As the war in Ukraine grinds on, a look at the economic battlefield and how the conflict might permanently reshape the global economy. Diane talks to Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
A decade ago plant-based fuels held tremendous promise in the U.S. The hope was that they would reduce reliance on foreign oil and cut greenhouse gases caused by burning fossil fuels. Ethanol made from corn took off, helped by a government mandate requiring billions of gallons of corn ethanol to be added to gasoline and diesel. But last month the Obama administration signaled it is rethinking the biofuel mandate. This has corn growers and developers of advanced biofuels up in arms. On the other side is the oil industry and environmental groups. For this month’s Environmental Outlook: the battle over ethanol policy and the future of biofuels.
- Dina Cappiello National environmental reporter, The Associated Press.
- Scott Faber Senior vice president for government affairs, Environmental Working Group; former vice president, the Grocery Manufacturers Association.
- Brooke Coleman Executive director, The Advanced Ethanol Council.
- Jason Hill Professor of bioproducts and biosystems engineering, University of Minnesota.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The EPA has proposed lowering the amount of ethanol in the nation's fuel supply. It would be the first such reduction since a biofuels mandate was established in 2007. Corn growers and other ethanol supporters are upset. But it's welcome news to big oil, which sees biofuels as eating into industry profits. Others oppose U.S. ethanol policy as environmentally unsound.
MS. DIANE REHMFor this month's environmental outlook and update on the ethanol and the future of biofuels, joining me in the studio, Brooke Coleman of The Advanced Ethanol Council; Dina Cappiello of The Associated Press; and Scott Faber of the Environmental Working Group. You're invited, as always, to be part of the program. Give us a call at 800-433-8850. Send us your email to DRShow@wamu.org. Follow us on Facebook or Twitter. And welcome to all of you.
MR. SCOTT FABERGreat to be here.
MS. DINA CAPPIELLONice to be here. Thanks.
MR. BROOKE COLEMANThanks for having us.
REHMGood to see you all. Dina Cappiello, I'll start with you. The renewable fuel standard that set this whole process in motion was created by Congress back in 2005. Remind us of what it does and how it came into being.
CAPPIELLOWell, it all started in 2005. I think the big year was actually 2007, which was with the passage of the Energy Independence and Security Act, sort of the renewable fuel standard. It greatly expanded the mandate, stretched it out, included different categories for additional biofuels, advanced biofuels and cellulosic biofuels. That was signed into law by President Bush. But it has actually come under the Obama administration to implement it. So the EPA actually, every year, sets the volumes for the various categories.
CAPPIELLOAnd, basically, almost every year for the corn ethanol portion it has adhered to the law. Until this year, when they actually basically required less than the law required for the first time.
CAPPIELLOWell, basically what the issue is, is that since the law has -- was passed, the whole energy outlook has changed in this country. This was a law that was passed when we were importing a lot of oil. In October, we just, for the first time in 20 years, we just produced more oil in this country than we imported. We're consuming less gasoline because of fuel efficiency standards. We're controlling greenhouse gasses from our vehicle for the first time. So really the energy world has kind of changed since this mandate came to be.
CAPPIELLOAnd what the EPA said when it lowered the ethanol target was, hey, listen, if we keep ramping up the amount of ethanol we produce, there's virtually not going to be enough gasoline to blend it into. It's what we call the blend wall. Right now, you know, 10 percent -- most gasoline is 10 percent ethanol. We're going to have to increase that percentage and that has some concerns in terms of what it will do to engines, et cetera. So it just reached its limit, is what the EPA said. And they lowered it for that reason.
REHMBrooke Coleman, your industry is opposed to reducing ethanol requirements. So what are your thoughts on the EPA's proposal?
COLEMANWell, they -- it's important that the renewable fuel standard remain aggressive. And the reason for that is the oil industry has a monopoly. And so, in the world as we know it, we can show up with a fuel that's a dollar cheaper than gasoline and go to Exxon's doorstep and say, will you buy it. In a free market, in a price-driven marketplace, Exxon is forced to buy that because it's a better fuel, it's a cheaper fuel. And they're worried that if they don't, then the oil company down the road will. And the problem with that is it dampens innovation.
COLEMANIf you don't have the opportunity to sell your fuel, then innovators don't enter the space. And so what the renewable fuel standard really does at its core is it forces a monopolistic industry to buy an emerging fuel -- a fuel that is the lowest carbon fuel in the world with regard to cellulosic ethanol, which is the companies that I represent. And before we came upon this new decision by the Obama administration, we were commercializing second-generation ethanol, second-generation biofuels. And now our deals are really put on hold to see what the Obama administration decides to do.
REHMSo the point being that corn growers, ethanol producers, really, really want to keep producing, even though what the EPA is saying is: Maybe we don't need so much anymore.
COLEMANThat's right. Congress decided in 2007 that it could produce more renewable fuel of a variety of different types. And that it would do about a fifth of the marketplace with renewable fuel. And we're on pace to do that. We've created 400,000 jobs. We've built 200 biorefineries in this country in the last two decades. And the oil industry hasn't built a refinery since the mid-'70s. And so it's a real success story. The question is, why is the Obama administration hitting pause? And what can we do about it to make sure that he actually changes his mind and puts the program back where it should be?
REHMBrooke Coleman, he's with The Advanced Ethanol Council. Scott Faber, with the Environmental Working Group, you agree with the EPA's decision, I gather.
FABERWe do. We think it's great news that EPA has finally recognized that the RFS isn't working as designed and that we've hit, as Dina said, the blend wall -- that we've reached a limit on the amount of ethanol that we can ultimately blend into gasoline. 99 percent of our -- of the engines that are in commerce -- most cars and virtually all engines for boats, chainsaws, snowmobiles, augers, lawnmowers, can't run on blends that include more than 10 percent ethanol. And so there's a practical problem we face.
FABERNot only do we have this problem of engines not being able to run on these higher blends of ethanol, we have no way to deliver -- most of the gasoline pumps that are currently on our streets, on our street corners can't deliver ethanol blends of more than 10 percent. So, but there's no question that we need a mandate to drive the development of low carbon fuels. That's not what we've gotten. What we've gotten is a mandate that's driven the development of too many bad biofuels -- primarily corn ethanol -- that increase greenhouse gas emissions when compared to gasoline.
REHMAnd wasn't corn ethanol supposed to be one of those that lowered greenhouse gasses?
FABERThat's right. Well, the hope in 2007 was that indeed corn ethanol would reduce greenhouse gas emissions. What we've found and what EPA itself has found -- despite making some very optimistic, as Dina has documented in her reporting -- what we've found is that, especially in the early years of the RFS, corn ethanol has increased greenhouse gas emissions when compared to gasoline. And there's two reasons for that, very quickly.
FABEROne is because we have increased demand for corn to fuel so much, we've dramatically increased the price of corn and that's contributed to the conversion of an unbelievable amount of wetlands and grasslands. We've lost, just between 2008 and 2012, we've converted -- farmers have converted more than 23 million acres of wetland and grassland -- that's an area the size of Indiana -- primarily in response to the higher price of corn and other commodities. When you plow up all of that wetland and grassland, you release an enormous amount of carbon into the atmosphere.
FABERAnd you apply an enormous amount of fertilizer, which also increases nitrous oxide emissions, a potent greenhouse gas.
REHMAll right. Brooke, I know you're longing to respond.
COLEMANI am. You know, it's good that we have an opportunity to listen to what the oil industry says about the renewable fuel standard. I'm not sure why the Environmental Working Group is making these arguments. Virtually nothing that Scott said over the last couple of minutes is true. Let's start with the blend wall.
REHMWait a minute. You're saying nothing he has said?
COLEMANI can go through each one if you like. But let's start with the blend wall. He said that we can't blend more than 10 percent ethanol.
COLEMANE15 has now been certified by the EPA to be fine for use in cars greater than...
COLEMAN...newer model cars, newer than 2001. Okay so that's...
REHMSo for 15 percent as opposed to 10 percent.
COLEMANThat's right. So a 5 percent increase now works in 2001-newer vehicles. That's two-thirds of the cars on the road today. 85 percent ethanol blends, 15 percent gasoline blends, have been legal fuels for several decades. And its growth was exponential over the last year, year-and-a-half, as the renewable fuel standards started to work. That's point one. So there's no blend wall. The blend wall is basically the oil industry not wanting to use more renewable fuel, which is what Congress knew their position was five years ago and why they passed the law in the first place.
COLEMANNow let's stop for a second at climate change, okay? 60 percent of the fuels required under the renewable fuel standard are advanced biofuels, okay? So and advanced biofuels have to be 50 percent better than gasoline to be eligible. Okay? So Congress basically said, a fifth of our gasoline market has to be renewable fuels, and 60 p0ercent of that chunk has to be at least 50 -- not 15 -- 50 percent better than gasoline. Corn ethanol is largely a step in the right direction. Scott says the EPA has concluded that they're not better than gasoline. That is factually incorrect.
COLEMANThe EPA has concluded that they are better than 2005 gasoline. You can talk to anybody at EPA. Finally, the prairie apocalypse -- the idea that we're plowing prairies under to do corn ethanol -- this is a popular thesis. And Dina is going to jump in here because she wrote a story about this. The problem is, with the prairie apocalypse theory, is it's not happening. Total crops in this country in terms of acres planted have been going down for decades, okay?
COLEMANWhen EPA passed this rule and when they did the rule, they said, okay, we're going to add up all the crops that are planted in this country. We're going to draw a line there. If that number goes up and hits that line, then we're going to require everybody who breaks new ground to do biofuels or anything else, to tell us what they're doing. And, since the passage of the law, crops have gone backwards. Total crop acreage has gone backwards. This is basic, basic, basic data that comes out of the government every single year.
REHMBrooke Coleman, he's with The Advanced Ethanol Council. Dina Cappiello is national environmental reporter for the Associated Press. And Scott Faber is senior vice president for government affairs at the Environmental Working Group. We'll take a short break. I'm sure our other guests want to chime in when we come back. Stay with us.
REHMAnd it's clear that corn ethanol gets people stirred up. here in the studio, Brooke Coleman of the Advanced Ethanol Council, Dina Cappiello of the Associated Press and Scott Faber of the Environmental Working Group. Here's a Tweet from Rick who says, "Ethanol has never been cost effective. It costs more energy to produce than it delivers and requires government economic support to survive."
REHMHere's an email from Peter. He says, "How much energy is being consumed to produce one barrel of biofuel and the amount of pollution being generated from the planting to the finished product? Is there a net energy gain from using biofuels and a net reduction in pollution?" And how much has, if it has, the move toward growing biofuels raised the cost of foods at purchase, Dina?
CAPPIELLOWell, let me address that question by also addressing some of Brooke's comments.
CAPPIELLOSo when the EPA set out to actually model the pollution benefits from the greenhouse gas perspective, it actually modeled them for 2022. And so when he talks about 60 percent for advanced biofuels, that's in 2022.
CAPPIELLOWhen you talk about 21 percent on average for corn ethanol, that's in 2022. Now, for argument's sake, let's say that the EPA models are right, which our reporting showed they weren't. But let's say they are right. Twenty-one percent in 2022. Look at the EPA's own models in 2012 and in 2017. Most of the processes for ethanol refining don't improve the greenhouse gas footprint over a 2005 petroleum baseline.
CAPPIELLONow they actually agree with the industry in one respect that obviously it's a 2005 baseline. And a lot has changed in the petroleum sector, right.
CAPPIELLOWe're talking about Canadian tar sands, we're talking about tight shale which has emissions. So should the EPA go back and relook at its model? Probably. I asked them that same question. They said they don't have the resources. So let's talk about -- these are models in 2022. But what our reporting showed in our AP investigation on corn ethanol is that a lot of the inputs into the EPA model were wrong. They got -- the yields were off. How much nitrogen fertilizer is going to be applied was off.
CAPPIELLOAnd all of these inputs -- a model's only as good as what you plug into it. And you can debate whether at 16 percent better in 2022 corn ethanol or 35 percent better. Or some say 50 percent better. But the assumptions on all of those models are vastly, vastly different. And so I think what we really can say is, you don't know and you might -- shouldn't probably bet on it.
CAPPIELLONow, let's talk about cropland. We also looked at cropland, native prairie conversion and conservation land conversion. The EPA -- Brooke is right -- looks at total cropland. That system just does not work. What happens in that system is this. So, yes, total cropland has shrunk. Why? Because people in my home state of New Jersey have taken crops out of production and built shopping malls, right. And then a guy in North Dakota breaks new land for corn or soy and it completely cancels one another out. So you actually don't see it.
CAPPIELLOWhich is why we want to go track it because the government's not tracking it. And we wanted to ask the question, what is going on out there? With a new breakings breaking land that has not been cropped and also taking land out of conservation, fallowed cropland and putting it into production. Since this mandate happened, 5 million acres have come out of the conservation reserve program. That is a program that sets aside cropland, fallows it under contract, pays farmers to fallow it and has been planted into crops. Not all of that is corn. It's very hard to track how much of it is corn, but corn is definitely a driver there.
CAPPIELLOThen we looked at satellite analysis, and with that -- satellite analysis in the corn belt and saw what grasslands came out of production into either corn and soy. And that's 1.2 million acres. They can criticize our analysis. USDA's own data for 2012 alone shows hundreds of thousands of acres going into crop production that were once native prairie.
REHMAll right. Scott Faber, I want to ask about the money behind the Environmental Working Group. Who pays for it?
FABERWe have individual supporters and foundation supporters.
FABER...like the McKnight Foundation, the Walton Family Foundation. It's all on our website and it's completely transparent.
REHMAny oil companies?
FABERNo, of course not.
FABERWe don't take any money from the oil industry.
REHMTell me why the oil industry so strongly opposes ethanol?
FABERWell, ironically the oil industry was looking around for a substitute oxygenate in the -- or before the passage of RFS in 2005 and 2007 to replace MTBE, which also turned out to be a problem for the environment, especially groundwater pollution. And so -- and ethanol does provide an important benefit as an oxygenate. The question isn't whether or not we should be blending ethanol into gasoline. It's whether or not we're providing enough incentives to get the really promising second generation biofuels into our fuel mix.
FABERWell -- and Brooke can talk about this as well -- there are many biofuels that are being produced from crop wastes, from other crops like switch grass and other grasses, even from municipal solid waste that are required to produce significant greenhouse gas reductions. One of the things Brooke left out was that almost all of the corn ethanol production today in the United States is exempt from having to meet the 20 percent GHD reduction requirements in the law...
FABERGreenhouse -- sorry, greenhouse gas reductions in the law because they were grandfathered by congress in 2007.
FABERAnd as Dina said, most of the corn ethanol today -- most of the different pathways of producing corn ethanol today increased greenhouse gas emissions when compared to gasoline according to EPA's own regulatory analysis.
REHMOkay. But Dina, if you limit ethanol and the production thereof, how might that effect the possibility of advanced biofuels being produced commercially? Is that not going to seriously hurt those efforts?
CAPPIELLOI mean, I think it could. I mean, let's face it. I mean, this was long considered a bridge fuel. In the course of our reporting on this issue, the administration considered it a bridge fuel. They were well aware of kind of the tradeoffs of corn ethanol but were willing to accept them to get to cleaner, greener, better biofuels. And so I think there are people out there that say hey -- and we heard this actually in our reporting from the administration that if we pull the rug out from under ethanol -- the corn-based ethanol, we are going to hinder development of these advanced biofuels.
CAPPIELLOAnd the reason is this. I mean, the whole theory behind this law was that these -- the corn-based ethanol, the traditional biofuels, if you will, were going to actually plateau. And they've already actually started to plateau. They were actually capped at 15 billion gallons. I believe this past year -- and Brooke can correct me -- I think it was 13 billion gallons we were already at. So we were very close to maxing out on this law already.
CAPPIELLOAnd the whole theory behind it was, let's get the infrastructure in place. Let's -- we know how to make this. This is not much different than moonshine, so let's make it. Let's put tanks, put pipelines, truck it, what we need to do and then get to the cellulosics. They're harder. They're harder to break down. There's a lot of challenges with that. But what we have seen though, Diane, is we haven't actually seen that in the cellulosics. This year EPA required 6 million gallons of cellulosics to be produced. That's less than 1 percent of what the 2007 law required.
REHMAll right. And Brooke, do you have evidence that there is some companies that are really making progress on producing other biofuels?
COLEMANOh, absolutely. So I represent a council of them. So remember, the RFS 2 assigned less than six years ago in December, 2007. In those five to six years we had a 100-year recession -- global recession. We were in a briefing just two weeks ago when a member of the finance industry said, it didn't matter what value proposition you gave us three years ago. We didn't have the money. So when you're building $150 million plants, if you can't get a loan you're going to have to wait.
COLEMANAnd so a lot of that happened to our industry. But if you actually look at the progress we've made during our recession, we now have a trash to ethanol facility up and running in Vero Beach, Fla. Five, ten years ago if someone had said we'd have an ethanol facility in Vero Beach, Fla., most people in the room would've laughed. But we now have that. We have another one in Columbus, Miss. that's been inserted into a down pulp and paper mill. And they're making biofuel -- second generation biofuels out of wood waste.
COLEMANWe have another one being built in Hugoton, Kansas, a town of 1400 people there employing 1,000 engineers and construction workers just outside a town of 1400 in Kansas.
REHMAll right. But the one question nobody has answered is, how has this whole ethanol policy affected the price of food?
COLEMANOh, it -- I mean, if you look at -- I mean, if you look at the price of food in this country and you index the price of food -- there's actually something called the food index -- it does not correlate to ethanol use. In 2009 -- I'll give you an example -- in 2009 the price of oil fell off a cliff. The price of food fell off a cliff. And the use of ethanol continued to increase. You can't have causation without correlation. What the food price index does correlate to is the price of oil.
COLEMANIf you look at the price of grains and the price of food, when you have higher oil prices you have higher food prices, that's because oil not only affects every single commodity decision that's made from an investment perspective, but it also effects how you make the food, how you transport the food, the cost of plastics. So you -- really ethanol use today uses 3 percent of the world's grains. Are you suggesting to me that the 3 percent that we use is driving price in the other 97 percent?
FABERSo there's no question that ethanol has increased the price of corn and ultimately the cost of producing basic staples, milk, meat significantly, especially in the period between 2007 and 2010. USDA, the World Bank, IMF, anyone who's independently looked at this question has found that the run up -- the dramatic expansion in ethanol production capacity from about 5 million gallons -- now 14 billion gallons -- 5 billion gallons to about 14 billion gallons through that period has dramatically increased demand for corn for ethanol by up to ultimately now 40 percent of our corn.
REHMAnd you're saying that that's affecting the price of food.
FABERAnd that had a huge impact on the price of especially basic staples like milk, meat, other things that are heavily influenced by the price of corn.
REHMSo what are people to believe as they hear two absolutely opposing viewpoints here, Dina? What have you found as far as the price of food?
CAPPIELLOWell, I think -- I mean, causation and correlation, as he points out, are two different things. But let's put it this way. Up until this year, the last three years, the biggest use of our corn crop has been ethanol production. It's a huge new market for corn that has helped drive up prices. Anybody -- I don't think anybody disagrees with that. So it really -- it's a trickle-down kind of logic here. So if you raise corn prices that go into feed, what that feed is fed to you increase prices. It trickles down. And that's where -- that's, I think, where the debate kind of is in the middle ground.
REHMDina Cappiello of the Associated press and you're listening to "The Diane Rehm Show." And joining us now by phone is Jason Hill of the University of Minnesota. He's professor of bioproducts and biosystems engineering. Welcome, Professor Hill.
DR. JASON HILLGood morning. Thank you for having me.
REHMCan you give us some of the most promising examples of advanced biofuels?
HILLWell, the most promising examples are those that are produced from wastes and residues, say municipal solid waste or residues from the forestry industry or from agricultural residues like the cobs of corn. Those we already produce. And if we collect them in an environmentally sensitive manner, they can have very low carbon footprints. And they can contribute to a more sustainable future.
REHMIs there anything out there that's close to being commercially viable other than ethanol?
HILLWell, there are many other biofuels, and this is -- the ticket is to look for those biofuels other than ethanol that can be readily introduced into our fuel system. I'm part of a project sponsored by USDA that's looking at producing a gasoline-like substance from what's called pyrolysis oil which is produced from converting biomass under very specific conditions that allows for essentially a product that's been distinguishable from gasoline or diesel.
REHMNow I understand that your work is actually funded by both the USDA and the EPA and the Department of Energy. You have not taken money for your research from either side, but based on your research, are biofuels in society's best interest to develop?
HILLWell, that's a tough question. Certainly there's a place for liquid fuels. For instance -- for jets for instance. You probably wouldn't want to fly on one that was powered solely by batteries at this point. However, you know, for vehicle transportation, like for our cars and rail systems, there are other options. For instance if we look at conservation and efficiency, that'll take us much further than the renewable fuel standard. We produce about 14, 15 billion gallons of corn ethanol today.
HILLAnd if we increase the efficiency of our vehicles -- of our cars from 20 to 21 miles per gallon, one mile per gallon, we will have done as much for increasing our energy independence as producing all that corn ethanol. So we really need to look at what's in society's best interest, and that involves the costs, the tradeoffs and the benefits.
REHMAnd what do you see as the tradeoffs?
HILLWell, no matter what energy source we use, there's going to be an impact. And so something might be really good for greenhouse gas emissions, but it might be very harmful in terms of air pollution that affects our human health directly, or water pollution. So we need to monetize these impacts. We need to put some dollar value on how they impact society. And then we can compare that to what it costs to produce those fuels, you know, the direct economic costs. And that gives us an idea of what the tradeoffs are as well as who benefits and who suffers.
REHMDo you think the EPA is doing a good enough job of measuring those kinds of tradeoffs?
HILLWell, they were in a very tough position. They were -- there was all this interest in producing fuels that would be environmentally sustainable at a time when oil prices were very high. And so they -- well, they found in their numbers, as you heard in the previous conversation -- what they found and what was sort of publicized were essentially two different things. And so undoubtedly this has become a very political issue. But the fact of the matter is, there's some bio fuels that are environmentally preferable to our current gasoline and diesel fuels, and there are some that are much more harmful.
REHMJason Hill of the University of Minnesota, professor of bioproducts and biosystems engineering. Thanks for joining us.
HILLThank you very much.
REHMShort break, right back.
REHMAnd it's time to open the phones for your questions, 800-433-8850. Actually, you know, we've got so many callers. Let's go to Keene, N.H. Hi, John, you're on the air.
JOHNGood morning, Diane.
JOHNHi there. It's been an interesting morning with the people and their conversations. However, I have to disagree with several things. One, CO2 emissions, I'd like to know -- and just a brief answer from each one -- what do we breathe out, we as a human being?
REHMWe breathe carbon dioxide. Now, what's your next question?
JOHNOkay. Which is a greenhouse gas. My next question is this, as an AFC certified master mechanic, I have found over the years, since the introduction of ethanol in the fuel, that automobiles in general and mine in particular have lost 10 to 15 percent of their previous fuel mileage. So with that -- and that can be verified quite easily, I'll go to this. We had ethanol to our fuel to supposedly make the greenhouse gasses lower, yet we're burning more fuel. So I don't understand the sense in that.
REHMAll right. Let's see what sense Scott makes of it.
FABERWell, John makes an excellent point, that ethanol has less energy content than gasoline, and so it requires more ethanol to go the same distance. And that's a real challenge for those who would advocate for ethanol. It's also a good argument for some of the fuels that Professor Hill discussed, which are drop-in fuels, essentially hydrocarbons that perform just like gasoline. The other thing he raised is that many engines, especially boat engines, lawnmower engines, other two-stroke engines, aren't designed to run on higher blends of ethanol. One of the points that Brooke made earlier was that EPA's approved E15, that's not what automakers and the AAA think. They've warned that if you put higher blends into your car that your warranties will be invalidated.
FABERAnd AAA has in particular urged automakers not to put these higher blends into their cars and especially into other things like boats, which just not only aren't designed to run on these higher blends, but could cease to work properly.
REHMAll right. I want to take a caller in Roachdale, Ind. Hi there, Marion. You're on the air.
MARIONThank you, Diane. I'm a nurse and health advocate, a rural resident, and for the Earth and the animals. And I just want to add a personal element to this, that nobody seems to be talking about, but in Indiana we have now destroyed half of our woodland and pasture land for corn and soybeans. And they justify it, that we have to feed the world, yet 45 percent is going for ethanol and 47 percent goes for livestock in confined-animal feeding operations that we're still building. I mean it's a hype.
REHMAll right. Let's see what Dina has to say.
CAPPIELLOWell, in the course of our reporting we saw that, as well. I mean we went to southern Iowa, we went to Nebraska, we went to South Dakota -- Associate Press reporters did, not myself, not only me-- and saw this conversion happening, whether that was from conservation reserve program, conservation lands, fallowed crop land or grasses in prairies that had never been crop land before. And whether you believe the satellite data or the USDA data, we witnessed it. We talked to farmers who talked about having cows and having pasture land. And because of the high prices of corn and the economic decisions they had to deal with, decided to convert, knowing that the lands weren't great, knowing it was marginal soil that would run off, knowing that they'd have to pump it with fertilizer.
CAPPIELLOAnd to go back to the previous caller who talked about gasoline, it's not just gasoline in our cars, over the course of this mandate, according to USDA data, fuel use on farms has gone up because of all the additional tillage, the back and forth. And so there are energy inputs on the farm that also have to be considered.
REHMAll right. Brooke?
COLEMANA couple things, a couple things. First, with regard to boats, E15, that I mentioned, is an optional fuel. It's an option at the pump. If you have a pump -- I own a boat -- don't put it in your boat if you're not comfortable putting it in your boat. At the end of the day what we're trying to create here is options for people at the pump. Right now, as of today, ethanol is about a dollar cheaper than gasoline and it's American made. Now, does everybody want to use it? Perhaps not, but if it's sitting at the pump at a dollar cheaper than gasoline and it's American made, that's what a lot of people are going to gravitate to.
COLEMANOne last point.
COLEMANOne last point to Dina's point. I know people are concerned about cultivation of acreage. I know people are. She specifically referenced her article. If you look at that area that she looked at in her article, the Dakotas, Nebraska area, there was an increase in corn acres. And that's because the price of corn was high. What Dina left out of her article is that wheat acres and other field crop acres have dropped by more than the increase in corn. So one of the things you have to look at is farmers are crop switching all the time. If you write an article about switching wheat for corn it's not as, let's say, tantalizing as an article about ripping up the prairie.
COLEMANThe Conservation Reserve Program that she pointed to as a smoking gun actually had its budget cut in the 2008 Farm Bill. So the reduction in Conservation Reserve Program acreage came because farmers were no longer paid to put those acres into conservation. We opposed CRP budget reductions, but we were not able to keep them from happening.
COLEMANSo the reason that those acres came down is because there's no longer budget in the Farm Bill to keep them that way.
REHMHere is an email from Jeff, in Stockholm, Sweden. He says, "Is it morally right to grow and process food, such as corn, to create fuels to power our vehicles, when there are people around the world who don't have enough to eat? There is a moral issue here." Scott?
FABERAbsolutely. I think Jeff has hit the nail right on the head, which is that it is unconscionable that we're diverting 40 percent of our corn crop to produce fuel.
FABER40 percent -- more than 40 percent this year. And when so many people, so many Americans are living with hunger, when I think it's now 1 in 7 Americans are living with hunger. It's just simply unconscionable to be diverting so much food to fuel. The challenge is ultimately to develop the second generation of fuels that don't hit our food security needs and our environmental security needs against our energy security needs. And the RFS, as currently designed, has failed to deliver. It's produced too many bad bio-fuels that increase the price of food, that damage engines, that increase emissions, that degrade water quality, and not enough of the good biofuels that really help solve some of our problems.
REHMAll right. Here's an email, "As long as Iowa is the first primary state we will have ethanol. I don't see how you can have this discussion about ethanol without including the political component." Dina?
CAPPIELLOThere's no doubt there is a political component. I mean, obviously President Barack Obama has long been a biofuels supporter, as an Illinois senator it distinguished him from a very packed field during his first election in Iowa to actually support ethanol. We obviously have Agriculture Secretary Tom Vilsack, who is from Iowa. There is a very big political component here. Huge amounts of support for this. But, you know, one thing that we pointed out in our reporting, which I thought was really interesting, is in 2007 this was talked about as an energy security issue as an environmental issue. And you have seen over the years -- even this administration, who has been a very big supporter of this mandate -- a change in the rhetoric, and talking really more about this as an agricultural policy, as a boon to rural America.
CAPPIELLOIt's almost like, you know, we're already down the track, it's on autopilot and now we have this new market for farmers, farmers are getting great, you know, money for their corn crop, how can we stop this now in its tracks?
REHMSo how much would the Obama administration seek to reduce ethanol production, Scott?
FABERWell, in the proposal that is out for debate right now, for comments right now, the administration would reduce the amount of corn ethanol that was required by the 2007 law from 13.8 billion gallons to about 13 billion gallons. And as you said at the outset, it's the first time the administration has decided to use its discretion, which the Congress gave to it, to reduce the amount of ethanol blended into gasoline. As Dina said -- and what's interesting about this -- is that many of the arguments that the administration made just four years ago, are no longer being made.
FABERWe're not making energy security arguments. We're certainly not making environmental arguments. We don't hear the president or Secretary Vilsack making those arguments.
REHMWhat kind of arguments are we making?
FABERAnd as Secretary Vilsack said in Dina's excellent reporting, that this is about boosting the income of farmers. It's no longer energy policy. It's really become energy policy masquerading as agriculture policy. And it's important to remember there are lots of other ways that taxpayers support the income of farmers, primarily through farm subsidies. It's not necessary that we all pay more, in the form of higher food prices and the form of engine repair bills in order to support the income of corn farmers.
REHMIs there any data supporting your just made statement that corn ethanol damages automobile engines at a greater rate?
FABERThe best evidence that higher -- certainly there's lots of evidence that was included in the EPA's regulatory analysis of whether or not to go from E10 to E15. But the best evidence is the arguments being made by the boat industry and people who own boats themselves. Brooke's a boat owner. He may be a member of Boats U.S. No one is fighting harder to reform RFS to reduce our alliance on corn ethanol than the people who represent boat owners here in Washington.
REHMWhat about that, Brooke?
COLEMANSo, look, we keep coming back to whether we can use higher blends and I think it's an important issue. DOE, the Department of Energy, tested 88 cars, ran them all 125,000, found no problems with E15, 15 percent ethanol blends, or E20, 20 percent ethanol blends in these cars. They said it was fine. The whole flap about E15 comes from a three-car test -- I’m sorry, a five-car test that was commissioned by the American Petroleum Institute. And it's instructive with regard to energy -- and we're having this conversation about politics. We're all smiling because energy is politics. Right?
COLEMANSo there's a political element to ethanol.
COLEMANThere's a political element to oil. There's a reason the oil industry has had tax breaks since 1916 and no one can seem to get rid of them, even though they're making money hand over fist. And the practical effect of these tax breaks is to embed the oil industry as the only choice at the gas pump. And what policies like the renewable fuel standard do is they live over the top of that bias and they drive other fuels into the pump. The better outcome, quite frankly, would be to go back to the tax code and level the playing field and take all the support for oil and gas out of the equation. But Scott pretends like it's this…
REHMBut I don't want to get into the taxes on oil. What I asked was is there any evidence of greater damage…
COLEMANI'd be happy to answer that.
COLEMANAnd I'm telling you right now, that the American Petroleum Institute ran a test, which quite frankly they rigged, to make it look like there was a problem in the faith of the Department of Energy's test, which ran these cars all day, all night for 125,000 miles and didn't find a single problem in any car.
REHMAnd you're listening to "The Diane Rehm Show." And, Dina, you said earlier that tests done by EPA were wrong to begin with and have not been redone.
CAPPIELLOThese are actually models. So they weren't actual analytical tests. So what the EPA did, and was required to do under the 2007 law, was to actually model whether ethanol, corn-based ethanol and the other ethanol advanced in cellulosic, would be better than a petroleum baseline, better than the gasoline we all consume every day. Right? And so to do that they had to use a very complex -- and it was a very complex model -- to predict in 2022…
CAPPIELLO…that was the thresh hold…
CAPPIELLO…what it would look like. And part of our reporting, when they first did that analysis, outshot 16 percent, which wouldn't have met the law's mandate. The law said that corn-based ethanol had to be 20 percent better in 2022 for greenhouse gasses. And so when the EPA came out with this 16 percent figure -- talk about the politics -- well, you know, the sky fell down. I mean, everybody was really upset because they wanted the 20 percent figure. Although, as Scott pointed out, most of the plants were grandfathered. So they went back and they plugged in some new numbers and out came 21 percent. They also incorporated a high-yield scenario, based on a higher yield, which was not in the regulatory part of it, but it was just kind of an alternative scenario that showed that with a higher yield it would be 23 percent better come 2022.
COLEMANDiane, I have to…
REHMAll right. I want to take…
COLEMAN…respond the EPA rig job allegation because I want to defend EPA on this, very quickly.
COLEMANDo you mind?
REHMGo ahead, very quickly.
COLEMANWhat EPA needed to do was they needed to test biofuels, their impact, their impact over time. And so they decided that the best way to test biofuels on their impact over time is to test their impact in 2022, when the full policy kicked in. It's only fair. If you're going to increase the volumes and test them to 2022, that you actually use 2022 as the year you judge them. Dina wants to sit here and say, well, they should have been judged at the plant level in 2012, but on the land-use level in 2022. That would be the rig job. EPA is doing this, their GHG part of it, very responsibly.
CAPPIELLOI've covered EPA for 15 years and I’m going to tell you I've never seen EPA as part of policy, only model out until 2022. We look at emissions at inputs throughout the years of the policy. I mean this policy is in effect -- when this policy was passed people were making the greenhouse gas argument. Not in 2022, but when it was on the floor of Congress. So I think it's fair to look at what it's doing now. This is a point that I made over and over again in the course of my reporting, to scientists, to EPA, to the industry, the environmentalists, is hey, guys, we're now six years into this mandate. Let's stop modeling it and talk about what we're seeing on the ground.
REHMScott, as far as corn ethanol goes, what would your recommendation be?
FABERWell, there's no question that we should continue to reduce the amount of corn ethanol that's blended into gasoline. It's proven to increase, not only greenhouse gas emissions, but it's had a dramatic impact on water quality. We have to apply a lot more fertilizer than we did in the past. And it's had a negative impact on air quality. In 2011 the National Academy of Sciences found that overall corn ethanol was worse for air quality than gasoline, that blending more and more ethanol into gasoline would worsen air quality. So there's no question that relying so much on corn ethanol has been a mistake.
FABERWhat we need to do is reform RFS to drive even faster the development of the second generation biofuels that use waste products.
REHMAll right. And what would you do?
COLEMANWell, 90 percent of the gallons that are left in the renewable fuel standard are advanced biofuels gallons. And the obsession with corn ethanol is an obsession about one more billion gallon. And here's the bottom line…
COLEMAN…there's a global competiveness issue here.
REHMI've got to go.
REHMThank you. Brook Coleman of the Advanced Ethanol Council, Dina Cappiello of the AP, and Scott Faber of the Environmental Working Group. Clearly a discussion that will go on. Thank you all.
FABERThank you, Diane.
COLEMANThank you for having us.
REHMAnd thanks for listening. I'm Diane Rehm.
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