Fargo, North Dakota
May 21, 2009
By Cole Gustafson, Biofuels
Economist
North Dakota State
University Extension Service
On May 5, 2009, the U.S.
Environmental Protection Agency (EPA) announced proposed
regulations regarding implementation of the 2007 Energy
Independence and Security Act (EISA). Despite the legislation's
namesake, there isn't much security for the growth of
traditional corn ethanol.
EISA was landmark legislation for the biofuels industry because
it set a national goal of producing 36 billion gallons per year
of renewable energy.
Following passage, a national debate ensued on whether our
country had enough land available to produce this quantity of
biofuels and its impact on food supplies (food vs. fuel).
The original EISA legislation defined three types of biofuels --
conventional, advanced and cellulosic. Conventional biofuel is
traditional ethanol produced from cornstarch (grain). Advanced
and cellulosic biofuels were defined based on their ability to
reduce greenhouse gas emissions. Advanced biofuels must reduce
greenhouse gas emissions by up to 50 percent, while cellulosic
must reduce greenhouse gas emissions by up to 60 percent.
EISA included a specific column for production of conventional
biofuels and eventually increasing production to 15 billion
gallons per year by 2022.
Advanced and cellulosic biofuels only included ranges of 5 to 21
billion gallons per year and 3 to16 billion gallons per year,
respectively, because the federal government was uncertain how
rapidly these new technologies could be commercialized. The
legislation charged the EPA with reviewing and updating these
guidelines annually.
The EPA now has provided more clarity. Conventional biofuels in
the future must reduce greenhouse gas emissions by up to 20
percent. In determining this calculation, the EPA now includes
both "direct" and "indirect" causes during the lifecycle of
production. The latter component commonly is referred to as
indirect land use change. However, the EPA finds that any new
traditional corn grain ethanol plant would reduce greenhouse gas
emissions by only up to 16 percent, so it would not qualify as a
conventional biofuel.
In its proposed regulations, though, the EPA is grandfathering
in traditional corn grain ethanol plants built before Dec. 19,
2007. Therefore, existing ethanol plants will be able to
continue to operate and produce ethanol that conforms to the
federal guidelines for the time being. It is uncertain how long
this grandfathering provision will last, especially as new
technologies arise and production of conventional biofuels with
a greater than 20 percent greenhouse gas emissions reduction
occurs.
Existing corn grain ethanol plants are investing in new
technology, such as fractionation and changing plant energy
sources, in an effort to reduce greenhouse gas emissions. In
doing so, the plants increase their chances of being able to
meet the tighter EPA regulations being proposed.
To ensure compliance with new EPA regulations, each gallon of
biofuel produced will have a unique 34-digit renewable
identification number. Blenders will have to document that they
have purchased appropriate quantities of each type of biofuel
when producing their final consumer products.
The greatest challenge the biofuels industry now faces is
finding capital to construct new advanced and cellulosic plants.
With unproven biofuels conversion technology, changing EPA
regulations and weak financial markets, new investment capital
is going to be difficult to procure. |
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