Posts tagged “ethanol mandate”
In my previous column — Why I Don’t Ride a Unicorn to Work — I used an analogy to describe the US government’s approach to cellulosic ethanol mandates. In brief, they have mandated that something that does not exist — commercial cellulosic ethanol volumes — be blended into the fuel supply in the hopes that they can incentivize the industry into existence. They decided to require gasoline blenders to purchase the fuel, which as it turns out was a bit of a problem since it didn’t exist.
Last week the court sided with the American Petroleum Institute in a lawsuit against the Environmental Protection Agency (EPA) over the mandates. The court ruled that the EPA — which was responsible for determining the mandated volumes each year — based their projections on wishful thinking rather than on sound analysis (See the court decision here).
So how did the EPA respond? Less than a week after the court ruled that the EPA had based their cellulosic ethanol projections on wishful thinking, the EPA set the 2013 cellulosic ethanol mandate at 14 million gallons — up from last year’s mandate of 8.65 million gallons. Given that only around 20,000 gallons of qualifying cellulosic fuel was produced in 2012 — about 0.2% of the final mandated volume — the EPA’s decision to increase the 2012 mandate by over 60% is odd to say the least. It seems like they have doubled down on last year’s wishful thinking with an even larger dose of wishful thinking. CONTINUE»
The Unicorn Analogy
It isn’t because it’s too far to work. Nor is it because it rains here in Hawaii nearly every day and I might get wet. It isn’t because the powerful automobile lobby has convinced me that driving a car to work is a better option for me. No, it’s a bit more fundamental than that.
I don’t ride a unicorn to work because unicorns don’t exist.
But imagine the following scenario. A number of companies claim that they are developing unicorns, and in 3 years they will be commercially available. The government thinks “Hey, this is a great idea. It would be a more environmentally friendly method of transport. Let’s force automakers to start selling these unicorns in 3 years. We will base our projections on how many unicorns these unicorn companies say they will produce. After that we will increase the number the automakers must sell in each subsequent year, and then force the automakers to pay up if they don’t meet these quotas.”
I started to notice a trend in the comments following my latest Forbes essay about the redundant nature of ethanol subsidies now that mandates via the Renewable Fuel Standard (RFS) are in place. Several comments in a row seemed to be regurgitated talking points that were just red herrings with respect to the point I was making. I knew that meant that somewhere a call had gone out to ethanol supporters to speak out against me. I now know the source, and at the end of this essay, I offer a debate challenge to the organization that issued the talking points. To review, my point is simple. Someone said that it would be great if I could reduce it to… Continue»
My latest is up at Forbes right now. It is about the redundant nature of our current ethanol subsidy: A Redundant Subsidy An excerpt: As many ethanol producers have argued – the gasoline blender and not the ethanol producer receives the subsidy anyway. The gasoline blender – ExxonMobil for instance – buys ethanol for $1.70 per gallon (currently), receives a tax credit worth $0.45 per gallon (the credit was reduced to that level in 2009), and then blends it into gasoline that is presently wholesaling at approximately $1.90 per gallon. With the tax credit, the current price of ethanol on an energy equivalent basis to gasoline is just about equal to the $1.90 wholesale price of gasoline. So the tax… Continue»
In a move that wasn’t really a surprise, today the EPA announced that they are not yet ready to approve ethanol blends above E10 for automobiles: EPA Notifies Industry Group on Status of Ethanol Waiver Request WASHINGTON – The U.S. Environmental Protection Agency (EPA) today announced that it expects to make a final determination in mid-2010 regarding whether to increase the allowable ethanol content in fuel. In a letter sent today to Growth Energy – a bio fuels industry association that had asked EPA to grant a waiver that would allow for the use of up to 15 percent of ethanol in gasoline – the agency said that while not all tests have been completed, the results of two tests… Continue»
As I noted in my essay Big Oil Buys Big Ethanol, I expected that we would see more oil companies buying up troubled ethanol assets. Per the Houston Chronicle, Sunoco has become the latest: Oil companies shop for discounted ethanol plants FULTON, N.Y. — When Sunoco closed this week on the acquisition of a bankrupt ethanol plant for pennies on the dollar, it became just the latest oil refiner to step into the alternative fuels market. Traditional refiners under pressure to reduce emissions are finding new avenues to meet evolving environmental standards, and finding big bargains along the way. However, I think the article largely misses the point of why these transactions are taking place: The plant is close to… Continue»
Actually, according to them everybody hates it:Everyone Hates Ethanol I can assure them that corn farmers, ethanol producers, and ethanol lobbyists don’t hate ethanol. But they are correct that a coalition of strange bedfellows has united in opposition to our ethanol policy. The article makes a lot of good points, but it is quite harsh: These days, it’s routine for businesses to fail, get rescued by the government, and then continue to fail. But ethanol, which survives only because of its iron lung of subsidies and mandates, is a special case. Naturally, the industry is demanding even more government life support. Corn ethanol producers — led by Wesley Clark, the retired general turned chairman of a new biofuels lobbying outfit… Continue»
I did a double-take when I saw this headline: Ethanol Lawsuit Proceeds against Oil Companies It turns out that oil companies – forced to use ethanol in gasoline despite many protests – are now being sued because ethanol blends can corrode fiberglass tanks in boats. NAPLES, Fla. — A Florida lawsuit against six oil companies that alleges negligence for failing to warn boat owners of potential harm from ethanol-blended gasoline, survived a motion to dismiss from the defendants, NaplesNews.com reported. Plaintiff attorney Jeffrey Ostrow of Fort Lauderdale said the next step is pursuing certification to become a class-action lawsuit. The intent is to represent all Florida boat owners who have used ethanol-blended fuel and whose boats have been damaged by… Continue»
No big surprise here, and I have been advising people that there was very little chance that the EPA would grant the waiver, but they have officially denied the ethanol waiver request from the state of Texas: EPA denies Texas governor’s ethanol waiver request EPA Administrator Stephen Johnson, during a conference call with reporters, said the agency’s assessment looked at the livestock issue and found feed prices have increased because of biofuel production. “However, is that the result of the (Renewable Fuels Standard) mandate? Our conclusion is no,” Johnson said. “And second, are those price increases meeting the statutory requirement of severe harm to the economy? And our conclusion is no.” Environmental groups, concerned about how biofuels affect climate, water… Continue»