demand for biofuels outstripped the previous RFS. And demand for ethanol as a gasoline extender will continue to outstrip the current RFS. A Merrill Lynch analyst recently noted that oil and gasoline prices would be 15 percent higher than they are now without the use of biofuels

US Rep. Herseth-Sandlin (D-SD) Questioning Big Oil (ExxonMobil, Chevron, BP, ConocoPhillips, Shell)

Don’t miss US Rep. Herseth-Sandlin (D-SD) questioning big oil companies:  ExxonMobil, Chevron, BP, ConocoPhillips, and Shell

Uncontrollable Forces

Two editorials in the New York Times this week have claimed that rising oil prices are “uncontrollable forces” and “not anyone’s fault.” (See The World Food Crisis, 4/10/08 and Grains Gone Wild, Paul Krugman, 4/7/08). The implication is that biofuel policy in the United States IS controllable – and eliminating use of food crops for biofuels will allow U.S. grains to fill markets throughout the world.

This scenario ignores the effect that oil prices have on food and grain prices. And as recently as March 2008, OPEC members declined to increase production of crude oil, despite increasing worldwide demand.
Also, the most likely outcome of reducing demand for biofuels in the United States is a reduction in planting of grains. The USDA released its 2008 “Prospective Plantings” on March 31. The data show that farmers in the United States respond to market signals just like every other farmer in the world, by planting crops that will earn them the highest price. So how do we cut the Gordian knot?

British Prime Minister Gordon Brown got it right today when he wrote to Japanese Prime Minister Yasuo Fukuda asking him as chair of the G8 group of industrialised nations to take action to deal with rising food prices. His specific proposals include:

Improving developing country agricultural production: Rising food prices provide an opportunity as well as a challenge for poor countries - with three out of four poor people in the world living in rural areas and dependent on agriculture. We must help smallholders address problems of limited and insecure landholdings, lack of access to inputs and markets, poor rural infrastructure and inadequate market information. A large aid for trade package will be crucial.

Technology and research: Continuing international support for agricultural research will be crucial, along with reform of the international research system to achieve even greater impact on poverty and hunger. We need to undertake research to explore technological solutions to improve the security and consistency of supply. We must take the initiative to further develop higher-yielding and climate resilient varieties of crop.”

The letter was also sent to UN Secretary General Ban Ki Moon, Dominique Strauss-Kahn of the IMF and Robert Zoellick of the World Bank.

TIME Magazine’s Journalism Scam

Or How TIME Eliminated Fairness In Reporting

As a former reporter and scientist I read Michael Grunwald’s recent story in TIME, The Clean Energy Scam with a certain amount of dismay. The New York Times calls Michael Grunwald, “a talented Washington Post reporter.” However talented Mr. Grunwald may be, in this story he has broken one of the key tenets of journalism — tell the whole story, not just the part you like. For when you only tell part of the story, your audience can no longer trust you.

I went hunting around on the Internet for reporting guidelines and found the guidelines used by WGBH’s show Frontline. They have a section on fairness in which they say,

“Specifically, fairness means that producers:

1. will approach stories with an open and skeptical mind and a determination, through extensive research, to acquaint themselves with a wide range of viewpoints;
2. will try to keep personal bias and opinion from influencing their pursuit of a story;
3. will carefully examine contrary information;
4. will exercise care in checking the accuracy and credibility of all information they receive, especially as it may relate to accusations of wrongdoing;
5. will give individuals or entities who are the subject of attack the opportunity to respond to those attacks;
6. will represent fairly the words and actions of the people portrayed;
7. will inform individuals who are the subject of an investigative interview of the general areas of questioning in advance and, if important for accuracy, will give those individuals an opportunity to check their records;
8. will try to present the significant facts a viewer would need to understand what he or she is seeing, including appropriate information to frame the program; and,
9. will always be prepared to assist in correcting errors.”

Mr. Grunwald’s piece reads less like the cover story of a prominent weekly news magazine and more like an opinion column on the editorial pages of a newspaper. Mr. Grunwald talks to four scientists about biofuels, all of whom had comments that support his doom and gloom thesis. He did not speak to anyone who had an opposing viewpoint. When he mentions Tim Searchinger’s study published in Science, he refers to it as, “groundbreaking.” Last time I checked it was scientists whom determined what was groundbreaking.

Let’s see, so far Mr. Grunwald has broken rules 1, 2, and 3.

Well who else could Mr. Grunwald have spoken with. Well, the National Corn Growers Association seems to have an opinion on this issue — in fact they make it crystal clear on their homepage. He also could have called the American Lung Association of the Upper MidWest, or any number of other groups or scientists.

Mr. Grunwald closes with, “Advocates are always careful to point out that biofuels are only part of the solution to global warming, that the world also needs more energy-efficient lightbulbs and homes and factories and lifestyles. And the world does need all those things. But the world is still going to be fighting an uphill battle until it realizes that right now, biofuels aren’t part of the solution at all. They’re part of the problem.”

Who are these advocates? It reminds me a bit of the “some people say,” criticism of Fox news (see video below).

Could it be that Mr. Grunwald is inserting his own opinion?

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Tell the Real Story

A growing chorus of media reports have commented on recent dramatic rises in food prices across the world:

Food Prices Rising Across the World — CNN.com
Rising Grain Prices Panic Developing World — Washington Post
United Nations Says Millions At Risk From Soaring Food Prices — Bloomberg

Nearly all of these articles identify biofuels production as the leading cause. But a cursory glance at grain production statistics reveals that biofuels – certainly in the U.S., which has received most of the blame – has not resulted in any decrease in grain supply — see: http://www.ncga.com/news/OurView/pdf/2006/FoodANDFuel.pdf. Surplus corn for 2007 was around 1.3 billion bushels. The total estimated supply for 2008 is even higher, on fewer acres. As the Corn Growers say, “World hunger has many causes. Lack of corn is not one of them.”

So why the rise in food prices?

The Washington Post headline gets it exactly right: PANIC – a sudden fear which dominates or replaces thinking and often affects groups of people or animals.

When you take the time to look at the actual data on this issue – rather than stating anecdotal speculation as fact, as many of these articles have done – it’s clear that, as the AP story correctly points out, the fundamental driving forces of recent rising food prices are: “petroleum prices, which increase the cost of everything from fertilizers to transport to food processing[, r]ising demand for meat and dairy in rapidly developing countries such as China and India,” and to some extent, the shift of grain production into biofuels.

But none of these factors – and certainly not biofuels production alone – accounts for the dramatic spikes in rice and other grain prices in the past couple of months. This is without question a case of market panic. And unsupported finger pointing, such as is found in these and many other recent articles only helps to fuel the panic.

As a former journalist myself, this kind of lazy and careless reporting – speculative commentary masquerading as fact – makes my blood boil. It’s about time more thoughtful, responsible journalists began telling the real story.