EPA biofuel rule: why it needs reform
We are in a far better position now to consider scaling back our use of ethanol produced from grain biofuel than we were when the EPA biofuel rule was established, Styles writes. With shale gas, tight oil and various renewables, the energy scarcity that has defined our policies for the last four decades is far less relevant to our policy choices going forward.
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Without belaboring the events of the last five years, virtually every one of those trends has reversed course. That has occurred partly as a result of the recession and the lasting changes it produced in the US economy, and partly due to an energy revolution that was largely invisible in 2007 but had already begun.Skip to next paragraph
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US gasoline consumption peaked in 2007 and has since declined to 133 billion gal/yr last year. The EIA forecasts it to fall to 128 billion by 2020 and 113 billion by 2030. US crude oil output is the highest in 22 years and is set to exceed imports this year, while the US has become a net exporter of gasoline and other petroleum products. Since 2007 US ethanol production has grown from 6.5 billion gal/yr to 13.3 billion gal., and it seems more than coincidental that corn prices had doubled to an average of $6.22/bu by last year.
Food vs. Fuel
That brings us to the controversy that has been widely referred to as “food vs. fuel”. In the last several years I’ve read numerous papers attempting to determine by correlation or other empirical methods whether and to what extent the increase in US ethanol production from corn has affected food prices. To put this in context, since 2005 the quantity of corn used for US ethanol production has grown from 1.6 billion bu/yr to 5 billion bu/yr, or from 14% to 40% of the annual US corn crop.
Some studies, such as this 2009 analysis from the non-partisan Congressional Budget Office found a significant influence on food prices. Others, including an Iowa State study recently cited in a blog post from the Renewable Fuels Association, found a negligible influence. What differentiates the work of Dr. Bar-Yam is that he and his colleagues have developed a quantitative model based on two key factors — corn consumed for ethanol and commodity speculation — that closely fits the behavior of a global price index. Their model also accounts for the “distillers dried grain” byproduct from ethanol plants, which returns about 20% of the corn used in the form of protein-upgraded animal feed.