The EPA made public this morning an independent review of how it should calculate the life-cycle effects of renewable fuels on air pollution.
Normally this would be an arcane economic debate over methodologies, time periods, and at what rate to calculate/discount the value of gains over time. But at stake here, ultimately, is billions of dollars in taxpayer subsidies to agribusiness, and even the future of the whole bio-fuel industry in the U.S.
So a controversy has been growing among various self-interested factions since the EPA, under the Obama Administration, reversed its Bush-directed self and said greenhouse gases are a health problem, which will be addressed.
A contentious rulemaking process is now well underway.
From an automotive point of view there are two central issues. The first is how to decrease emissions and our dependence on imports of foreign oil from terrorist supporting countries. The second is a subset of the first: what if the biofuels we are using — ethanol, biodiesel, natural gas — really cause more emissions than they save? That’s why how the EPA calculates the life cycle emissions effects is of such concern to subsidized businesses, the agricultural lobby and various clean air special interest groups.
The U.S. is already under Congressional mandate to use increasing amounts of renewable fuels. Under the Energy Independence and Security Act of 2007, EPA is responsible for revising and implementing regulations to ensure that gasoline sold in the United States contains a minimum volume of renewables. The Renewable Fuel Standard program will increase the volume of renewable fuel required to be blended into gasoline from 9 billion gallons in 2008 to 36 billion gallons by 2022. (At one point the goal under President Bush was 35 billion/2017.)
The new RFS program regulations are being developed with what the EPA euphemistically says is a “collaboration with refiners, renewable fuel producers, and many other stakeholders.”
Translation: Big bucks are at stake here, and lobbying will be intense.
The proposed methodology appears to have the support of the five eminent scientists who agreed to review it. They are:
1. Dr. Joseph Fargione, The Nature Conservancy
2. Mr. Ralph Heimlich, Agricultural Conservation Economics
3. Dr. Elizabeth Marshall, World Resources Institute
4. Dr. Jeremy Martin, Union of Concerned Scientists
5. Dr. Kenneth Richards, Indiana University
According to the EPA, evidence suggests that biofuel-induced land use change produces significant near-term GHG emissions, with displacement of petroleum by biofuels over subsequent years in effect “paying back” earlier land-conversion impacts.
So the choice on bio-fuels will come down to what is the time horizon over which to analyze emissions and apply a proper discount rate to value near-term versus longer-term emissions.
EPA is proceeding with two options.
Option one assumes a 30-year time-period for assessing future GHG emission impacts and equally values all emission impacts regardless of time emitted (a 0% discount rate).
Option two assesses emission impacts over a 100-year time period and discounts future emissions at 2% annually. Additional variations of the time period and discount rate are discussed in the proposed rule and the peer review charge questions.
In reading the long and dense report, of the five scientists, most generally agreed that the approach taken by EPA was scientifically objective.
However, Dr. Marshall said it was difficult to determine whether selection of the parameters followed a scientifically objective process because the discussion within the rulemaking documentation did not provide enough depth to justify the time accounting scenarios proposed.
Opinions of appropriate time frames varied considerably. And herein is the coming battle by the moneyed interests.
Reviewers disagreed on whether EPA should use an impact time frame-the length over which to account for the changes in GHG emissions, in particular due to land-use changes, which result from biofuel production-or project time frame-how long production of a particular biofuel is expected to continue into the future.
Reviewers also disagreed on what duration the various time frames should have. Some recommended that EPA use both a project and an impact time frame within the analysis, and some introduced the concept of a “rolling” time frame. Reviewers offered time frame lengths ranging from 13 to 100 years.
How this all works out in the rulemaking remains to be seen. The devil is definitely in the details. And it looks like that if shorter time frames are used, the biofuels industry will be in trouble on the facts, and will no doubt resort to political intervention.
The Obama administration is on record favoring a science-based approach, but whose scientist are you going to believe?