Final Notes from BIO’s World Congress

On June 29 at BIO’s World Congress, Steen Riisgaard, CEO of Novozymes, and Stephen Tanda, Board Member of Royal DSM N.V., released a report from the World Economic Forum on The Future of Industrial Biorefineries. The report says that a biorefinery value chain could create revenue for agricultural inputs ($15 billion US), for biomass production ($89 billion), for biomass trading ($30 billion), for biorefining inputs ($10 billion), for biorefining fuels ($80 billion), for bioplastics ($6 billion) and for biomass power and heat ($65 billion) by 2020.

You can download and listen to the press conference Release of report on The Future of Industrial Biorefineries.

The highlight of the final day of the World Congress was a debate between Princeton Visiting Scholar Tim Searchinger and MSU Professor Bruce Dale, moderated by Univ. of Minnesota’s John Sheehan. Sheehan sought to explore both the strongest and weakest parts of the arguments for and against including an indirect land use penalty in the carbon lifecycle of biofuels and bioenergy. For him, the central question in the debate is whether or not the world is running out of land to use — for all purposes, not just agriculture — meaning that any new use, such as biofuels, inevitably causes a shift of use somewhere else.

For Searchinger, the central point is that the traditional lifecycle of biofuels and biomass energy accounts a credit for using carbon stored in crops and trees. Bioenergy, he argues, should only get credit for new sources of carbon that it creates or for using carbon that would have decayed and entered the atmosphere anyway, but never for carbon that is already stored.

Dale took an optimistic view that a switch to bioenergy — and away from petroleum — would spur the creation of additional carbon stores. This could be accomplished through increased productivity and yield on the same amount of land, for instance, and through regrowing of crops and biomass sources so that the credit given to bioenergy is repaid quickly.

Wrong Question: Can Biofuels Be Carbon Friendly?

The Science Insider blog last week hosted an interesting debate between Tim Searchinger, Princeton visiting scholar, and John Sheehan, of the Institute on the Environment at the University of Minnesota, regarding the recent policy proposal in the pages of Science by Searchinger et al. to “fix” the carbon accounting of biomass for bioenergy and biofuels in U.S. legislation and the successor to the Kyoto protocol, by giving credit only to biomass that can be managed in such a way as to sequester additional atmospheric carbon in the soil. As Searchinger puts it in the recent debate, “bioenergy only reduces greenhouse gases if it results from additional plant growth or in some other way uses carbon that would not otherwise be stored.”

To be sure, use of bioenergy can only reduce the overall level of greenhouse gases in the atmosphere by sequestering carbon in the soil (in root systems). And yes, individual biofuel or bioenergy producers could use only new biomass that has recently pulled carbon from the atmosphere (although other environmentalists may differ on that) or biomass that would otherwise be left to decay and emit the stored carbon anyway. The question then is whether there is enough of this type of biomass to meet energy needs.

But that is not the point of the current Kyoto protocol or of U.S. cap-and-trade legislation. Their shared goal is to reduce overall GHG emissions, over time, ideally lowering the cap until emissions reach equilibrium.

Searchinger cites recent modeling studies to say that not employing his fix to global carbon accounting “would lead to the loss of most of the world’s natural forest because clearing those forests for bioenergy becomes one of the cost-effective means of complying with laws to reduce greenhouse gas emissions.” However, the fossil fuel industries are certain to receive allowances under the U.S. legislation. Employing a carbon accounting model that treats biomass as equivalent to fossil fuel would definitely make continued reliance on fossil fuel the cost-effective alternative.

Another interesting response to the Searchinger et al article comes from Geoff Styles of the Energy Collective, who extends the carbon accounting argument to electric vehicles. All alternative energy sources can be opened up to particular scrutiny. What is needed is a truly accurate and balanced accounting of fossil fuel use to compare these arguments.

The only other political option would be to drastically cut use of all energy. Models do project that the current worldwide economic recession has brought about a reduction in climate emissions by cutting energy use.

Searchinger does note that biomass and biofuels have the potential to balance greenhouse gas emissions – depending on land management. A better question here is whether his models can show that fossil fuel use also has the potential to balance greenhouse gas emissions with proper land management.

Weekly Industrial and Environmental Bio Blog Roundup

This week we start off with a little Road Music, From Bluegrass to Switchgrass, from our colleagues at the Biofuels Center of North Carolina. They’ve put together a nice set of bluegrass pieces. To listen visit their web site.

Gas2.0 announces this week that BP could start selling biofuels in 2010, writing that,

“BP has partnered with Verenium to bring a commercial-scale cellulosic ethanol facility online next year to start bringing alternative fuels to a gas”

Wednesday, according to the Government Monitor,Tom Vilsack announced,

“the publication of nine additional BioPreferred product categories which will now be eligible for Federal procurement preference.”

Making, “more Than 1,000 Biobased Products Eligible For Federal Procurement,” the Monitor reports.

You can find USDA biopreferred on Twitter, http://twitter.com/BioPreferred and on the Web at: www.biopreferred.gov.

So what’s the deal with this conversation on whether or not biofuels are carbon friendly? We at BIO have certainly have had a lot to say on the matter and you can find all our opinions on our biofuels page.

However, our opinions aside, the folks at the journal Science, where the initial study and follow-up policy paper were published say that they are giving us the inside story, by holding a moderated conversation between Tim Searchinger and John Sheehan—kind of interesting, take a look for yourself.

That’s all for this week. See you next week!

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.”

Environmentalists Want to “Stick” It to Farmers

Jason Hill of the University of Minnesota’s Institute on the Environment wrote recently in the St. Paul Pioneer Press, asking why the Waxman-Markey climate change bill should treat agricultural emissions differently from energy and transportation emissions, with a “carrot-and-stick approach, one in which fossil fuels suffer the stick while agriculture feasts upon the carrot.” Hill’s primary objection to the bill is the amendments added by Rep. Collin Peterson (D-Minn.), which exempt agriculture and forestry from carbon caps but provide credits for carbon sequestration that farmers can trade on the market. They also would postpone implementation of the EPA’s analysis of international land use change.

Writes Hill, “Peterson’s amendment is essentially nothing more than a slick accounting trick, one meant to portray biofuels produced in this nation in a better light while making the carbon footprint of agriculture in developing countries look worse.”

This is a bizarre statement, turning even the theory of indirect land use change on its ear. The original calculation of indirect land use change put forward by Searchinger et al held that “when farmers use today’s good cropland to produce food, they help to avert greenhouse gasses from land use change.” Further, in the context of international negotiations for a climate change treaty to replace the Kyoto Protocol, the ILUC theory is clearly an attempt to shift accounting of carbon emissions in developing countries onto U.S. biofuels.

Calculations of land use change by current models are completely contradicted by agricultural trade and production numbers, making the models appear to be nothing more than accounting tricks. The model projections look nothing like real outcomes because they rely on several false premises and double count certain sources of emissions. The greatest fallacy of the ILUC theory is that worldwide agricultural productivity has already reached a natural limit and cannot respond to increased demand in any other way than clearing of rainforests. The main premise of the theory – that biofuels have been introduced into a static worldwide agricultural system and therefore are the primary cause of shifting agricultural production – is an assumption that can’t be supported by data.

Using USDA’s modest assumption for growth in yields of U.S. corn over the life of the Renewable Fuel Standard, a simple calculation shows that corn productivity can keep up with demand to produce the conventional biofuel portion of the RFS. This assumes continuation of 2016 to 2018 USDA projections for 2022 – constant total planted acreage of 90.5 million acres, increase of 75 million bushels per year for fuel ethanol, and increase of 1.8 bushel per acre per year yield improvement:

Overall harvested acreage for corn production is projected to remain stable due to continued yield productivity gains

In fact, USDA currently projects a corn yield of 159.5 bushels per acre for this year. And USDA projections from January 2009 show that inclusion of biofuels will stabilize land use, in terms of the acres planted to the eight major crops:

U.S. land planted to eight major crops.

Beyond this, and despite a report) that deforestation in Brazil increased in June, the deforestation rate in Brazil continues to decline. Responding to the Agence France-Presse report, Mongabay noted, “Deforestation in the Brazilian Amazon typically peaks during the June-August dry season when ranchers and farmers burn forest to clear land for development.”

A group of scholars – that includes Hill – recently called for a focus on real solutions to climate change. The world needs economic growth, energy and food. We should not premise our search for solutions on the false notion that these three necessities are in direct competition with each other.

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.

The Facts of Life on Waxman-Markey

You take the good, you take the bad, you take them both and there you have … the Peterson amendment to the Waxman-Markey bill, formally known as H.R. 2454, the American Clean Energy and Security Act (ACES). According to Grist contributor Meredith Niles, there are a number of positive inclusions in the amendment that were advocated by environmental groups.

The good aspects, according to Niles, are those that will encourage improved agricultural practices. The bad part of the amendment is that the USDA – the agency whose mission is to promote both domestic agriculture (to keep it from moving overseas) and food safety – will oversee the implementation of these positive aspects.

Niles laments that “industrial agriculture interests are overtaking environmental interests in a bill that, again, is fundamentally meant to reduce greenhouse gas emissions.” No doubt, the agricultural interests have a similar lament about implementation of the Renewable Fuel Standard, which was intended to reduce reliance on oil. There is an interesting comment to Niles’ article by ecoplasm, who says, “Selecting ‘scientific’ analytical tools to meet some influence group’s desired result was a hallmark of the past administration’s EPA, hopefully not this one’s.”

A Scientific American assessment of the Waxman-Markey (Peterson) bill shows how much the “science” of indirect land use change has been affected by the rhetoric from environmental NGOs. The article asks, “Should Domestic Ethanol Producers Pay for Deforestation Abroad?,” and states plainly, “the question is not whether there are indirect impacts but rather how big they are.” The reality is that this assumption about indirect land use change – that it will inevitably occur – is built into the model EPA uses to measure it. It’s a perfect example of selecting a ‘scientific’ analytical tool to achieve an influence group’s desired result.

The Peterson amendment proposes a study by the National Academies on indirect land use change. No doubt, another example of carefully selecting an analytical tool. The 2007 EISA bill also contains a provision for the National Academies to study the issue, though funding for the study has never been authorized.

The science on indirect land use change will continue to develop (is currently continuing to develop). The real issues will be whether there are any positive moves toward reducing greenhouse gas emissions once all the politics are done.

EPA Gathers Input on RFS

The EPA today held a public hearing on the RFS2 Rule and will be holding a Workshop on Lifecycle Greenhouse Gas Analysis for the Proposed Revisions to the National Renewable Fuels Standard Program tomorrow. These fora are intended to solicit feedback from stakeholders in the rulemaking and provide information on how the EPA developed its lifecycle model.

BIO submitted testimony to the EPA asking that the agency maintain flexibility in the rule to reconsider the greenhouse gas reductions associated with biofuels as the science of life cycle assessment, particularly methods of accounting indirect land use change, matures.

At a U.S. House Agriculture Subcommittee hearing on May 6, several experts discussed the considerable uncertainties that remain in the current models for ILUC that the EPA has employed.

Joe Glauber, chief economist of the USDA, listed some of the sources of uncertainty, including crop yields and production growth over time, economic and non-economic limits to land use change, and assumptions plugged into the models at the start. Glauber also noted that predicted U.S. plantings of principal crops for 2009 remain well below historical trends and that increases in corn and soybean acres are offset by declines in wheat and cotton acres.

As Glauber points out, conversion of forests is one of the key factors in the life cycle greenhouse gas estimates of the EPA’s analysis and many of the published studies on ILUC. Yet, there is considerable uncertainty over whether forest would be the primary source of new cropland.

Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University, pointed out that there is little evidence that U.S. biofuel production has caused deforestation either in the United States or in Brazil. Rather than conversion of forest or pastureland, “U.S. cropland has increased primarily through a reduction in CRP acres and through increased double cropping of soybeans after wheat.” Similarly, expansion of soybean production in Brazil has been accommodated by increased stocking rates on pastureland. It is increases in cattle production in Brazil that have led to deforestation for pastureland in the Amazon.

Babcock concluded, “The precision with which models can estimate emissions associated with market-induced land use changes is low.”

The fact is that the model employed by the EPA attaches heavy penalties for greenhouse gas emissions to production of biofuels based on assumptions that worldwide agriculture is a zero-sum game in which use of crops for one purpose leaves a shortfall in crop availability elsewhere that can only be made up by converting forest to agriculture. When the conclusions of the model are driven by the assumptions, they should be seen as logically invalid.

Opportunity Costs

The Washington Post this week reported on a carbon-credit proposal being put forward by Ecuador for consideration in UNFCCC Climate Change Talks. Ecuador is asking for carbon credits in exchange for leaving undisturbed one-fifth of its petroleum reserves, which are located beneath a protected national park that is part of the Amazon rainforest.

The proposal is similar to one put forward by Brazil last August, called the Amazon Fund, which asks foreign countries to donate money for investment in Brazilian businesses that would conserve the Amazon rather than cut it down – rubber production, for instance, rather than timber, cattle, and agriculture.

The Intergovernmental Panel on Climate Change recognizes natural and managed forests as potential carbon sinks, but not untapped petroleum reserves.

Ecuador’s proposal highlights one of the more obscure calculations in the life cycle emissions of biofuels included in the EPA’s proposed rule — namely “foregone sequestration.” Because natural forests store more carbon than managed agricultural land, biofuels are assessed an opportunity cost stemming from conversion of forest or grassland to agriculture. This is not actual carbon released from the forest or grassland, but a penalty for not preserving a carbon sink (or, in the case of grassland, not converting it to a forest).

The EPA has assumed and applied to biofuels a constant rate of foregone sequestration over a period of 80 years. In fact, the cumulative calculated emissions of corn ethanol include only this opportunity cost after the 20 year mark. The rate is equal to nearly half the calculated emissions of the gasoline baseline. The inclusion of this factor more than doubles the calculated emissions per acre of converted Brazilian forest land assumed to be caused by U.S. biofuel production.

A similar opportunity cost should arguably be applied to petroleum, particularly if Ecuador’s proposal moves forward and the international community recognizes untapped petroleum reserves as potential carbon sinks. In the case of Ecuador, this opportunity cost might include both the emissions that could have been avoided by leaving fossil carbon in the ground and the deforestation caused as roads, pipelines, and drilling sites are cleared from the Amazonian forest.

Don’t Worry, Be Happy

The EPA has released its long-awaited proposed rules for the Renewable Fuel Standard, including calculations of the lifecycle greenhouse gas emissions for various biofuels. Unlike California, the EPA is proposing to “discount” the greenhouse gas emissions of both biofuels and the baseline petroleum gasoline. The discount rate that EPA uses for most of the calculations it presents is 2 percent over 100 years, although it also proposes using a 0 percent discount rate and a 30-year time span and is taking comments on other combinations. Biofuel critics immediately decried the use of the 100-year timeframe because the resulting calculation produces a better outcome for biofuels.

Denver Post columnist Vincent Carroll writes:

But the mere fact that it would consider measuring ethanol’s carbon impact over 100 years — or should we say guessing at it? — is evidence enough of the ethanol lobby’s stature.”

And the Washington Post’s Juliet Eilperin and Steve Mufson report:

The EPA raised the possibility of computing greenhouse gas costs over a 100-year period instead of a 30-year period. The longer time frame would make the benefits of corn-based ethanol seem greater while discounting the initial costs, such as the loss of untilled land, over time. For example, the EPA said corn-based ethanol is 16 percent better than regular gasoline if its costs are calculated over 100 years, but 5 percent worse over 30 years.
‘EPA has left open the option that an exception to good science could be made in the case of a favored special interest,’ said Frank O’Donnell, who heads Clean Air Watch.”

Both biofuel supporters and detractors should be wary of these calculations and of the precedent they could set. It’s abundantly clear that few people understand what the numbers mean.

The timeframe being discussed is for application of a “foregone sequestration” penalty — the number of years that converted land is considered to be foregoing its preferred use for carbon sequestration as forest or grassland. This penalty is added over and above the initial assumed release of carbon from conversion of the land (and note that there is no comparable penalty for not leaving petroleum carbon “sequestered” underground). Under normal circumstances, industry would prefer a short timespan – fewer than 30 years. After this period, the land would be considered agricultural land rather than former forest and would no longer accumulate a carbon penalty.

The choice of a discount rate is intended to measure present day valuations of costs and benefits over time. So, what are the costs and benefits of reducing greenhouse gas emissions that EPA is discounting? In the analysis, it is the cost of converting forest and grassland to agricultural land in order to obtain the benefit of reducing greenhouse gas emissions from transportation in the future – the “payback”. What the EPA should have measured, though, is the cost of converting our petroleum-based system of transportation to a biomass-based one versus the benefits of reducing greenhouse gas emissions.

The results in the EPA’s proposed rule are skewed by two indefensible assumptions. First is the assumption that the baseline for greenhouse gas emissions from petroleum should be discounted. The law requires establishment of a baseline for gasoline in 2005. To apply a discount rate assumes that the baseline will improve by some rate of change over time. And since petroleum is not assessed a foregone sequestration penalty, the cost of taking carbon from well below ground and putting it into the air is essentially free.

A positive discount rate says that future reductions in greenhouse gas emissions are less important to Americans than the present day costs. Since EPA applies the discount to the petroleum baseline, it is in effect saying that Americans will care less and less about reducing greenhouse gas emissions over time if it means that they have to change their driving habits today. In other words, don’t worry, keep using petroleum and be happy.

Second is the assumption that biofuels are causing land conversion around the world and that the land conversion is always and everywhere accomplished by burning the ground cover and immediately releasing massive amounts of carbon. This unfounded and unproven assumption skews the results of the analysis to the point that the application of a highly unfavorable discount rate appears to benefit the industry and draws the wrath of environmental advocates.

But the reaction from O’Donnell and Carroll shows that biofuel opponents will decry any outcome as politics trumping science — unless it’s their politics that trump science.