NPRA Cites Three New Independent Reports on the Consequences of the Biofuel Mandate

WASHINGTON--NPRA, the National Petrochemical and Refiners Association, Executive Vice President Charles T. Drevna today called attention to three new reports from the international Organisation for Economic Co-operation and Development (OECD), FarmEcon.com and the Chesapeake Bay Commission that confirm increasing doubt as to whether increasing the biofuel mandate established by the Energy Policy Act of 2005 is necessary much less wise given the impact on food prices and negligible environmental benefits resulting from ethanol’s production, distribution and use.

“A number of experts in a variety of fields have cautioned policymakers against relying heavily on biofuels to achieve the two goals of enhancing energy security and improving our environmental quality,” Drevna said. “The new reports from the OECD, FarmEcon.com and the Chesapeake Bay Commission really tell the rest of the story when it comes to the biofuel mandate and its negative consequences. The OECD, for example, asks the basic question, ‘is the cure worse than the disease,’ and then discusses the potential ‘food-versus-fuel debate.’ FarmEcon.com says the cost increases associated with ethanol subsidies are already showing up ‘in the prices of meat, poultry, dairy, bread, cereals and many other products made from grains and soybeans.’ Finally, the Chesapeake Bay Commission warns that ‘biofuels could lead to shifts in crop patterns and acreages that create an uncertain future for farmers and foresters and seriously worsen the overload of nutrients to our rivers and the Bay’ if handled incorrectly.

“We strongly urge policymakers to consider these consequences as they debate increasing the federal biofuels mandate in pending or future energy legislation.”

Report Excerpts

Organisation for Economic Co-operation and Development (OECD)

• “In theory there might be enough land available around the globe to feed an ever-increasing world population and produce sufficient biomass feedstock simultaneously, but it is more likely that land-use constraints will limit the amount of new land that can be brought into production leading to a ‘food-versus-fuel’ debate.” (Richard Doornbosch and Ronald Steenblik, Biofuels: Is The Cure Worse Than The Disease?, Organisation for Economic Co-operation and Development , September 2007, p. 4 [emphasis added])
• “When such impacts as soil acidification, fertilizer use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel.” (p. 5 [emphasis added])
• “Neither should current biofuel support policies be championed for their supposed capacity to reduce GHGs or improve energy security. The cost of obtaining a unit of CO2-equivalent reduction through subsidies to biofuels is extremely high, well over $500 per tonne of CO2-equivalent avoided for corn-based ethanol in the United States, for example, with other researched countries not performing much better. The score is also not very favourable in terms of displacing fossil fuels. In most cases the use of biofuels roughly doubles the cost of transportation energy for consumers and taxpayers together.” (p. 6 [emphasis added])

FarmEcon.com

• “In total, the costs of ethanol paid by taxpayers, fuel purchasers and the food system is about $31 billion in 2007, or about $4.40 per gallon of ethanol produced. Corrected for the energy content of ethanol relative to gasoline, this is equivalent to a wholesale gasoline price of $6.67 per gallon. Ethanol is not a cheap source of energy, it is about 3 times as expensive as gasoline.” (Dr. Thomas Elam, Fuel Ethanol Subsidies: An Economic Perspective, FarmEcon.com, September 19, 2007, p. 17 [emphasis added])
• “The ethanol subsidy program is now increasing the cost of food production though side effects on major crop prices and plantings. The cost increases are already starting to show up in the prices of meat, poultry, dairy, bread, cereals and many other products made from grains and soybeans.” (p. 2 [emphasis added])
• “[N]early all of the world’s current grain supply would be needed to fuel the U.S. gasoline powered vehicle fleet, leaving almost nothing for world food needs. Put another way, each 1% of the U.S. gasoline supply that is replaced by ethanol uses almost 1% of our current global grain production. Clearly, the global demand for food places a severe limit on the feasibility of using grain supplies for producing a large percentage of U.S. motor fuels.” (p. 5 [emphasis added])

Chesapeake Bay Commission

• “Handled incorrectly, biofuels could lead to shifts in crop patterns and acreages that create an uncertain future for farmers and foresters and seriously worsen the overload of nutrients to our rivers and the Bay.” (Chesapeake Bay Foundation, Biofuels And the Bay: Getting It Right To Benefit Farms, Forests and the Chesapeake, September 2007, p.3)
• “Brazil is often cited as a promising example of biofuel production and consumption. Ethanol, produced from the country’s vast acres of sugar cane, now comprises half of Brazil’s transportation fuel, and 77 percent of new cars in Brazil can run entirely on ethanol. However, Brazil may also serve as an example of how rapid growth of biofuels can lead to unintended environmental consequences. The demand for sugar cane-based biofuel may accelerate the conversion of other agricultural lands and push grazing farther toward rainforests. Given the role of these vast forests in mitigating global climate change and in providing other ecosystem services, this may represent a major drawback to the continued growth of the biofuels industry in tropical regions.” (p. 5 [emphasis added])

NPRA members include more than 450 companies, including virtually all US refiners and petrochemical manufacturers. Our members supply consumers with a wide variety of products and services used daily in their homes and businesses. These products include gasoline, diesel fuel, home heating oil, jet fuel, lubricants and the chemicals that serve as "building blocks" in making everything from plastics to clothing to medicine to computers.