Biofuel folly

Ted Gayer says forcing the private sector to produce large amounts of renewable fuel will harm consumers by increasing energy and food prices.

Gayer is an associate professor at Georgetown University’s Public Policy Institute, and from July 2007 to July 2008, served as deputy assistant secretary of economic policy at the Treasury Department.

According to this essay by Gayer at The American, the federal energy policy established in 2007 requires 11.1 billion gallons of renewable fuels to displace petroleum-based fuels by 2009, with 36 billion gallons of renewable fuels by 2022.

“Forcing the market to produce large amounts of renewable fuel will harm consumers in two ways: it will increase prices at the pump, because biofuels are more costly than gasoline, and it will drive up the price of food, because it diverts crops into fuel,” Gayer noted. “The impact of food price inflation will weigh most heavily in developing countries where food purchases comprise larger shares of consumption. Food expenditures account for as much as 70 percent of household consumption among lower income groups in the developing world.”

Gayer makes the following points in his essay:
• “While the Environmental Protection Agency (EPA) analysis suggests that the switch toward renewables will decrease ammonia, carbon monoxide, and benzene, it also predicts ‘significant increases in ethanol and acetaldehyde emissions’ and ‘more modest increases in nitrogen oxides, formaldehyde, particulate matter, hydrocarbons, acrolein, and sulfur dioxide.’”

• “Indeed, much of the early enthusiasm for biofuels was based on the belief that their use would reduce greenhouse gases. It is true that burning biofuels results in less tailpipe emissions of greenhouse gases relative to burning petroleum. Yet this ignores the increase in emissions that results from the production of biofuels, especially the land use changes as farmers convert forest and grassland into cropland for biofuel production. An article published in Science magazine in 2008 found that ‘corn-based ethanol nearly doubles greenhouse gas emissions over 30 years and increases greenhouse gases for 167 years.’”

• “The EPA’s findings indeed show a substantial increase in greenhouse gas emissions stemming from the initial land use changes needed to meet the mandate. Only over a long time horizon do the relatively clean-burning fuels start to accrue reductions in greenhouse gases relative to petroleum.”

• “At a cost of higher fuel prices (the EPA predicts 2.7 to 10.9 cents more per gallon), higher food prices (the EPA predicts $10 more per person per year on food), increases in harmful local pollutants, and a considerable increase in short-term greenhouse gas emissions, the standard only starts paying climate-related dividends many years in the future.”