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The Ethanol Quandary And Why Governments Ignore It

| Wednesday August 27th, 2008 | 0 Comments

ethanol.jpgMost of the biofuels on sale in Britain do not conform to environmental standards according to a study by the Renewable Fuels Agency which has shocked experts. The agency found that only 19% of all biofuel on sale in Britain actually is environmentally friendly. The remainder fails to meet quality standards drawn up by the UK government.
In America, such reports are published almost weekly. Everybody knows that some biofuels are of dubious quality. The worst types are the biodiesel blenders (B20 biodiesels). These apparently contain anywhere between 10 to 74% of actual biodiesel content.


So is this a big deal? Well heck, yes. An official UK study released last June, the Gallagher Review, recommends that the government slows the introduction of biofuels until more is known about the possible negative impacts. Major issues need sorting out, including tracing back the countries of origin of some of the biofuels, the report’s authors concluded. The UK imports the majority of its biofuels from the US. So yes, big deal!
The main question now is how governments react to the reports evidencing that major parts of the industry effectvely are total scams. US consumers perhaps have the most reason to feel cheated because the manufacturers of blended biofuels get a standard tax credit based on the amount of biofuel components. This means that those that put in 10% instead of 20% biodiesel get rewarded for something they don’t deserve. And those that use higher percentages of biodiesel are putting their consumers at risk because the high blends of biodiesel can freeze in cold temperatures.
Biofuels like ethanol have had a lot of bad press and deservedly so. The news articles about their often dubious quality follow thousands of reports about the ethical issues linked with some biofuels, including allegations that cultivating biofuel crops lead to large scale deforestation in the Third World. Not to forget various other environmental catastrophes including the loss of plant and animal species.
The UK government’s current rules for biofuel quality standards are considered very lenient and that’s what’s keeping the ball rolling for the time being. Suppliers have to produce an end product with a content of 30% sustainable biofuels under the so called Renewable Transport Fuel Obligation (RTFO) which went into effect last April. But the 30% is a guideline only. That means that you can have little confidence that the stuff is what the labels (and the sanctimonious ads) say it is.
There are as yet no signs that Downing Street is going to follow up on the recommendations of the Gallagher Report to research all the ins and outs of the biofuel industry before going ahead with blending all the fuels. Perhaps this is because it thinks the industry will sort itself out.
In the US, the government is equally ignorant of the concerns raised. The Environmental Protection Agency is hotly promoting the sale of biofuels. It recently stepped in when the State of Texas called for reducing the Renewable Fuels Standard (RFS) by 9 billion gallons. The EPA’s decision secured the extra supplies of ethanol on the US market for one purpose only; a reduction of the gasoline prices. The State of Texas had argued that biofuels are driving up food prices and hurting the economy. The RFS will add 11.1 billion gallons of ethanol to the supplies next year.
In addition to the controversy over the environmental effects of biofuels, the general marketplace for biofuels is thriving whilst consumers are struggling. This might turn out to be a lethal combination. A lot of unease lives among the populations of both in the US and the UK which is manifested especially when earnings reports are published of oil companies that provide the precise details of how the higher fuel costs are being passed on to end consumers.
Factual evidence that consumers end up paying for the extra costs of more expensive transports of food and services, combined with continued news reports about the destruction of forests due to biofuels makes people feel powerless and angry.
But producers themselves are striking endless international deals, which they can only do because of the rising demand for biofuel. So we’re faced with a healthy market of a dubious product which is oh so destructive for the environment. That’s even much more infuriating.
The demand for biofuel is actively promoted by government initiatives like the RFS. In Europe the market is created by the EU’s official target to run the European transport system on biofuel by 10% by the year 2020.
Despite all the controversy neither the American government nor the EU are acting in the best interests of the environment it appears. In the UK, this has already resulted in various street protests. People have even taken to target private companies. For instance Vopak in Essex was the target of activist protesters who raised awareness and concern about widespread deforestation in places like Brazil, Indonesia and Papua New Guinea.
The UK government appears to have turned a blind eye. But the solution as recommended by the Gallagher Report is relatively simple. A temporary suspension of biofuel imports that are hard to figure out in terms of standards or country of origin would have producers sort out their mess in a jiffy. It would also get clarity over the sustainable production methods.
The UK government also fails to urge Brussels to abandon its biofuel target, something other European countries are doing. The EU government thus far has ignored this.
It does not look likely that the problems will be resolved any time soon. The biofuels market is one big mess and various attempts to sort it out are falling short. One reason is that the industry itself is thriving and that countries want access to cheap fuel. The US considers itself as the world leader in biofuels because its ethanol production has quadrupled since 2000. The US market is 450 million gallons now and soon second generation ethanol (made from non-food feedstocks) will drive producers to drive up the market even more, production wise.
The UK’s Renewable Fuels Agency’s environmental standard addresses some issues but is by far not sufficient. It covers concerns about the environment as well as child labour and water and soil conservation issues. Yet it does not include carbon emissions from indirect effects such as changes in land use caused by biofuel planting, according to a report in the Guardian. This, experts say, could cancel out their environmental benefits altogether.
The Roundtable on Sustainable Biofuels, global multi-stakeholder initiative to develop standards for the sustainability of biofuels appears more promising. This initiative is in its early stages yet, but it aims to operate much the same way as the Forest Stewardship Council, a global standard for paper which is highly effective and has a certification method that is respected globally. The Roundtable on Sustainable Biofuels clearly takes over where governments are leaving off but nevertheless has already been signed by an impressive list of over 300 companies, NGOs and environmental organizations.
If the initiative proves successful, a lot will have been won. Because despite all the negative issues, let’s not forget the other side of the coin. Running your car on ethanol based fuels is still better than filling it up with ordinary petrol. Last year alone, US greenhouse gas emisssions prevented through the use of ethanol reached over 13 million tons. And there’s the decline of the price of petrol at the pump thanks to the extra ethanol, a mixed blessing perhaps, but hey less expensive oil means food producers have less costs to pass on to end consumers.
Edward T. Schafer, secretary at the U.S. Department of Agriculture says U.S. gasoline prices have already gone down 20 cents to 35 cents per gallon due to the extra ethanol. He also estimated that in 2007, consumers in Texas saved between $2.5 billion and $4.5 billion as a result of ethanol having entered the market.


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