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As political winds shift, ethanol may take a hit
"A low-carbon fuel standard is not a direct ethanol mandate," an energy policy expert told a meeting of ethanol producers.
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The ethanol industry has been blessed with tax breaks and government requirements to blend the fuel with gasoline.
But the global warming debate is changing energy politics, making ethanol less of a sure bet to win allies in Washington and in some state capitals, an energy policy expert said Thursday at a national ethanol industry conference in St. Paul.
"A low-carbon fuel standard is not a direct ethanol mandate," said Jason Grumet, executive director of the National Commission on Energy Policy in Washington.
Electric and hybrid cars and other technologies that promise to reduce the creation of greenhouse gases that are linked to global warming could overshadow ethanol incentives in the next two or three years, Grumet said.
"The political dynamic is changing a bit," he said.
In addition to global warming concerns that could shift energy policy away from favoring ethanol, the alternative fuel continues to take hits from critics who say that ethanol's appetite for corn is driving up food prices.
"Fuel vs. food is gaining traction in D.C.," Grumet said. "It's one of the reasons the House didn't pass a renewable-energy standard."
Tax credit's future
A 50-cent-a-gallon tax credit to support ethanol production is set to expire in 2010.
"When current tax credits run out, that's when you'll see some serious discussion about ethanol policy," Grumet told the conference, attended by about 1,800 ethanol producers from around the country.
"Volumes [of ethanol production] are so large and profits have been so large over the last several years that I think it's unlikely Congress will preserve the 50-cent-a-gallon tax credit," Grumet added during an interview.
But that's not the only hurdle ahead for ethanol makers. Corn-based ethanol has come under fire from critics as a fuel that takes almost as much oil to produce -- in fertilizer, pesticides and transportation -- as it replaces.
Politicians who are motivated to get the country to reduce greenhouse gas emissions no longer can be considered reliable promoters of ethanol, Grumet said.
Doing it right
Making corn-based ethanol production more efficient and shifting from corn to grasses and alternative feedstock will become increasingly important for ethanol to keep friends in Washington and state capitals, he said.
"It's true that ethanol is not the only game in town" on winning political support as an energy alternative, Grumet said. "But if you do it right, ethanol can be a leading way to reduce carbon emissions."
Doing it right, in his view, means distilling corn in ethanol plants using methane from animal manure or "biomass," including wood chips or crop waste.
A still that burns coal may make ethanol production as big a greenhouse gas producer as gasoline, Grumet said. But introducing alternative fuels at ethanol plants and introducing efficiencies in growing corn could reduce ethanol's greenhouse emissions by 50 percent, he said.
Future government incentives, Grumet said, are likely to be tied to reducing carbon emissions rather than picking a particular fuel, such as ethanol, as a target for government largess.
"Build the most efficient plants that you can," Grumet said. "It's not only the right thing to do, it also may be the most economical thing to do."
Mike Meyers • 612-673-1746 • meyers@startribune.com
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