Visualizing the indirect effects of oil

It has been pointed out numerous times on this blog (herehere and here) that you can’t have a true comparison of fuels if you account for the direct effects of all fuels and the indirect effects of only one. But that is what the U.S. Environmental Protection Agency (EPA) and the California Air Resource Board (ARB) have proposed. Both the EPA in their proposed RFS II rules and ARB in their Low-Carbon-Fuel-Standard have calculated the direct effects of all fuels and then only looked at indirect land effects and applied them only to biofuels.

Is it reasonable to claim that there are NO indirect effects from petroleum? One study, published in the academic journal Biofuels, Bioproducts and Biorefining, suggested that accounting for the military protection of pipelines alone would double the greenhouse gas emissions of Persian Gulf oil. But if you don’t want to read through the study, just watch this video from the Renewable Fuels Association. They say a picture is worth a thousand words and in this case I think they’re right.

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Corn Growers Try to Understand Indirect Land Use Change

The National Corn Growers Association’s recent “Land Use: Carbon Impacts of Corn Based Ethanol 2009” conference highlighted the confusion the issue of indirect land use change has engendered for farmers. Chuck Zimmerman of AgWired summed it up in a report from the conference:

Do you understand things like indirect land use when it comes to regulations via departments like the EPA due to the RFS? Me either. And I’ve sat in on conferences and discussions and interviews on the subject for a while now. That’s because an issue like indirect land use involves predicting the future based on certain assumptions that may or may not be valid, especially if they’re based on out of date data and information.”

Conference chairman Jamey Cline, NCGA Director Biofuels and Business Development, indicated to Zimmerman

that these issues are extremely important to agribusiness and corn growers in particular because if the CARB regs hold up, by 2012 they will effectively shut off that market to ethanol. Additionally, one presenter said that due to the proposed climate change bill and RFS, approximately 27.1 million acres would be taken out of production across the Unites States. That would have a huge impact on our economy, especially in rural areas.”

Jeanne Bernick of Farm Journal also reported from the conference:

Even the leading ag economists of our day are scratching their heads on this issue (read Land Use Change Tricky to Measure). They claim it is simply impossible to verify why land use changes occur.

“‘We are trying to measure the unmeasurable,’ says Bruce Babcock, ag economist with Iowa State University’s Center for Agriculture and Rural Development (CARD). ‘We would never really be able to verify why those acres changed production plans. Annual agricultural land use is flux, and largely variable.’

“Interpretation: No one really knows what influences land use change. Farmers make planting decisions in the U.S. and around the world based on a multitude of factors (weather, markets, weed and insect pressure), not just one factor like increased biofuels production in the U.S.”

Mike Wilson of Wallace’s Farmer astutely noted several questions raised by the conference:

Why are we setting U.S. policy based on something that may or may not take place in other countries? As speaker and Texas A&M ag economist Bruce McCarl says, ‘If we want to get out of this indirect land use debate, we simply need to have Brazil institute some greenhouse gas emissions penalty for when it develops its land.’

“What role does politics play in this? Clearly politics is the 800-pound gorilla in the room. President Obama has his people in place and a mandate from voters; he wants to get something passed regardless of the flawed logic that is now floating around in EPA’s regulatory proposal.

“Is this an Obama-driven apology to the rest of the world for eight years of George Bush unilateralism?

“Is this punishment for not agreeing to the Kyoto Protocol so many years ago?”

During the August Congressional recess, Sen. Chuck Grassley (R-Iowa) invited EPA officials Gina McCarthy, who is Assistant Administrator for the Office of Air and Radiation, and Margo Oge, who heads the Office of Transportation and Air Quality, to tour Iowa State University’s BioCentury Research Farm near Boone and the Renewable Energy Group’s 30-million gallon biodiesel plant at Newton.

Dan Looker, Business Editor of Agriculture.com, reported:

Dermot Hayes, an economist with ISU’s Center for Agriculture and Rural Development, shared research by a graduate student, Jerome Dumortier, that shows the effects of technology as crop prices rise due to demand for biofuels. Farmers are more likely to spend more on biotechnology that speeds up yield gains, Hayes said. If this effect is just 1% more than the trendline in yields [1.6% is used in EPA calculations] over 10 years, it brings the gain [carbon debt] from ethanol from 166 years to just over 30. If it’s just 2% higher, the gain from producing ethanol instead of using gasoline is immediate. In essence, there is no indirect land use effect.

After the recess, at a Senate Agriculture, Nutrition, and Forestry Committee Hearing on Sept. 3, Senators heard from Bill Couser, a fourth-generation farmer from Nevada, Iowa:

As a seed corn grower for Monsanto I have witnessed firsthand the wonderful improvements in corn and soybean genetics over the last few years. The simple fact is that yields are not only increasing, they are increasing at an increasing rate. Coupled with improved farming practices, I have no trouble believing Monsanto’s national average projection of 300 bushels per acre corn by 2030. Iowa will likely hit that mark much sooner. And we will do it with fewer inputs and less impact on soil and water than today.”

Piping in the Tar Sands

Previously on this blog, I posed this question: Ethanol or Tar Sands? With Canada as the largest supplier of petroleum to America, it was a simple question: do we want to get the additional transportation fuel we need from domestic, renewable sources or from clearing Canadian forests?

Well, we got an answer of sorts late last week when the U.S. State Department issued a permit to Enbridge Energy Corp. to build a 326-mile pipeline from Canadian tar sands fields to refineries in the United States. According to the UPI: The Alberta Clipper pipeline — which will run through Minnesota and the northeast corner of North Dakota from Superior, Wis., to Hardisty, Alberta — will carry up to 450,000 barrels of crude oil a day. Ironically, the pipeline will cut right through the middle of the State of Minnesota, which is often considered the birthplace of ethanol.

According to a story in the Chicago Tribune last year, refining Canadian tar sands will cause global-warming pollution from Midwest oil refineries to soar by as much as 40 percent during the next decade. But, as this blog has pointed out before, CARB and EPA are not taking these increased emissions into account in their life-cycle analysis of oil. While they have tried to guess the emissions of biofuels 100 years from now, they are relying on data several years old – before we were piping in much oil from the Tar Sands – to calculate the emissions from petroleum.

And while the State Department is giving the green light to the Canadian Tar Sands, another government agency is holding up the increased use of domestic biofuels. Despite having overwhelming data to support it, the Environmental Protection Agency (EPA) has not yet approved the use of up to 15 percent ethanol in existing autos. The ethanol industry is currently capped at ten percent of the domestic fuel supply and largely because of that more than 1.5 billion gallons of production capacity is sitting idle. And, as the CEO of POET said recently, the future of cellulosic ethanol depends on the increased market access that would come with E15.

To recap: the State Department approves a pipeline for Canadian Tar Sands while the EPA holds up increased ethanol use. Ethanol or Tar Sands? You tell me.

Alberta Clipper Pipeline

Why ILUC Theory Bears No Resemblance to Reality

Iowa State’s Bruce Babcock has written a defense of the current economic equilibrium models used by the EPA and California Air Resources Board, in light of the fact that the models’ assumptions about soybean production and acreage have turned out wrong. Babcock frames the debate over international land use change as “whether the models used by CARB and EPA are accurate enough to support regulations.” There is, however, a larger question over whether the models are the appropriate ones to use in the first place.

Economic equilibrium models by definition measure the demand for biofuel feedstocks as a shock to the worldwide agricultural system. As Babcock explains, economists estimate a baseline measure of the agricultural system “under a set of assumptions about future macroeconomic growth, growing conditions, crop yields, exchange rates, and government policies,” and then rerun their model with a higher amount of biofuel production while holding all other factors constant. The difference in model outcomes is intended to isolate the effect of biofuels on the system.

It has been noted that the outcomes are highly sensitive to the assumptions for the factors that are held constant. For instance, authors at Iowa State have explored the sensitivity of the model to the variable of crop yield. But the underlying problem with the model is that it presents the worldwide agricultural system with only one possible reaction to the “shock” of U.S. biofuels — land use change. And it does so by assuming that worldwide land use is at a point of equilibrium. “Expansion of U.S. biofuels will result in more land being devoted to crop production on an aggregate worldwide basis,” Babcock writes.

Worldwide agricultural land use is shifting and has shifted over time as other countries compete with the U.S. for agricultural markets. The USDA Economic Research Service’s “Agricultural Projections to 2018” shows that U.S. agricultural land devoted to the eight major crops has shrunk since 1980, but is expected to remain stable through the next decade due in part to biofuels. While this model and its outcomes are also based on and sensitive to assumptions, they are designed to measure the interplay of worldwide economic growth, population growth, the value of the U.S. dollar, and oil prices in addition to U.S. agricultural policies and biofuels.

Babcock notes that the variables plugged into the models being used by EPA and CARB “are ripe ground for aggrieved parties.” It should also be noted that the choice of models by EPA and CARB were also political decisions influenced by the input of environmental and other interests. The fact that these models are used by EPA and CARB only to measure the effects of biofuels, while different models are used for petroleum, is likewise a political decision. Perhaps certain parties would not be so aggrieved if the outcome of the “analyses” by EPA and CARB had not been predetermined in such a way.

Indirect Land Use Paradigm Change

A recent analysis by Iowa State University Biofuels Economist Robert Wisner argues that requirements for biofuel production are on a collision course with greenhouse gas reduction goals. He notes that the Energy Independence and Security Act’s requirement for gradual increases in production of biofuels “was designed to provide time for technology development and industry growth.” However, he says, California’s and the EPA’s requirement for immediate reductions in greenhouse gas emissions may block the industry’s growth.

Wisner notes some of the large uncertainties in producing accurate, science-based measurements of indirect land use change emissions:

Longer-term technological changes that bring increased crop yields per acre, changes in livestock and poultry feed conversion efficiency that reduce feed needs per animal, the amount of crop residue left on soils, and other factors will affect indirect land use emissions.

When the EISA was first debated and passed, the prevailing theory was that an annual increase in corn production would be sufficient to meet the new demand created by the annual increase in biofuel production. See for instance, U.S. Corn Growers: Producing Food and Fuel from the National Corn Growers Association.

The new models being employed by California and the EPA, however, take as an assumption that the increase in biofuel demand represents a shock to the system that happens all at once. See, for instance, The Land Use Effects of Corn-Based Ethanol, by Thomas Darlington. The models change a key assumption about the effects of the Renewable Fuel Standard, coloring the conclusion drawn. Both assumptions should be open for testing as hypotheses.

More Indirect Effects from Oil

In the California Air Resources Board (ARB) hearing on the Low Carbon Fuel Standard, the ARB staff insisted that they looked at the indirect carbon effects of oil but couldn’t find any. In a recent post on this blog, I suggested that they should subscribe to National Geographic Magazine. But that isn’t the only news outlet where they could find evidence of indirect effects. This morning’s EE News had links to several stories detailing indirect effects caused by petroleum. Here they are:

Yesterday’s New York Times had a story about “Oil companies are being sued on charges of environmental damage, collusion with repressive governments and contributing to human rights abuses, among others.” One of the examples listed is a $27 billion lawsuit for oil pollution in the Ecuadorian Jungle. That lawsuit was the subject of the recent 60 Minutes episode Amazon Crude.

A second link was to a Wall Street Journal story on Afghan farmers who had their land ruined by Chinese oil drillers. A third link was to yet another study about the Canadian Tar sands, which was the subject of previously referenced post. By my count, that’s three stories in one day showing indirect effects of oil, yet neither the ARB nor the U.S. EPA accounted for any indirect effects from oil in their life-cycle analysis of gasoline. If academic studies are more your flavor, try this one showing GHG emissions from Persian Gulf oil are doubled when military activities are taken into account.

In a letter to Growth Energy, ARB Chairman Mary Nichols vowed that ARB would “evaluate the land use and other indirect effect of all transportation fuels.” They shouldn’t have to look too hard. I only had to go to one web site.

EPA Ready to Release Rules for RFS

The White House Office of Management and Budget has completed its review of the EPA’s rules for the Renewable Fuel Standard, which will contain the lifecycle analysis for U.S. fuels. Reuters and the Des Moines Register have reported on the significance of the rule, though EPA has not made clear when the rule will be published in the Federal Register, beginning the comment period.

The rule, much like California’s Low Carbon Fuel Standard (CARB), will include an estimate of carbon emissions from indirect land use change attributed to biofuels. The estimates are based on economic modelling that is based on circular reasoning — the models automatically assume that biofuel feedstock production by definition causes a shift in agricultural crop production.

An analysis by John Sheehan of SheehanBoyce LLC makes the point clearly:

The CARB/GTAP and Searchinger models for land use change are, in a way, based on circular reasoning. They set up conditions such as fixed pre-biofuels land demand (in the case of GTAP) and constant yield (in the case of Searchinger), which make it almost impossible to avoid indirect land use changes.”

A previous analysis by Thomas Darlington of Air Improvement Resource Inc. raised the exact same point, saying:

The model is therefore answering the question “What are the land use changes if all the ethanol increase is shouldered in one year (in this case, 2001)?” However, we would submit that this is not the correct question to answer. The real question is how much new land is converted either domestically or internationally if the 13.25 bgy ethanol increase is phased in from 2001 through 2015?”

Both analyses make the point that indirect land use change effects can be measured more accurately by dynamic models that account for crop production yield and demand changes.

An analysis prepared by the New Fuels Alliance further points out that while CARB and EPA have extended lifecycle analysis for biofuels by including a risk assessment of their economic impacts, both agencies are relying on existing estimates of the lifecycle emissions of petroleum fuels.

Considering the magnitude of the GHG emissions associated with petroleum fuels, the calculation of the indirect GHG effects including the appropriate fate or coke, residual oil and the demand for fuel oil for crude transport would be appropriate.”

The New Fuels Alliance points out that “Road building in forested areas causes relatively small direct emissions, however the roads are often a magnet for subsequent deforesting activities, providing access to previously inaccessible land.” This is a point made earlier on this blog.

The New Fuels Alliance analysis stops short of conducting a general equilibrium analysis of the economic impact of petroleum, but points out that there is an existing model for doing so. CARB had claimed that they simply did not know how to do such an analysis for oil.

EPA should use the comment period that will begin when they publish their rule in the Federal Register to investigate better models for analyzing the indirect effects of both biofuels and oil.