Yes, Virginia

One of the most strikingly circular arguments put forward to support inclusion of current estimates of indirect land use change emissions in both California’s Low Carbon Fuel Standard and the EPA’s Renewable Fuel Standard Life Cycle Assessment is that these estimates are so large. The University of California Berkeley Letter to EPA from Michael O’Hare et al. and the previous letter to California’s Air Resources Board by the same group (Mark Delucchi et al.) are examples of the argument:

The salience of this requirement lies in the size of current estimates of these indirect emissions: added to typical direct emissions values, they indicate that substituting certain biofuels, especially corn ethanol, for gasoline will actually increase the global warming (GW) intensity of motor fuel, or decrease it so little (depending on how it is calculated) that these biofuels would fail to meet EISA required GHG reductions.”

And again:

The best methods currently available for estimating market-mediated effects are economic models such as partial and general equilibrium models. Several groups are currently employing these models to estimate indirect LUC, and despite considerable uncertainty, none has concluded that zero grams of CO2 per megajoule is the best estimate of the effect. Ignoring an effect that may be large simply because it is uncertain is unjustifiable.”

And once again:

So far no models, in particular no peer-reviewed models, have been advanced that come up with values for iLUC that are significantly lower than those in the Searchinger et al paper.”

So in the spirit of the holiday season, I’d like to offer a similar argument. This year, 2008, will be the 50th anniversary of the North American Aerospace Defense Command’s (NORAD) tradition of tracking Santa’s flight from the North Pole around the world. The tradition began in 1955, but NORAD inherited it in 1958. Fifty-plus years of scientific modeling and measurement of the phenomenon ought to be considered proof positive that Santa Claus exists.

Happy Holidays everyone.

Discounting the Future of Biofuels

It appears that global leaders’ faith in energy technologies that can reduce greenhouse gas emissions compared to oil is waning, particularly for biofuels, as reported in GreenInc. Respondents to the survey, which included 1,000 environmental experts, ranked energy conservation and efficiency technologies as having the greatest potential impact, both short- and long-term.

Some 44 percent of respondents also said they expect that the current economic crisis will hinder progress toward an effective international climate agreement. Katherine Sierra, World Bank Vice President for Sustainable Development, noted, “The development challenge is to accelerate or maintain robust economic growth in poorer countries while also dealing with the impacts of climate change. The financial situation is no justification for postponing action on climate change. Climate change is not waiting, so we cannot wait either.”

These sentiments appear to be relevant to a rather arcane debate about the application of a discount rate to greenhouse gas reductions. The debate over the discount rate may become a more prominent issue, since it is a feature of the EPA’s Advanced Notice of Proposed Rulemaking on Regulating Greenhouse Gas Emissions under the Clean Air Act. It also appears that the EPA would apply a discount rate to greenhouse gas emission reductions in the life cycle assessments of biofuels, under the RFS.

A discount rate is used in cost-benefit analyses as a way to measure current costs against the value of future benefits. In applying the theory to reductions in greenhouse gas emissions, the idea is that the benefits are for future generations and on a worldwide scale, while the costs of deploying reduction technologies are paid by specific individuals today. Further, there is uncertainty about which technologies will provide the greatest benefit and investing in one may come at the expense of investing in others.

Gary Becker, the noted economist and University Professor at the University of Chicago, explains it by saying,

Future generations would be better off if the present generation, instead of investing the $800 billion in greenhouse gas-reducing technologies, invested the same amount in capital that would be available to future generations.
“Common sense also dictates that one recognizes that technologies will be much improved in the future, including technologies related to improving health, income, and the environment. A positive and non-negligible discount rate is the formal way to recognize the importance of these and related considerations.”

But environmentalists have traditionally opposed the use of a discount rate for environmental benefits. Lisa Heinzerling, a law professor at Georgetown University, responded to the use of the discount rate in EPA’s ANPR on her own blog page, saying, “Discounting is a technique used to reflect the idea that events occurring in the future are not as important as events occurring now. By using a fairly low discount rate, EPA avoided the severe trivialization of the future that often attends use of discounting.”

Elsewhere, though, she took issue with the use of any discount rate for environmental benefits:

We have said that the federal government places too low a value on human life; that it devalues the future through discounting; that it fixates on the costs and dismisses the benefits of environmental protection; that it slights the worth of effects that cannot be counted.
“Cost-benefit analysis is a deeply flawed device that has never been the environmentalist’s friend. It impedes rather than aids understanding of the concrete consequences of regulations. It would behoove the next president — and all who value environmental protection — to do more than fiddle around the margins of old debates, and to question whether a decision-making framework that can stare environmental catastrophe in the face and declare it ‘efficient’ is really the best we can do.”

Even proponents of including international land use change calculations in the EPA’s life cycle assessment of biofuels may take issue with the application of a discount rate to the calculation, or at least a high rate. Mark Delucchi is a research scientist at the Institute of Transportation Studies at UC Davis and developer of the Lifecycle Emissions Model. He notes that in the context of indirect land use for biofuels, “the discount rate determines the value of the reversal of the initial change: a zero discount rate gives it a value equal to that of the initial change; a high discount rate gives it no value.” And, “If the discount rate is very large, then we don’t care at all about the future reversion of land use and reversal of the initial change in emissions; we care only about initial change in land use and emissions.” In other words, using the discount rate in this context assumes that the carbon debt attributed to biofuels due to land use change is never paid back, which would be incorrect. Delucchi argues that a positive discount rate applied to the life cycle analysis should be reduced to reach zero over time.

However the debate on discount rate plays out in policies on greenhouse gas reductions and the Renewable Fuel Standard, the theory does seem to reflect the preferences of environmental leaders – that we not use biofuels today but wait for a better technology to come along in the future. The risk for them is that everyone’s faith in the ability to produce clean energy and reduce greenhouse gas emissions will start to fall.

Environmental Groups Pressure EPA to Calculate Indirect Emissions

The latest salvos on the EPA’s rulemaking process for the Renewable Fuel Standard come from six major environmental groups – the Environmental Defense Fund, National Wildlife Federation, Natural Resources Defense Council, Friends of the Earth, Union of Concerned Scientists, and Environmental Working Group – and academics at the University of California Berkeley.

In their letter to EPA Administrator Stephen Johnson, the environmental groups argue that delaying conclusions about which biofuels make the grade under the RFS until after the EPA has solicited comments on the rule “would encourage ventures that increase global warming pollution and will fail once the lifecycle accounting accurately and completely addresses the impact of land use changes.”

I have to disagree. Deciding which biofuels make the grade and which don’t before lifecycle accounting accurately addresses land use change risks discouraging investment in projects that might eventually have a beneficial impact on climate change emissions.

The groups further say, “We think that the inclusion of indirect effects will illustrate which second-generation feedstocks incur the least indirect land use changes.” However, since there are few second-generation feedstocks actually in production, the analysis of lifecycle emissions will be based on small-scale data. The indirect land use change emissions, particularly on a worldwide scale, will be purely hypothetical, since no large-scale markets currently exist for second-generation feedstocks. In fact, one of the stumbling blocks for the industry is the need to create the markets for harvesting second-generation feedstocks.

To decide which of these feedstocks “incur the least indirect land use changes” and to try presumptively to “distinguish promising approaches from dead ends” before data is gathered or the model proposed by the EPA is fully developed will undercut investment in second generation biofuels before they get off the ground.

The EPA’s “rigorous rule-making process that has drawn on the best available science,” as these groups put it, runs a great risk of appearing arbitrary by announcing premature conclusions about the land use change emissions calculation for biofuels.

Arguments about the food price impact of biofuels, some put forward by noted academics using the best available science, have ultimately been contradicted by evidence throughout the past year. While crop prices that reached highs during the summer and food prices that spurred riots in some corners of the world seemed to bear out the worst scenario put forward by respected researchers such as C. Ford Runge, the collapse of food prices in the past few months tends to support others who said that the price of oil was the main driver. See an earlier post for other arguments.

In a separate letter to Johnson, the group of academic experts led by University of California Berkeley’s Michael O’Hare put forward a series of arguments to refute the original letter from Bruce Dale et al. The Berkeley et al. academics sum up their argument so:

That some land will be brought from natural conditions into cultivation, with accompanying rapid carbon emissions from the existing vegetation, when ethanol demand is added to whatever other corn the world market would otherwise use, is an inference from absolutely foundational and uncontroverted elementary principles of human behavior, such as the law of demand. Exactly how large the effect is requires sophisticated predictive models and will never be as precise as measuring the specific gravity of ethanol, but to act as though the effect is nil is simply obscurantist and unscientific. No principle of law or regulatory practice or common sense dictates that the state must regard any uncertain value as zero.”

The problem with this is that there are other influences on land being “brought from natural conditions into cultivation” besides the demand for corn to produce biofuels, and current predictive models are not sophisticated enough to either measure the effect or to separate the various influences. But there is a principle of regulatory practice to point out. The regulatory action must provide the relief sought. Regulation of biofuels in the way sought by environmental groups ought to reduce greenhouse gas emissions from native land brought into cultivation. Since the EPA is not regulating deforestation around the world, there is little chance that will happen.

Robert C. Brown, director of the Bioeconomy Institute at Iowa State University, has a very cogent dissection of the environmentalists’ arguments:

People in the developing world are finding it profitable to expand agriculture in their own countries rather than depend upon U.S. farmers to feed them. In some progressive circles, this might sound like a good thing – what we in the United States admiringly refer to as self-reliance.
“There is no scientific evidence indicating that deforestation is driven by biofuels production. Whereas the world has lost 500 million acres of rain forest in the past 10 years, the U.S. biofuels industry has diverted less than 20 million acres to ethanol production. Something else is responsible for the epidemic of deforestation.”