Oil is the largest source of global warming pollution in the United States, and tailpipe pollution from gasoline-powered cars and diesel trucks is its most concrete manifestation. But even before these fuels are delivered to the gas station, a great deal of damage has already been done.
The carbon dioxide, methane, and other global warming pollution coming from oil wells and refineries in the oil supply chain is larger than the emissions from all the jet fuel used in the United States. Moreover, much of this pollution is unnecessary, and can be readily reduced using existing technology.
This is low hanging fruit compared to replacing all the 737s with planes like the Solar Impulse that just crossed the Atlantic on solar power. But before we can hold the oil industry accountable to cut the hidden pollution on the other side of the gas pump, we need to illuminate the extent of the problem.
A recent report from the Center for American Progress catalogs The Who’s Who of Methane Pollution in the Onshore Oil and Gas Production Sector. The top 5 are ConocoPhillips, ExxonMobil, Chesapeake Energy, EOG Resources Inc., and BP America.
Some of these names are familiar as major oil companies, and others are better known as gas companies, but these days the separation between oil and gas industries has all but vanished. With the rise of fracking, oil and gas comes from the same companies, and often from the same wells. Indeed, recently the trade associations representing these two companies merged. But regardless of what share of their product mix goes into cars versus power plants, methane pollution is a major climate pollutant, and the oil and gas industry has to be held accountable to curtail its wasteful and polluting practices.
EPA recently finalized regulations for new sources of methane in the oil and gas industry and is beginning to collect information on methane emissions from the existing operations, to develop appropriate regulations for this damaging global warming pollutant. Right now it’s clear we still have a lot to learn about exactly how large these emissions are. The CAP report is based on EPA reporting that captures just about half of the methane pollution from the industry. Improving accountability of polluters to measure and report their pollution is an essential foundation for policies to address climate change.
While cutting methane pollution from oil and gas industry is an essential near term action, it’s only the tip of the iceberg where oil industry pollution is concerned. An important new report “A Smart Tax: Pricing Oil for a Safe Climate” by Deborah Gordon and Jessica Tuchman Mathews at The Carnegie Endowment for International Peace takes a broader view of the complex and challenging oil supply chain. They explain that different types of oil have dramatically different emissions. Figure 2 provides a useful contrast of some different US sources of crude.
Some oils are extracted without unnecessary pollution and are relatively easy to refine, with the result that more than 90% of their pollution comes from using the final fuels like gasoline and diesel. Other heavier oils are more energy intensive to extract and refine, and can create 75% more pollution per barrel of oil than the lighter crude.
For these more challenging oils, tailpipe pollution accounts for less than 2/3 of the total pollution, so pollution reduction policies that target only emissions from fuel use will fail to account for a lot of the emissions, which is not good policy.
The oil market is complex, with highly variable sources of crude, different extraction and refining techniques, and complex markets for a variety of products. Gordon and Mathews argue that a well-designed “Smart Tax” that is based on a comprehensive lifecycle assessment of the oil supply chain can align the interests of energy producers with the need to cut carbon pollution, stimulating innovation and avoiding perverse incentives. They walk through key implementation details including why refineries are the best point of regulation and the implications for global oil trade. But the first order of business is better information.
The starting point for smart policies that hold the oil industry to account is better information about pollution from the oil supply chain. Gordon and Mathews lay out a compelling case for a tax policy approach, but regardless of whether the policy instrument is the pollution tax economics textbooks favor, a broad performance standard approach like the California Low Carbon Fuel Standard, or a more narrowly focused performance standard like the methane rules being developed by EPA, good policy must be based on good information. The current information the government collects on pollution from the oil supply chain is scattered and incomplete.
The Energy Information Administration was founded in the 1970s with a charter focused on ensuring reliable access to the energy our economy needed. But where the future of clean transportation is concerned, producing enough gasoline to fuel our cars is no longer the most pressing problem. Instead we need to maintain and improve everyone’s access to mobility while also preserving climate stability. Achieving this goal will require collection, dissemination, and analysis of different information on our fuels by all the stakeholders inside and outside of government. These two reports point us in that direction.]]>
More than 80 percent of biodiesel is made from vegetable oil (the rest is mostly animal fats). The soybean and canola oil that make up the majority of biodiesel is basically the same as the cooking oil you buy at the grocery store, while the corn and used cooking oils are inedible varieties generally used for animal feed and other purposes.
Using more oils and fats for fuel instead of food and animal feed has consequences for competing users of these products and for the global agricultural system. Of particular importance from a climate perspective is the relationship between rising biodiesel use in the United States and palm oil expansion in Southeast Asia, which is a major driver of deforestation and global warming pollution.
Figure 1 shows that palm oil itself is not a significant direct source of US biodiesel production. But there are important indirect links between how much biodiesel we use in the US and how quickly palm oil plantations expand in Indonesia or Malaysia. These connections can be understood by comparing the rise of biodiesel with ethanol, and by examining the sources of biodiesel one at a time.
Vegetable oils and animal fats are converted into biodiesel via a chemical process called transesterification, after which they’re blended with diesel and used in trucks. Transesterification sounds complicated, but it is a pretty simple chemical reaction (you can actually make biodiesel in your garage); compared with ethanol, the biodiesel production process takes less energy and has lower direct emissions.
The main source of emissions for biodiesel comes from the vegetable oils and fats it is made out of, and not the process of converting them to fuel.
Although ethanol production is much larger, biodiesel has grown more quickly since 2010, more than tripling between 2010 and 2015:
Biodiesel is most often sold as a blend of up to 5 percent biodiesel mixed with petroleum diesel. This is labeled as ordinary diesel fuel consistent with the official specifications. Some trucks can use up to a 20 percent biodiesel blend, but distribution challenges associated with marketing different blends for different vehicles have limited the adoption of these higher blends.
Today, biodiesel accounts for about 3 percent of the diesel fuel sold. For comparison, 10 percent ethanol is blended into most of the gasoline sold today.
While biodiesel is a relatively small share of diesel fuel, it has a large footprint in agricultural markets. The fact that ethanol consumes about 40 percent of U.S. corn is much publicized by ethanol critics, but less attention has been paid to the growing share of soybean oil being made into biodiesel, now about 25 percent.
One reason for the different level of publicity is that expanded demand for corn to make ethanol increases input costs for meat producers, who have been among the loudest and most persistent ethanol critics. But counterintuitively, increased demand for soybean oil actually makes input costs cheaper for the meat industry. To understand this mystery, read on!
Soybeans are an interesting crop, connected to their sister crop corn in complex ways in the agriculture, food and fuel system. While you may occasionally encounter soybeans in their immature form as edamame, the majority of soybeans are crushed to make soybean oil and a high protein meal that is mixed with corn in animal feed.
Soybean oil accounts for only 40 percent of the value of the soybeans, so the economics of soybean production depend jointly on the oil and the meal. As you would expect, increased demand for soybean biodiesel will raise demand and prices for soybean oil, but meal goes the other direction. As more soybeans are crushed to supply oil, the price of soybean meal will fall as increased production meets unchanged demand.
Since soybean prices depend on the sum of oil and meal prices, the net result is that soybean prices are only weakly linked to soybean oil prices. In a specific example worked out and explained in detail here, a 10 percent increase in soybean oil prices led to a 4 percent decrease in soybean meal prices and less than a 2 percent increase in soybean prices. So the impact of soy biodiesel on food prices is mixed, increasing the cost of vegetable oil, but decreasing the cost of animal feed.
But while soybean production is not very responsive to soybean oil prices, other vegetable oils are more responsive, particularly canola and palm oil, which have a higher share of their value derived from vegetable oil. For this reason, increased use of soybean oil to make biodiesel does not lead to much increased production of soybeans, but primarily leads to substitutions among vegetable oils and ultimately more vegetable oil imports.
The substitution of imports for soybean oil used as biodiesel is clearly illustrated in recent agricultural statistics. Starting in about 2003, there was a relatively sudden increase in the use of soybean oil for biodiesel. This increase did not result in an associated jump in soybean oil production, which pretty much stayed on its previous trend, driven by steady growth in demand for protein meal.
Instead, as US soybean biodiesel production grew, domestic consumption of soybean oil for food and other uses fell. Soybean oil use for food and other uses was replaced by imports of other oils, primarily canola and palm oil. This shows up quite clearly in the chart below, which compares the rising use of soybean oil for biodiesel to increased imports of palm, canola and other oils.
It is clear from the data that expanded use of soybean oil to make biodiesel was matched by growing volumes of imported vegetable oil, but the question of causality is a little trickier. That is because in the same timeframe that soy biodiesel consumption was growing, concern about the health impact of trans fats, mostly hydrogenated soybean oil, led to decreased consumption of trans fats, which were replaced in Oreos and many other prepared foods with other oils.
Some of the hydrogenated soybean oil was replaced with palm oil because of its similar properties. In this telling of the biodiesel story, biodiesel expansion is not the cause of increased imports. Rather, rising imports of palm and other oils were caused by changes in US food preferences attributable to health concerns; expanded production of soybean biodiesel was an outlet for the unwanted soybean oil, providing a substitute market while also displacing fossil fuel use and lowering the cost of soy meal for meat producers.
This optimistic interpretation is not implausible, but it is certainly incomplete. Vegetable oils are traded in a global marketplace, where demand for vegetable oil has been growing steadily. If the soybean oil no longer consumed as hydrogenated oil had been exported (either as vegetable oil or as whole soybeans) it would have found a market among the major vegetable oil importers. Vegetable oils are highly substitutable in many markets, and greater availability of soybean oil would have displaced some of the growing demand for palm oil.
Precisely quantifying these relationships is tricky, but given the link between palm oil expansion and deforestation, this alternative explanation paints a less optimistic picture of the climate impact of soybean biodiesel expansion in the last few years.
Regardless of whether you assign causality to falling demand for trans fats or rising demand for biodiesel, that chapter has come to a close. The shift away from hydrogenated soybean oil is now essentially complete; we should not expect a continued surplus of soybean oil.
In fact, the soybean industry is hard at work developing new technologies to regain lost market share in food markets. To the extent they succeed, it will further increase demand for soybean oil and lead to further substitution by palm and other oils.
The point is that increased use of soybean oil-based biodiesel in the US has a limited impact on soybean production, which is primarily determined by demand for protein meal. Instead, the main effect is to tilt the balance of demand in favor of vegetable oils versus protein meal, which favors sources like palm and canola. Canadian canola oil may supply some of this additional demand, but palm oil is the least expensive, fastest growing source of vegetable oil on the global market, and most likely to fill the void left by US soybean oil being used for fuel.
While the majority of biodiesel is made from the same vegetable oil used for cooking, about 40 percent is made from inedible and recycled oils and fats that are not used directly as human food. This share has stayed fairly constant even as biodiesel production has increased.
Every schoolchild knows that recycling is good for the environment, and so increased use of used cooking oil and other recycled sources to make biodiesel is a feel-good story and gets a lot of attention. But like many stories we tell children, the reality is a little more complex.
It turns out that recycled oils and fats used to make biodiesel are not a free lunch for the environment after all. That’s because for the most part, these oils and other fats are not being diverted from landfills like egg cartons used for art projects. There are existing uses for these resources, including livestock feed, pet food, and to make soaps and detergents. If used cooking oil that was feeding livestock is diverted to fuel, the livestock will have to eat something else instead.
There are certainly some efficiency gains to using a lower value feedstock instead of food grade vegetable oil to make fuel, so while these recycled fuels are not a free lunch, they are certainly a discounted lunch. Determining exactly how much of a discount is tricky, and requires lifecycle analysis to figure out the indirect impact by estimating the replacements in animal feed and other existing markets. But ignoring the need to replace these products leads to unrealistically optimistic environmental assessments.
Another fast growing source of biodiesel is inedible corn oil produced as a byproduct of corn ethanol. Corn oil has historically been more expensive than soybean oil, and thus not an attractive source of biodiesel. But over the last few years, a new source of corn oil emerged that was competitively priced.
The corn ethanol boom of 2005 to 2010 saw a huge increase in production of distillers’ grains, an animal feed co-product of ethanol production that is left behind once the corn starch is made into ethanol. Ethanol producers learned that they could extract corn oil from the distillers’ grains, reducing the fat content of the animal feed in the process.
This distillers’ corn oil smells like a brewery and is not sold for human consumption, but it works for biodiesel and animal feed and sells at a significant discount to edible corn oil. Removing a portion of the oil from distillers’ grains of animal feed reduces its caloric content, but it does not reduce its value significantly. So this approach is quite profitable, and most ethanol producers adopted it.
Biodiesel produced from distillers’ corn oil grew by about ten times from 2010 to 2013, but leveled off thereafter. Corn oil associated with distillers grains is limited by corn ethanol production, and while some further shifting of oil from feed to fuel markets is possible, the increase associated with the ethanol boom is unlikely to be repeated, and is not the basis for a sustainable trend into the future.
One well known source of environmentally-friendly biodiesel is used cooking oil, which allegedly makes your old diesel car exhaust smell like French fries. Together with distillers’ corn oil, used cooking oil (also called yellow grease) has accounted for most of the growth of biodiesel from recycled oils and fats.
But while higher prices for used cooking oil has increased collection somewhat, most of the large sources of used cooking oil were already being collected. Increased demand for waste oil does not increase supply of used cooking oil, since this is a waste product whose quantity is set by demand for corn chips or French fries.
For the last few years, overall production of used cooking oil has been basically steady while biodiesel use grew from a small share to consuming 60% of domestic used cooking oil in 2015. The increase came mostly from reducing exports rather than increasing diversion from waste streams.
Even if 100% of our remaining exports are made into biodiesel, it would increase biodiesel production by just about 5%, and the current importers would have to look elsewhere to replace the lost oil. So there is not much more growth coming.
I’ve walked you through the major domestic sources of biodiesel, qualitatively highlighting the limitations to domestic sources of biodiesel. Last year we commissioned Professor Wade Brorsen at Oklahoma State University to do a quantitative projection, and he determined that 29 million gallons per year of growth would be reasonable from domestic sources.
Twenty-nine million gallons sounds like a lot, and indeed it is enough to fill an additional 44 Olympic-sized swimming pools each year. But it amounts to less than 2% growth a year in biodiesel production, which is itself a small share of diesel production.
If biodiesel production grows faster than this rate it is likely to be either imported, produced with imported sources of oil, or produced by bidding away existing sources of oil from other users, who will in turn be forced to switch to imports.
The potential for significant and sustainable growth in domestic biofuel production depends upon moving beyond food-based fuels made from vegetable oil or corn starch and turning instead to biomass resources. These resources have the potential for significant—but by no means limitless—expansion as the technology to convert them to cellulosic fuels scales up.
The potential and implications of making ethanol from biomass is discussed at length in Chapter 3 of our recent report, Fueling a Clean Transportation Future. And as cellulosic ethanol technology matures, different biological or chemical processes can make the same resources into cellulosic diesel, jet fuel or other fuels or products as well.
Talking about government regulations is a good way to put people to sleep (at least my wife), so I saved this little lullaby for the finale. Each year, the EPA must put forth specific regulations to implement the Renewable Fuel Standard (RFS), which Congress passed in 2005 and was amended in 2007. In recent years, this has gotten tricky, as tradeoffs and constraints in the fuel system make realizing Congress’ goals complicated.
Last year the EPA made a major overhaul of its approach to the RFS, which basically put the policy back on track. This year they are sticking quite close to that approach (see this summary for details), which will help build stability and predictability for a policy that has been short of both.
For biodiesel, the EPA has proposed an increase of 100 million gallons, from 2 billion gallons a year to 2.1 billion gallons, the same increase they proposed last year.
Not surprisingly, the biodiesel industry has a more bullish view, and argues that EPA should expand mandates for bio-based diesel by 5 times as much, to 2.5 billion gallons.
This is 17 times more than Professor Brorsen found could be supported by domestic sources of oils and fats. Growth rates this far in excess of domestic resources will inevitably lead to much greater reliance on imports of either biodiesel or oils and fats to replace domestic sources bid away from existing users. The 500-million-gallon a year increase the industry seeks is unsustainable, and would set the industry up for a crash. It would also create a huge hole in the global vegetable oil market which would largely be filled by palm oil expansion.
To provide stable support for the biodiesel industry and to avoid unintended problems across the globe, it is important that policy support for biodiesel growth is consistent with the growth in the underlying sources of oils and fats. The EPA should scale back its proposal in light of these constraints.]]>
My new report, Fueling a Clean Transportation Future, released today, takes a broad view of how transportation fuels are changing. I delve deep into the changing sources of oil used to make gasoline and the growing negative consequences for the climate; the way ethanol is made today, and the prospects to make it cleaner in future; and the growing importance of electricity as a transportation fuel, and what it will take to realize the full climate benefits of this important technology.
Here are a few key findings about gasoline that may surprise you. Read the whole report to learn more.
Featured photo: Richard Masoner]]>
The technology DuPont is starting up breaks down the non-digestible parts of plants into the sugars that are the basic building blocks with which we can produce ethanol today, and other fuels and bio-products in the future. These fuels and other products are currently made from oil; replacing them with sustainable low carbon substitutes is critical to building a low carbon chemical and fuel industry, which is why companies like DuPont are pursuing it. It’s also a key element of our comprehensive strategy to cut oil use and emissions from transportation fuel in the years and decades to come, which is why I take an interest in it.
In a past career I was involved in starting up new chemical process technology for very different products (computer chips instead of ethanol). I remember the excitement and rush of learning that comes when the preparation is done and the new factory is starting up. Suddenly there is real money on the line, more than $200 million in the case DuPont’s Iowa factory, and you have no choice but to solve the inevitable problems that arise during process scale-up.
Making progress on these challenges is urgent not just because of DuPont’s financial interests, although I am sure that is a major motivator to them, but also because cutting emissions from transportation and other sectors is urgently needed to stabilize the accumulating carbon dioxide in the atmosphere from oil and other fossil fuels that is bringing us ever closer to catastrophic climate change. Earlier this month the World Meteorological Organization announced that atmospheric CO2 concentrations have hit yet another record in their relentless upward climb.
In this context it was depressing to get back to the DC suburbs to hear the oil industry flooding the airways with vacuous arguments about how to rearrange the deck chairs on the Titanic. The oil industry has made repealing the RFS their top legislative priority, and their regional affiliate the Western States Petroleum Association is similarly focused on blocking or rolling back low carbon fuel standards in California and Oregon. They claim that with expanded domestic oil production we no longer need these cleaner fuels. Following their usual playbook they have released a slew of ads touting out-of-date and misleading studies during the presidential debates.
Here’s an excerpt from one of these studies, funded by the American Petroleum Institute (API) predicting that implementing the RFS will cause
[…] outrageously high consumer costs that are evident immediately, i.e, in 2015. The 2015 statutory requirement […] requires about a 30% reduction in gasoline and diesel volumes from expected demand in 2015. To achieve this reduction in gasoline and diesel demand requires that costs increase by roughly $90 and $100 per gallon more than today’s costs, respectively.
Not to be outdone, the ethanol industry is hitting back with its own ads, studies and bogus arguments including claims that the RFS is the “only federal law on the books combating climate change” and that EPA’s failure to finalize timely rules for the RFS “has caused net farm income to likely fall more than 50 percent in only two years.”
These absurd claims are based on the flimsiest of straw men and contribute nothing useful to the tired arguments the parties have been making for years. It is obvious to an informed observer that the ambitious timeline Congress set for scaling up cellulosic biofuels has proven far too optimistic. It is equally clear that even without the RFS corn ethanol will remain an important part of the gasoline blend and the agricultural economy. In light of this reality, and with no help from the regulated parties, the Environmental Protection Agency (EPA) has the unenviable task of figuring out how to implement the law in a manner that is realistic and makes steady progress on oil saving and climate goals. While the TV ads might make you think the EPA is deciding on the future of corn ethanol, the truth is the post-2015 RFS is focused on expanding the use of low-carbon advanced and non-food cellulosic biofuels.
The RFS is a tough program to implement, but EPA’s proposal is basically on target and I expect them to finalize something close to their proposal later this month. The RFS is an essential tool to make progress on cleaning up an important part of our fuel supply. We should certainly be doing more, but API argues we should do less. It’s also important to clarify that the RFS is by no means the only provision of the Clean Air Act that EPA is using effectively to reduce global warming pollution, with important standards for vehicle fuel economy, and power plants in place and standards for heavy-duty trucks and oil and gas wells in process.
This isn’t the first time I’ve been compelled to point out how unproductive this hyperbolic rhetoric is. It might seem obvious, but when an API funded ad tells you that the most important priority for fuels policy is stopping the RFS, and claims it has the interests of the environment or even the global food markets at heart, you should be very skeptical. The progress on cellulosic ethanol over the last few years is a tremendously important part of building the clean fuel technologies we need to cut oil use and emissions from transportation, and it would not have happened without the RFS.
I am convinced that the progress being made now inside the cellulosic ethanol plants at DuPont, Poet and Abengoa, and at nearby farms and in laboratories across the county are vastly more important than the sad nonsense posing as debate about the Renewable Fuels Standard in Washington DC and elsewhere.]]>
Cleaning up the fuels we use to power our vehicles is a critical step to cut oil use and reduce the emissions responsible for climate change. We are making progress, but the scale of the challenge requires patience. For it is not enough to just make cleaner fuel—the whole supply chain must adapt. The implications reach beyond fuel producers to refiners, gas station operators, automakers and drivers as well. Two specific changes are turning out to be especially complicated:
Important progress has been made in commercializing cellulosic biofuels, but the required scale up is just getting started. Yet continued progress and further investment is stalled because of uncertainty regarding policy and the future of the market for ethanol. The EPA’s initial proposal for 2014 biofuel policies was issued late in 2013 and ultimately withdrawn. It was reissued at the end of May of this year together with rules for 2015 and 2016. The oil and ethanol industry remain dissatisfied, the former saying the proposal calls for too much biofuel and the latter that it calls for too little. However, the EPA’s job with the remainder of the RFS is to support expanded use of advanced and cellulosic biofuels, not satisfy these two deeply entrenched special interests. Resolving the underlying policy uncertainty is the most important challenge facing the EPA in this rulemaking process. Finalizing the proposed rule in November will put the program back on schedule, and is an important first step.
For the last several years I have been asking the EPA to update their approach to the RFS, recognizing the need to make adjustments to their approach in light of the slower-than-expected scale up of cellulosic biofuels and infrastructure limitations. While this single rulemaking process won’t solve all the challenges of cellulosic biofuel scale-up, the EPA by and large adopts the approach I have advocated and sets up the future of the RFS in the right way.
I will be submitting detailed feedback to the EPA on their proposal during the comment period and will post a link to my comments as an update to this blog when they are complete. In the meantime I wanted to share in short form what the EPA got right, what they can improve, and what remains for the future.
Update: We submitted our formal comments to EPA on the RFS rulemaking, along with an analysis of biodiesel feedstock availability that we commissioned from Professor Wade Brorsen at Oklahoma State University.]]>
Professor Stock served as a member of President Obama’s Council of Economic Advisors in 2013 and 2014. He was deeply involved in deliberations about the RFS during his tenure, and it was in that context that I first met him, back in October 2013, when I went to the White House to offer perspective on how best to implement the RFS.
Updating the RFS to address the delayed scale up of cellulosic biofuel and to shift from the current 10% ethanol (E10) to higher blends turned out to be very complex and challenging, and the proposal EPA made late in 2013 was ultimately withdrawn and only reissued at the end of May of this year.
Professor Stock has continued to think about the RFS since leaving the White House, publishing a report in April titled The Renewable Fuel Standard: A Path Forward, which he presented recently at the Press Club with other biofuels experts I have featured in this blog (including Scott Irwin and Bruce Babcock). I interviewed Professor Stock at Harvard on June 8th, just a few days after EPA issued the long-delayed rules that we had discussed 20 months earlier.
In our conversation Professor Stock explained why biofuels policy is challenging, but important, and why the recent EPA proposal is a sensible middle path forward. The video has some key highlights, and for the real policy wonks, the audio and transcript of our longer discussion covers the future of renewable fuels and the RFS, possible routes forward for the RFS, different externalities the RFS is designed to address and a number of other topics related to fuel policy in general. It was a lengthy conversation, so I’ve included a table of contents (with timestamps for the audio) to help you find specific topics of interest.
Three key takeaways are:
Listen to the full audio below, or download the full transcript here.
In a recent World Resources Institute report, long-time biofuels critic Tim Searchinger (together with coauthor Ralph Heimlich) argues that there is a global food crisis looming and “the world is already full,” so there is no land available to grow crops for fuel or energy. While I agree that protecting food production, farmland, and forests is a primary concern, I disagree that the world is full and that all crop based bioenergy should be phased out. This oversimplifies things, and ignores the productive role bioenergy can play in a sustainable agricultural system.
The land use decisions we make in the coming decades are critical to meeting needs for healthy food, healthy farms and a stable climate. But I am not convinced these goals rule out a meaningful role for bioenergy. Instead biofuels must steadily improve over time, moving to lower carbon production processes and more sustainable feedstocks. And the scale of biofuel production should balance food needs, forest protection, and other land uses. Searchinger and his coauthors make many useful suggestions in their series of reports, and I agree with them that biofuel targets should not be based on an arbitrary fraction of total energy use like 10% or 20%. But it does not follow that the right number is zero.
While diverting crops or land into fuel production can obviously cause problems, the oversimplified idea that we should use all our land to fill a looming global “calorie gap” also misses the mark. This formulation of the problem suggests we should put US agricultural land to work producing affordable calories to feed the world’s growing population. But we have tried this before, and ironically exports of cheap US grain to “feed the world” end up undermining the growth of sustainable food production in the developing world by harming farmers in those counties. As any student of agricultural history knows, “feed the world” is not the right rallying cry for a just and sustainable food system. So while high and unstable food prices are indeed a problem, it does not follow that the lowest possible prices are ideal either. Balance is required to move agriculture steadily in a low carbon, healthy and just direction.
The US already devotes tens of millions of acres of productive land to growing corn for ethanol, and the last thing we need to do is to stop making ethanol and instead dump the 5 billion bushels of corn produced on those acres onto global markets. Instead we need to shift those acres gradually but steadily to crops like perennial grasses, which will make US agriculture more sustainable, multifunctional and productive over the long term while sequestering carbon in deep roots and soil, and addressing critical water quality problems. More sustainable crops will produce lower carbon biofuels as well as a better agricultural system. These perennial grasses play a major role in our vision for biomass resources to produce clean energy and fuel.
But this transformation is not going to happen overnight and it will require investment and smart policy over many years. Biofuels policy is a small but significant piece of this puzzle, and no federal policy is as important as the RFS.
Recently, proposals to “reform” the RFS has been made in the House and Senate. The proposed bills are short, with the common element being a proposal to cut just a few lines of text to strip corn ethanol from the RFS. The House bill also blocks EPA from moving forward with ethanol blends beyond 10% (E10) and changes the way EPA sets standards for cellulosic biofuels made from non-food sources like corn stalks. On their face, these proposals seems reasonable. After all, corn ethanol has been the source of plenty of problems, and the bills leave in place the language that was designed to support advanced and cellulosic biofuels.
But in fact, this “reform” will turn the goals of the RFS upside down. This apparently targeted operation to surgically remove the problems of corn ethanol will actually have little impact on corn ethanol and will stop investment into the next generation of cellulosic biofuels. They would turn a program designed to stimulate investment in US renewable fuels production into a counter-productive shell game that will drive up costs without environmental benefits. The reasons for this are complicated, so I put them in a technical appendix below, but the bottom line is these proposals create rather than solve problems.
I’m not sure these bills are actually intended to be implemented; they seem like attempts to kill the RFS under the guise of reform. Rather than taking responsibility for giving up on renewable fuels, these proposals suggest removing a vital organ or two, ensuring the patient never leaves the operating room.
Don’t get me wrong, I know the RFS is not in great shape. But in this case, physical therapy is a better treatment than invasive surgery. I have been arguing for several years that flexibility and a more measured pace of growth is the key to EPA’s administration of the RFS. The original pace of the RFS was aspirational, but is now clearly unrealistic.
EPA needs to recognize that it will take longer than originally hoped to reach the ambitious goals of the RFS. Moreover, the ethanol blending challenges that precipitated the current crisis are a significant bump in the road, and to move forward we need an approach to ethanol blending that allows for gradual growth of cellulosic ethanol and also makes sense for automakers and fuel consumers. But these challenges are something EPA should work through with all the stakeholders rather than having Congress intervene.
EPA needs to lay out a plan to get the RFS on track, and stakeholders need to recognize this is not going to happen overnight and be flexible themselves. Failing to do so will maintain the status quo of 10% corn ethanol and 90% gasoline. What is at stake is progress on clean fuels made from non-food resources that we need in order to cut oil use and emissions over the long term.
A predictable and steady road forward for the RFS is important not only to the advanced and cellulosic biofuels industry, but to automakers, gas station owners and states pursuing low carbon and clean fuels policies as well. They all need to know what to expect from the RFS over the next 5 years to make their own plans. To make this work we need everyone to be flexible, and figure out how a balanced path forward will keeps us on the road to half the oil.
The RFS does not have a specific category for corn ethanol, but corn ethanol provides most of undifferentiated renewable fuel required by the standard, up to 15 billion gallons of the total. The corn ethanol industry is already built out to essentially this volume, and independent analysts agree that corn ethanol will continue to be produced at similar levels with or without the RFS because ethanol is a cost effective high octane blending component of gasoline. However, the proposed changes to the RFS would remove the motivation to expand biofuels beyond the so-called blend wall—the infrastructure limitations that make it hard to sell ethanol beyond the 10% currently blended into gasoline (E10). This would change the blend wall from what is now a treatable malady slowing the growth of renewable fuels into something closer to a terminal diagnosis for investment in advanced biofuels.
The reality is that investors in the next generation cellulosic plants will base their investment decisions on the future market for ethanol. Under the existing RFS, building a cellulosic ethanol facility provides the opportunity to be the one of the lowest carbon producers of cellulosic biofuel in a steadily growing market where policies like the RFS and West Coast Low Carbon and Clean Fuel Standards reward the lowest carbon producers of cellulosic biofuel. But if these RFS reform bills become law, the future US demand for ethanol will be stagnant and will even shrink slowly as more efficient cars and electric vehicles reduce demand for gasoline, and with it, E10. In this case, cellulosic ethanol producers have to compete in a shrinking market against mature incumbents (the corn ethanol industry) whose facilities are depreciated. And to add insult to injury, the same parties who have made huge investments in cellulosic biofuels (like Poet/DSM, Abengoa, DuPont and Novozymes) are also deeply invested in the first generation biofuels industry, so the faster they scale up cellulosic biofuels, the faster they lose market share at their existing facilities. The drag on investment is not just my hunch, I have heard this directly from the leaders of the companies struggling to raise money to scale up cellulosic biofuel production.
What about the reformed RFS? Don’t the requirements for advanced and cellulosic biofuels remain?
Yes, the requirements would remain on the books, but in a stagnant market for biofuels, new investments in currently expensive biofuels won’t make sense. Instead the obvious way to comply with the remaining RFS requirements will be for the US and Brazil to scale up the existing circular trade in ethanol, with the US using Brazil’s sugarcane ethanol (which qualifies as advanced biofuel), and the Brazilians using US corn ethanol, which would be squeezed out of the shrinking US market for ethanol to blend into E10 by the Brazilian imports (in Brazil, ethanol is ethanol, regardless of feedstock). Without a growing market for ethanol, this kind of counterproductive shuffling will be the lowest cost strategy to comply with the RFS, and investors in neither country will have a motivation to invest in the next generation of cleaner biofuels.
What about so called “drop-in biofuels” like renewable gasoline or diesel? Why not just move beyond ethanol?
The key to understanding this is to recognize that the most important obstacle to scaling up low carbon biofuels over the long term is not what biofuels are made into (ethanol versus gasoline or diesel) but what they are made out of (cellulosic biomass versus starch, sugar or vegetable oil). To scale up biofuels sustainably, we need to look beyond the food based resources we are using today, and focus on sustainable sources of cellulosic biomass (described here). And the fastest way to speed up the development of all kinds of cellulosic biofuels is to build real world experience with the supply chains for cellulosic biomass and the conversion technology to make these feedstocks into intermediates like sugars, syngas or hydrocarbons. This is just starting to happen as the first cellulosic ethanol production facilities move to a commercial scale. So putting the brakes on investment in cellulosic ethanol will slow rather than speed up progress on cellulosic drop in biofuels.
The RFS was intended to cut oil use and reduce carbon emissions by supporting a steadily growing market for renewable fuel and channeling this growth toward cleaner advanced and especially cellulosic biofuels. The proposed RFS reform instead protects oil’s share of the market and directs new biofuel producers to compete against existing biofuel producers in a steadily shrinking market. This is not the right prescription to put the renewable fuels industry on the road to recovery.]]>
This week Deborah Gordon, Director of the Energy and Climate program at the Carnegie Endowment (and founder of the vehicles program at UCS), together with Adam Brandt and Jonathan Koomey from Stanford University and Joule Bergerson of University of Calgary released some critically important new work on how oil is changing, and the implications these changes have for climate change. Oil companies top the list of major carbon producers, and while cutting oil use with efficient vehicles and innovative clean fuels can reduce emissions from driving, this new Oil Climate Index shines a light on the enormous but hidden emissions from the oil industry’s operations: the oil fields that extract crude and the refineries that convert it into gasoline, diesel, and other products.
Oil is changing and getting dirtier, riskier to extract, and more expensive to produce. This Oil Climate Index is a treasure trove of important information that my colleagues and I at UCS will be digging into in coming months, but right off the bat, I wanted to share 5 key insights and the data that backs them up.
The resources being used to make gasoline and diesel fuel are increasingly diverse; many bear very little resemblance to the “black gold” that kicked off the oil rush a century ago at Spindletop in East Texas. Yesterday’s oil were primarily conventional sources (in 2000, 84% of proved reserved), but today the majority of oil reserves are unconventional. The “oils” being made into fuel range from tar sands coming from Alberta, which is more similar to window putty than liquid oil, to light shale oils, commonly called tight oil, that resemble nail polish remover and are extracted from rocks using horizontal drilling and hydraulic fracturing at Eagle Ford in West Texas or the Bakken in North Dakota.
Some sources of oil like Norway’s Ekofisk field have emissions of below 25 Kg per barrel of oil produced, while others like Nigeria’s Obagi field involve extensive flaring and fugitive emissions of methane with total carbon emissions 10x higher, or almost 250 Kg/barrel. Flaring occurs when oil producers go after oil without putting in place the infrastructure to capture and use natural gas that is extracted with the oil—they simply burn it in place instead. This flaring is so extensive that it can be seen from space, but more importantly it is wasteful and increases the carbon emissions and other pollution associated with producing oil.
Flaring is avoidable, and Norway’s ban on flaring illustrates that it is possible to produce oil and gas without this wasteful practice. Russia and Nigeria have historically been the largest sources of flaring, but flaring in the U.S. has ramped up with the production of tight oil (tight oil requires appropriate infrastructure to avoid extensive flaring). This is an area where the U.S. has a responsibility to act.
Emissions from refining some extra heavy oils and especially tar sands can be substantially higher than lighter conventional sources of crude oil. For example, the heaviest tar sands crudes can have refining emissions of greater than 80 Kg/barrel, compared with less than 20 Kg/barrel for Brent crude from the North Sea. Adding these extra refinery emissions to the high emissions from extracting tar sands is one of the reasons that these dirtiest fossil fuel resources should stay in the ground.
In recent years tar sands oil production has risen, although the current lower gas prices are causing some companies to question the profitability of some projects. Making sure fuel consumers, producers, and the investors who finance these projects understand the carbon consequences of exploiting the dirtiest resources is critical to making smart decisions.
We think of oil being used to make gasoline and diesel fuel to power cars and trucks, but refineries produce a wide range of products which result in significantly different carbon emissions when burned. Refineries have options, but in general, different crude oils are more suitable or less suitable for particular slates of products. The emissions from gasoline are about 370 Kg/barrel, while petroleum coke—a low value product that is used as a substitute for coal—has emissions more than two thirds higher, almost 645 Kg/barrel. Some of the heavier unconventional crudes like tar sands oil are more likely to be used to make these dirtier products.
Together with affordable renewable alternatives to coal that reduce emissions in electricity generation, this is another reason to avoid the dirtiest sources of oil altogether.
The dirtiest sources of oil have emissions hundreds of kilograms per barrel higher than cleaner sources. In some cases, more responsible practices like capturing rather than flaring gas can keep these rising emissions in check. In other cases, the dirtiest extra-heavy resources are best left in the ground. With the US consuming 6.7 billion barrels worth of petroleum products a year, even a relatively small 10 Kg / barrel increase in average emissions will increase carbon pollution by 67 million metric tons a year. For comparison, this is the same as the extra tailpipe emissions if all the cars in the US were suddenly getting 2.5 fewer miles per gallon.
The auto industry is making important progress cutting carbon emissions and making cars that go further on each gallon of fuel. It is important that the oil industry does their share, and doesn’t undermine this progress by ramping up emissions at oil fields and refineries with wasteful and reckless choices. Getting clear information on the carbon risks of different sources of oil will allow investors to make informed choices about which sources of oil make sense in a carbon constrained future, help governments make smart decisions on long lived infrastructure like pipelines, and ultimately hold oil companies accountable for mitigating the harm caused by their products and practices.]]>
A year ago more than one hundred leading California scientists and economists sent an open letter on climate change to Governor Jerry Brown and the California Legislature urging them to maintain California’s leadership on climate change. These experts said that a clear price on carbon is “key, but not sufficient to adequately reduce emissions. Policies that promote renewable energy, low carbon fuels, and cleaner transportation are also critical.” Policymakers should look beyond the current policies, and prepare now to reach emissions targets between 2020 and 2030.
“Every sector involved in addressing climate change, from energy to transportation, will need sufficient time to prepare to meet new targets. The longer we wait the harder and more costly it will be. Please begin now to set a science-based, heat-trapping emissions target for 2030.”
California is taking up this challenge. In addition to policies that put a price on carbon, California has a comprehensive suite of policies that will clean up transportation including a low carbon fuel standard (LCFS) that shifts the market steadily towards cleaner fuels. And the state is starting to look beyond 2020. Governor Brown recently set a 2030 goal of cutting oil use in half, making it clear that 2020 is just the first step. The steady growth of clean fuels is key to meeting this goal.
Three recent studies look into the potential for clean fuels in the U.S., the West Coast, and California, and together illustrate why the future for clean fuels is bright, provided the policies are in place to support them.
California kicked off a transition to clean fuels with its LCFS in 2010, and later this month the California Air Resources Board will consider the readoption of the LCFS, making technical updates, resolving legal issues and getting the policy back on track to cut carbon pollution from transportation fuels by 10% per unit of energy by 2020. As they do so, they need to start planning for the next phase, from 2020 to 2030.
Accelerating the transition to clean fuels now will support innovation, cutting oil use and reducing transportation emissions and ensuring that investments in the clean fuels of the future replace dead end investments in ever dirtier sources of oil.
Experts at UC Davis’ Institute for Transportation Studies examined three distinct ways cleaner biofuels of different types are emerging across the United States (recently published in Energy Strategy Reviews).
Notice that the incremental approaches are likely to come on more quickly between now and 2020. But the leapfrog approach is the one with the potential to deliver the largest oil savings and emissions reductions by 2030. The transitional route also plays an important role in building early experience with cellulosic biofuel technology in a context that is less risky and capital intensive. This lower risk learning is especially important today, with policy uncertainty delaying investment in the most ambitious projects.
The bright future described in this study is by no means guaranteed. Strong policy support is needed to scale up low carbon fuels. These policies lead to steadily increasing production, which accelerates learning and brings down the costs of cellulosic biofuel over time. And the broader the market for the fuels, the faster this learning will accumulate. While US policy is stalled, the west coast is working on creating a large and steadily growing clean fuels marketplace.
Last month the International Council on Clean Transportation and E4tech released a study on the potential low-carbon fuel supply to the Pacific Coast region of North America. They find that California, Oregon, Washington, and British Columbia, acting in concert to create coordinated clean fuels policies, can triple the use of low carbon fuels and replace a quarter of the region’s gasoline and diesel use by 2030. That’s a massive reduction in carbon pollution and oil use. The report also highlights the diversity of potential fuels and pathways, with eight distinct scenarios and different amounts of low carbon fuels emerging as electricity, renewable natural gas, ethanol, biodiesel, and other low-carbon fuels ramp up at different rates.
Their study reinforces that there are many routes to a low carbon future, and with a flexible policy framework like a low carbon or clean fuel standard, policy makers are committing to the outcome, rather than picking specific fuels or technologies needed to get there. I’ve written in the past about the importance of flexibility in clean fuels policies, and my colleague Josh just posted a blog on how Oregon’s clean fuels program is making it work for them.
Today UCS, the Natural Resources Defense Council and the Environmental Defense Fund released a study of compliance options for the California Low Carbon Fuels Standard over the next ten years. The study was conducted by Promotum and addresses endless oil industry claims that moving to cleaner fuels is unfeasible. Our study examines where clean fuels can come from to meet both a 10% reduction in carbon intensity (carbon pollution per unit of energy) by 2020 (the standard adopted by California back in 2010), and looks beyond 2020 to a 15% standard in 2025.
The oil industry likes to focus on whether biofuels or electric vehicles (EVs) are ready to scale up quickly enough to meet ambitious targets. This study indicates that they are, and also that the oil industry can meet 15% of its clean fuel obligations in 2020 by improving efficiency and integrating renewable energy inputs into the production of oil and the refining of gasoline and diesel. Promotum evaluated the impact of credit prices of $100 a ton (LCFS credits are measured by ton of avoided emissions), and found that the available options would exceed the requirements of the policy in 2020, and allow compliance with steadily increasing targets that hit 15% in 2025.
It took more than a century to build today’s oil industry, and it will take longer than five or ten years to scale up the clean fuels industry that will succeed it. The three studies provide a roadmap for successfully achieving the low carbon goals that states are setting today, which will create a steadily growing regional marketplace for clean fuels. When you consider that the combined economies of California, Oregon, Washington and British Columbia would rank fifth in the world, behind Germany and ahead of France, it is clear this marketplace can provide major step forward towards a clean transportation future.]]>
Both the studies and the world have changed. Agricultural markets are more flexible, deforestation has fallen in some key areas (Brazil in particular) and biofuels production is getting more efficient. The overall result is that biofuels are getting cleaner over time, and most biofuels are cleaner than gasoline. But the central importance of reducing biofuels impact on food and forests has been reaffirmed. Expanding the production of food-based fuels will not deliver the low carbon fuels we need to cut projected oil use in half and address climate change, and will cause many other problems. Fortunately we have better options.
Prior to 2008, biofuels were considered a guilt-free energy source: cleaner than gasoline, good for farmers that produced the feedstocks, and available domestically at seemingly limitless scale. In February 2008 that changed when important papers in Science Magazine, particularly one by Searchinger and coauthors, raised the specter that as US corn ethanol consumed an ever greater share of U.S. crop production, cropland overseas was expanding to fill the void in food markets. Most concerning was the conversion of tropical forests to farmland. Since deforestation is itself a major source of carbon emissions, this shift undermines the potential climate benefits of crop-based biofuels. Searchinger and coauthors estimated that emissions from ILUC for corn ethanol were higher than the total emissions of using gasoline, leaving no potential for corn ethanol or other crop based biofuels in a low carbon transportation future. This concept resonated powerfully, reinforced by the related concern that using food for fuel could make food more expensive and aggravate food insecurity. Since then ILUC emissions have become an important and contentious part of the lifecycle analysis of biofuels and in the administration of fuel regulations that are based on such analyses.
Experts across the country have been hard at work on this topic for the last 7 years, and have learned a great deal about ILUC. The headline conclusion of the 2008 paper, that corn ethanol’s emissions are much higher than gasoline, has not survived careful scrutiny. Subsequent analyses found more flexibility in the agricultural system to expand production without large increases in deforestation, and deforestation in Brazil has slowed. California’s most recent analysis finds ILUC emissions of about 20 grams of CO2 equivalent carbon pollution per megajoule of energy for the fuel produced (g /MJ), about 80% lower than the Searchinger’s result. Nailing these numbers down remains challenging, and an uncertainty analysis finds plausible estimates range from 11 g/MJ to 37 g/MJ. However, these revised values mean that – when ILUC emissions are combined with all other emissions – corn ethanol produced at an average Midwestern facility using natural gas as a source of process heat is 20% cleaner than gasoline, and the cleanest facilities are better still.
However, the underlying notion that biofuels expansion is profoundly impacting agriculture has only gotten clearer. Numerous studies have looked at how biofuels expansion impacts land use, crop prices, food consumption, livestock, and the use of irrigation. The global food and agricultural system is complex, to say the least, and incorporating these modelling approaches into a regulatory framework is and will remain a major challenge. But every credible study finds that biofuels are a major player in global agricultural markets. It is clear that, going forward, sustainable biofuels must not only cut oil use and reduce emissions, but also protect food security and complement the agricultural system. For reasons ranging from climate change to water pollution to food price stability, expanding biofuels by moving more and more grain and vegetable oil into fuel markets is not smart transportation policy or smart food and agricultural policy.
Much of the analysis of ILUC has focused on corn ethanol and soybean biodiesel produced in the US and its link to deforestation in Brazil. This makes sense since the US and Brazil are the largest producers of ethanol and soy biodiesel and the largest producers of corn and soybeans, and Brazil is historically among the largest sources of carbon emissions from deforestation. But what was just starting to come into focus in 2008 was how much of an improvement Brazil was making in reducing deforestation. As my colleagues have described in their recent report, Deforestation Success Stories, Brazil has cut the rate of deforestation by three quarters and they have done this even as soybean and cattle production continue to grow.
California’s latest ILUC analysis suggests that most Brazilian cropland expansion is likely to come from pasture land , as cattle producers raise more cattle on fewer acres. Another important shift is where expansion is occurring, with cropland and pasture expansion occurring on previously cleared land in response to more robust forest protection. And recent analysis from Iowa State has shown that much of the increased production in Brazil from 2004 to 2012 came from farmers growing two or more crops per season, or harvesting more of what they plant. The progress in protecting forests together with these opportunities for intensification mean that the magnitude of deforestation associated with corn, soybeans and beef expansion is going down, which is great news.
The bad news is that deforestation in Southeast Asia is still a major concern, particularly driven by the expansion of palm oil production.Because of this, California’s recent analysis found that palm oil biodiesel has ILUC emissions of 71 g/MJ, more than twice as high as soybean biodiesel and more than three times as high as corn ethanol. This means that palm oil-based biodiesel is more polluting than petroleum diesel. In the U.S. we don’t use a lot of palm oil for biodiesel, but my colleagues are putting pressure on the major companies that use palm oil in household products and foods to stop the expansion of palm oil onto forests. And they are succeeding in getting important commitments from major U.S. companies (for example Hershey, General Mills and Proctor & Gamble) and global agricultural traders (for example Wilmar and Bunge).
When assessing the performance and potential of a biofuel, it’s important to look at ILUC alongside other factors. In 2008 when the ILUC debate got going, the general understanding (based on a model called GREET from Argonne National Lab) was that corn ethanol from a typical Midwestern facility would reduce emissions by about 20% compared to gasoline. Adding 103 g/MJ as Searchinger and coauthors suggested made corn ethanol far worse than gasoline, and even the 30 g/MJ (~30%) California’s 2010 analysis found, was enough to make corn ethanol from a typical facility equal to or a little worse than gasoline. But corn ethanol production has been getting more efficient, and an updated version of GREET that reflects these efficiency gains finds that the direct emissions for Midwestern corn ethanol produced using natural gas are about 60 g/MJ or 40% cleaner than gasoline. Adding 20 g/MJ to account for ILUC emissions still leaves typical corn ethanol about 20% cleaner than gasoline. And for corn ethanol producers that adopt the most efficient technology in their production process, for example installing efficient combined heat and power systems, the emissions can come down even further.
While ILUC is just one factor of the lifecycle, the lifecycle itself is still just part of the story for biofuel impacts. And where corn ethanol is concerned, we have to talk about scale. U.S. corn ethanol production expanded rapidly over the last decade, as ethanol changed its role from a minor blending component (an oxygenate required to address air quality problems in some key regions) to its present role as a source of octane in E10 (a 10% ethanol gasoline blend) that is the main type of gasoline sold in the U.S. today. As consumption of corn for ethanol increased by 400 percent in just a decade, ethanol went from being a relatively minor use of corn to being the single largest use worldwide.
Continuing this expansion will make things worse, starting with the harm corn ethanol expansion has caused to water quality, but also the damage to the long term productivity of our agricultural system. My colleagues have outlined the need for a more balanced approach to farming, and for both dietary and environmental reasons, doubling down on corn won’t help us get there.
While more corn won’t get us where we need to go, the good news is that we have a lot of biomass resources that are a better choice. These are waste materials from our cities and agricultural residues like corn stalks, as well as environmentally friendly perennial grasses. With these materials we can make enough cellulosic biofuel to easily double or triple biofuels production in the next twenty years, and these non-food based cellulosic biofuels can cut emissions up to 90% compared to gasoline. Just as important, these cellulosic biofuels can scale up while moving our agricultural system in a healthy and sustainable direction. Cellulosic biofuel production is coming on line now, and with policies that support the best biofuels, as well as more electric vehicles and continued efficiency improvements across the transportation sector, we can keep moving towards our goal of cutting oil use in half in the next twenty years.
My conclusion after working in this area for 7 years is that we need to focus on three distinct areas