OMAHA (DTN) -- Ethanol industry insiders have been here before.
Throughout the development of the ethanol industry in the past decade, study after study has tried to discredit corn-based ethanol on a number of fronts. A new study from the University of Tennessee is viewed by the ethanol industry in the same light.
The study declares the Renewable Fuel Standard should be replaced because the support for corn-based ethanol hurts the development of advanced biofuels such as cellulosic ethanol. The study, which was funded by a group representing oil companies and other businesses, calls out corn-based ethanol's environmental record and challenges biofuels industry claims corn-based ethanol is a necessary bridge to advanced biofuels.
The study comes out as the EPA's Office of Inspector General announced Thursday in a memorandum that it will begin "preliminary research" on a lifecycle analysis of the RFS. http://tinyurl.com/…
Tom Buis, co-chairman of Growth Energy, said in a statement Thursday the Tennessee study was published "with an agenda."
"It is misleading, inaccurate and runs counter to a large body of expert research," Buis said. "Slapping a new title on this previously discredited research won't change the facts, and those who published this study clearly have little interest in doing anything other than maintaining the status quo of our dangerous addiction to foreign oil and fossil fuels. When you separate the facts from the rhetoric, it's clear that this is a special interest study bought and paid for by big oil."
When it comes to ethanol's environmental record, Buis points to an Argonne National Laboratory study that found ethanol reduces greenhouse gas emissions by an average of 34% compared to gasoline "even when the highly controversial and disputed theory on indirect land use change is factored into the modeling. Furthermore, Argonne has found that without ILUC included, ethanol reduces GHG emissions by 57% compared to gasoline."
Renewable Fuels Association Senior Vice President Geoff Cooper said in a statement the Tennessee study doesn't take into account ethanol's climate benefits.
"Petroleum industry-funded studies like this University of Tennessee report fail to take into account the positive role that biofuels like ethanol play in the fight against climate change," he said. "In fact, a number of analyses by entities such as the Department of Energy, University of Illinois, International Energy Agency, Life Cycle Associates, and many others have all shown that ethanol provides major benefits in reducing greenhouse gas emissions."
A recent study from the University of Illinois-Chicago's Energy Resource Center found the EPA proposal to slash biofuels volumes by about 1.6 billion gallons could increase carbon emissions by about 4.5 million metric tons for a year, or the equivalent of putting nearly 1 million additional passenger vehicles on the road.
RFS FUTURE IN BALANCE
The future of the RFS hangs in the balance as the U.S. Environmental Protection Agency plans to finalize sometime in November three years' worth of RFS volumes.
The UT study was funded by the American Council for Capital Formation, a member of the Smarter Fuel Future coalition. The group boasts a number of oil industry interests as sponsoring members. However, the group also lists big agriculture-related companies Deere and Company and Eli Lilly and Company, as well as the National Rural Electric Cooperative Association, according to ACCF's 2014 annual report, http://tinyurl.com/….
Study authors Daniel De La Torre Ugarte and Burton English downplay corn ethanol's rural economic development benefits claimed by agriculture and ethanol interest groups to be the reason for unprecedented economic success on the farm in the past decade.
"At the local and regional level, bio-refineries such as corn-ethanol refineries may add some economic stimulus in the form of gross regional production, state and local tax revenues, and direct jobs (construction and operating) along with supply chain jobs and indirect employment opportunities stemming from wages and worker spending," the study said.
"However, while there are some localized economic benefits to corn ethanol refineries, there also have been widespread economic costs."
The authors point to "sizable federal and market subsidies" from the long-expired blender's tax credit and the Renewable Identification Number program, as well as bankruptcies primarily in 2008-2009 when the price of oil plummeted. They said those losses "translated into lost investments, jobs and unrealized tax revenues."
Since January 2005, the study said corn ethanol received nearly $50 billion in "cumulative" taxpayer and market subsidies, claiming corn ethanol could not have survived without the RFS.
"Our analysis shows that the corn ethanol industry, even with its tremendous growth over the past decade and technology maturity, cannot survive in any real commercial sense without mandated fuel volume requirements," the study said. "A rational investor interested in collecting a reasonable return would not have invested in a new ethanol facility after October 2008."
The study claims the "promotion" of corn ethanol in the past decade "did not meet intended environmental goals. Corn ethanol's environmental record has failed to meet expectations across a number of metrics that include air pollutants, water contamination, and soil erosion."
ADVANCED BIOFUELS IMPEDED
Ethanol companies have maintained corn ethanol plants are needed for advanced biofuel refineries to succeed. That's because advanced biofuel companies will rely on corn ethanol-established supply chains as well as expertise in corn ethanol production itself.
The UT study, however, said corn ethanol may in fact impede the growth of advanced biofuels.
"In fact, we contend that corn ethanol has actually stymied the growth of advanced biofuels by receiving substantial RFS targets (10% of fuel by volume), essentially retarding the growth of the advanced biofuels sector," the study said, failing to mention the oil industry has not met its obligation in the RFS of expanding infrastructure to distribute higher ethanol blends such as E15 and E85.
"Undoubtedly, advanced biofuels are by their very nature challenging to bring to market given the technology scale-up issues and capital cost intensity," the study said. "The RFS2 was intended to help ease the entry of advanced biofuels by subsidizing them through RIN credits. This has not occurred. Instead, the RFS has focused most of the attention on corn ethanol and diverted attention away from advanced biofuels."
RFS REFORM PROPOSAL
The RFS should have some sort of investment-based mechanism to spark the development of advanced biofuels, the study said.
As EPA has continued to propose cuts to the RFS volumes many advanced biofuels companies already this year have announced plans to build next-generation plants in other countries because of doubt about the RFS. By one industry estimate, the recent upheaval in the RFS has led to a loss of some $19 billion in investments in new technologies.
"The current RFS design is unsuitable for driving advanced biofuels forward," the study said. "It rewards production from mature technologies while advanced biofuels require a mechanism that overcomes their capital intensity and technology risk. An investment-based mechanism could be a solution. The mechanism could be designed to support projects that use both crop and forest residues and those requiring dedicated energy crops.
"In addition, the mechanism could be designed to incorporate the retrofitting of existing plants, which would be supportive of the existing corn ethanol industry."
The study said investment-based mechanisms have benefited the renewable electricity industry. "Solar installations have grown tremendously as a result," the study said. "In fact, subsides are now in question. We have had 10 years under the RFS, and a commercially viable, next generation biofuels technology has not emerged."
Read the UT study here, http://tinyurl.com/…
Todd Neeley can be reached at firstname.lastname@example.org
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