California regulator’s move helps corn-based ethanol demand

(Article by Beth Evans at Platts Business News service)

A decision this week by California regulators to lower corn-based ethanol’s so-called indirect land use penalty is good for that product’s demand, but timing of the change is not, the Renewable Fuels Association said last Friday.

California is in the midst of refining its Low Carbon Fuel Standard regulations, which go into effect January 1, 2011. The LCFS takes into account indirect land use changes (ILUC) caused by fuels, something that penalized US corn-based ethanol when compared to Brazil’s sugar-based production.

But in a resolution last Thursday, the California Air Resources Board said it would take new Purdue University research into account for its ILUC values, something that will lower the penalty for corn-based ethanol “by at least half,” according to RFA.

The new ILUC changes will not be effective when the LCFS begins January 1. Instead they will be incorporated into the regulations ” in the spring of 2011 or as expeditiously as practical afterward,” said CARB in its resolution. That will “confuse and disrupt the market,” said RFA CEO Bob Dinneen in a statement Friday.

CARB could not be reached for comment.

Brazil’s sugar-based ethanol markers backed CARB’s decision, which will also alter their fuel’s ILUC value. “The Board’s decision… ensures that as the science evolves, so will the regulations,” said Joel Velasco, spokesman for the Brazilian Sugarcane Industry Association.

CARB, in its resolution, said it continues to work with refiners and other stakeholders to “develop a screening process to assist regulated parties and other stakeholders in identifying high carbon-intensity crude oils.” It is also working with refiners and biofuels producers to complete an “evaluation for biodiesel and renewable diesel.”

Our Take:
It’s good to see that actual science can win, eventually.

Purdue put solid research into the question put forward by Tim Searchinger, an environmental attorney who used his position as a scholar at Princeton University to publish what is now recognized as a half-baked hypothesis. The Purdue research refutes Searchinger’s well-publicized assertion that a direct connection can be drawn between US land use and land use in other nations. Based on carbon emissions increases elsewhere, due to changes in land use beyond our borders, US industry should be penalized, Searchinger and his allies asserted. A thorough examination of the forces at work reveals that other countries alter their land use for many reasons, most of them a lot closer to home than whether US farmers decide to plant 85 million acres of corn or 90 million acres in a given year. 

But we’d like public officials to take this as a case in point that real harm can come from setting policy based on novel scientific hypotheses. The enterprise known as science doesn’t accept initial findings as fact, and neither should government. A new hypothesis should see vigorous debate and lots of attempts by other scientists to reproduce results before public policy is based upon such findings.

In California we are seeing the result of such hasty action. Regulations unfairly penalizing grain-based ethanol, based on Searchinger’s incomplete information, will go into effect January 1. This will potentially disrupt the use of ethanol in the state–just when California’s own ethanol production is getting back on its feet after the worst of the Great Recession. If the wheels of California government move too slowly to reverse their policy before it takes affect, despite CARB’s admission that it’s based on faulty information, then we hope they learn to take greater care and more deliberation in the future, before basing policy on unproved hypotheses.

Of course, a far more cynical reading of the situation is possible–that California’s reversal of its policy is only occurring because they realize that they played right into the hands of Big Oil, led up the garden path by the very folks that are supposed to prevent that from happening. California Air Resources Board (CARB) has created an artificial fuel shortage in their state. Brazil’s sugar and ethanol production is down. Absent Brazilian ethanol, and with a disincentive to using American grain-based ethanol, the net result of California’s policy is that more petroleum will be used, and the price at the pump will be higher. We can’t help thinking that CARB board members’ connections to California’s oil production industry plays some role in the delay in undoing the ethanol penalty.

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