Follow us on twitter
Site Feed
Podcast
Email Updates
Biofuels: Indirect Land Use; Climate Change; and Food Production – Prices (Ag Economy)
Biofuels: Indirect Land Use
Margot Roosevelt reported in today’s Los Angeles Times that, “California took aim Thursday at the oil industry and its impact on global warming, adopting the world’s first regulation to limit greenhouse gas emissions from the fuel that runs cars and trucks.
“The Air Resources Board voted 9 to 1 in favor of the complex new rule, which is expected to slash the state’s gasoline consumption by a quarter in the next decade. It seeks to expand the market for electric and hydrogen-fueled vehicles and jump-start a host of futuristic biofuels to replace corn-based ethanol, as well as oil.”
The LA Times article stated that, “The regulation requires producers, refiners and importers of gasoline and diesel to reduce the carbon footprint of their fuel by 10% over the next decade. And it launches the state on an ambitious path toward ratcheting down its overall heat-trapping emissions by 80% by mid-century — a level that some scientists deem necessary to avoid drastic global climate disruption.”
Today’s LA Times article went on to say that, “Scores of industry executives and environmental activists testified on the hotly debated fuel regulation at a daylong public hearing in Sacramento before the vote. Corn ethanol producers complained that the rule unfairly exaggerated the effects of using food crops for energy. Cattlemen argued that diverting corn to ethanol has upped their feed costs.
“Canada’s consul general in San Francisco charged that the rule discriminates against oil from Alberta tar sands. And former Gen. Wesley Clark, testifying for the ethanol industry, said the board failed to account for carbon-intensive effects of U.S. military forces protecting oil reserves in the Middle East [See related news release].
“The regulation calculates the life cycle of fuels from their extraction — or cultivation, in the case of biofuels — to their combustion. But the indirect effect of replacing cropland used for energy will also be included, and the board’s calculations of those land-use effects is strongly disputed by corn ethanol producers.”
The Associated Press reported today that, “California air regulators on Thursday adopted a first-in-the-nation mandate requiring low-carbon fuels, part of the state’s wider effort to reduce greenhouse gas emissions.”
The AP article indicated that, “Representatives of the ethanol industry have criticized the rule, saying state regulators overstated the environmental effects of corn-based ethanol. They also have criticized the board’s intention to tie global deforestation and other land conversions to biofuel production in the United States.
“The board has said Brazil converted rainforest into soybean plantations as a result of the growth in corn-based ethanol in the U.S. A formula being considered by the board would take into account the destruction of forests and grasslands elsewhere to grow fuel crops for U.S. demand.”
Yesterday, Reuters writers Steve Gorman and Nichola Groom reported that, “California regulators preparing Thursday to adopt landmark rules curbing carbon emissions from transport fuels made an eleventh-hour bid to woo critics who call the measures unfair to corn-based ethanol.”
The Reuters article explained that, “If adopted by the Air Resources Board as expected, the low-carbon fuel standard would become the first measure in the nation to impose on motor fuels limits on the amount of greenhouse gases, which contribute to global warming.
“Similar rules are being considered in 11 other states that are waiting for California to act. President Barack Obama has also called for a nationwide low-carbon fuel standard to help meet his goal of cutting greenhouse gas emissions more than 80 percent by mid-century.”
The Reuters writers added that, “Ethanol industry advocates and scientists are among those who have vehemently opposed rules drafted last month by the state’s Air Resources Board, saying they put grain-based biofuels at a competitive disadvantage.
“In a move to quiet those concerns, the state’s top air quality regulator, Mary Nichols, sent a letter Wednesday to biofuels industry executives insisting that ‘corn ethanol will play an important role in helping California achieve the goals’ of the proposed regulations.”
“One copy of the letter, released to Reuters, was addressed to former General Wesley Clark, co-chair of the biofuels association Growth Energy and a former Democratic U.S. presidential candidate,” the Reuters article said.
Near the conclusion of yesterday’s Reuters article, the writers stated that, “But members of the beleaguered ethanol industry say the measure’s ‘indirect land use’ provisions wrongly calculate the carbon impact of corn ethanol by factoring in the clearing of forests, which store carbon, when corn is grown in a big way.
“Critics call the land-use models flawed and selectively applied to grain ethanol, putting a widely available cleaner-burning fuel at a disadvantage to alternatives still being developed.”
Kate Galbraith reported yesterday at the Green Inc. Blog (The New York Times) that, “The Waxman-Markey climate bill recently introduced in the House also includes a national low-carbon fuel standard that uses California’s proposal as a model.
“California’s proposed standard has spawned controversy over its treatment of corn-based ethanol.
“Many environmentalists argue that it does little to counter global warming, due to emissions associated with growing corn and the use of land for crops.
“The proposed California regulation does not ban corn ethanol, but rates its greenhouse gas intensity as relatively high – even above that of petroleum in some cases, according to [Roland Hwang of the Natural Resources Defense Council]. He noted, however, that some ethanol produced in California and co-located with animal feed lots got a more favorable rating because less energy is needed to produce it.”
More specifically with respect to the federal implications of the California measure, Keith Johnson noted yesterday at the Environmental Capital Blog (The Wall Street Journal) that, “The draft Waxman-Markey energy and climate bill includes one section dedicated to a low-carbon fuel standard, modeled on California’s, but a little less stringent, and with a few more escape hatches built in.”
Meanwhile, Dan Piller reported yesterday at The Des Moines Register Online that, “President Barack Obama’s speech at Newton on Wednesday was especially noteworthy for its scant reference to ethanol.
“Iowa has 41 ethanol plants up and running or under construction, but ethanol producers have struggled of late with declining corn prices and drops in the price of ethanol.”
The article added that, “Obama’s call for spending on renewable energy development may be a net positive for Iowa, but ethanol interests may have hoped the president would have focused on the biofuels as much as on wind power.”
Climate Change
Greg Hitt and Stephen Power reported in today’s Wall Street Journal that, “House Democrats are weighing a plan to give some of the nation’s biggest polluters a 10-year cushion from the impact of greenhouse-gas regulations to get a cap-and-trade system in place now.
“Under the proposal, electric utilities would get free permits to emit carbon dioxide and other greenhouse gases for as long as ten years, after which they would gradually begin paying. In exchange, utilities would be required to shield consumers and businesses from higher electricity rates during that time. They would also make investments in conservation and renewable energy to lessen the industry’s reliance on coal.”
The Journal article explained that, “Negotiations over free emissions permits reflect the pivotal role centrist business-minded Democrats are playing in the evolving legislation to combat climate change.
“Republicans are attacking the House climate bill as a job-killing tax. In response, the bill’s main sponsors, Mr. Waxman and Rep. Edward Markey (D., Mass.), are working to shore up support among committee Democrats from the South and industrial Midwest who are worried about hurting their states’ economies.”
The House Energy and Commerce Subcommittee on Energy and the Environment held its third day of hearings yesterday on the Waxman-Markey climate proposal, details of yesterday’s activities are available here.
Meanwhile, a news item released yesterday by Senator Mike Johanns (R-Nebraska), the former Secretary of Agriculture, indicated that, “U.S. Senator Mike Johanns today spoke on the Senate floor about his motion to instruct Senate Budget Conferees to keep climate legislation out of the final version of the budget.
“‘The Senate has overwhelmingly expressed its disapproval of using budget reconciliation to slip sweeping climate change legislation into law,’ Johanns said. ‘Earlier this month, over two-thirds of the Senate, including 24 Democrats, voted to ensure a full debate on climate change legislation. Yet there is still a chance budget conferees may attempt to shortchange the American people by muffling debate. Nebraskans oppose and I oppose rushing such complex and far-reaching legislation into law without serious consideration by the United States Senate.’”
Sen. Johanns stated in a speech yesterday on the Senate floor that, “Notably, the Budget Resolution which we considered on the floor of the Senate did not include reconciliation instructions. I commended members of the Budget Committee during floor debate for not including instructions for cap-and-trade. At the same time, I expressed concern that the real threat came from what the House had done with its resolution. The House budget, I think we all now know, included reconciliation instructions. And we all know why they included instructions. The House has no use for them and therefore no reason to include them OTHER than to attempt to force cap-and-trade provisions into the conference report. This would restrict input from the American people or the Senate body on a policy that could result in massive new taxes and fees.”
And DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Frank Lucas, ranking member of the House Agriculture Committee, sees a major fight facing production agriculture in order to get ag practices acknowledged in any climate-change bill. Lucas also suspects that a cap-and-trade plan will require taxes to change how people use energy.”
Mr. Clayton noted that, “While agriculture often has its weather and price issues, Lucas, who took over as ranking member of the House Agriculture Committee in January, said that, long term, he is concerned about how cap-and-trade legislation is going to stress his district and agriculture as a whole. The topic ‘just started bubbling up’ at town hall meetings in his district last week.
“‘I’m going to fight to make sure rural America, production agriculture’s interest in this effort are defended as best I can, the hardships are minimized the best I can, but based on the track record in recent years, the odds of us winning are not very good,’ Lucas said. ‘That said, we don’t have a hard bill yet for us to calculate these costs.’
“Lucas said he is talking with House Agriculture Committee Chairman Collin Peterson, D-Minn., about the kind of policies the committee wants to develop on cap-and-trade legislation. But Lucas notes Democrats have 256 votes, nearly 40 more than needed to pass a bill.”
Food Production – Prices (Ag Economy)
A news release issued yesterday by the Food and Agriculture Organization of the United Nations (FAO) stated that, “High food prices persist in developing countries despite an improved global cereal supply situation and a sharp decline in international food prices, FAO warned today in its latest Crop Prospects and Food Situation report. This is creating further hardship for millions of poor people already suffering from hunger and undernourishment.
“This year’s world cereal production is forecast to decline by 3 percent from the 2008 record, but it would still be the second largest crop ever, according to FAO’s first 2009 forecast. Most of the decrease is expected to be in wheat, mainly due to a significant reduction in plantings in developed countries in response to lower international prices. In developing countries, cereal output could remain close to last year’s good level.
“Food emergencies persist in 32 countries, despite good 2008 cereal crops in many of the countries normally most at risk of food insecurity.”
***
With respect to some recent developments in the U.S. agricultural economy, an item posted yesterday at the Petaluma Argus-Courier Newspaper Online (California) indicated that, “[C]alifornia voters passed Proposition 2 last November. The measure requires most chickens, pigs and veal calves in California to have enough room to turn around freely, lie down, stand up and extend their limbs. But [Steve Mahrt, co-owner of Petaluma Farms] says his company has provided a cage-free environment for egg-laying hens for the past 25 years.
“Still, the measure is so vague and ambiguous that he is unclear if it applies to cage-free businesses such as his own. Although the provisions of Prop. 2 don’t take effect until 2015, Mahrt fears the effect of the measure could put local egg producers out of business. ‘It’s probably going to mean the end of an era in Petaluma,’ Mahrt told the Argus-Courier.
“While the measure might mean a slightly better life for some farm animals in California, it will likely put another nail in the coffin of local agriculture where egg farming once earned Petaluma the title of ‘Egg Basket of the World.’”
Yesterday’s item stated that, “Local egg farmers say the regulations will mean fewer eggs can be produced and will increase the cost of doing business. Mahrt says his ranch faces up to a two-thirds cut in production. Meanwhile, big out-of-state producers, who don’t have to conform to Prop. 2, will gain a competitive advantage and further undercut the prices of Petaluma’s smaller egg producers.
“This will also undermine the ability of local consumers to buy local and support Petaluma agriculture. If egg farms in California can’t compete with those prices anymore, consumers will buy out-of-state eggs.
“The result will be not only the loss of local agricultural operations, but the loss of several million dollars annually in state and local tax revenues from farm businesses.
“Meanwhile, local dairy farmers are facing a dire economic outlook as they are caught between falling milk prices and escalating feed prices. Milk prices are expected to stay low through the summer, which might be good news for consumers, but catastrophic for dairy farmers.”
Roy Roberson reported earlier this week at the Southeast Farm Press Online that, “By the end of March peanut farmers in the Southeast are usually sitting on go, contracts in hand and looking forward to the challenge of producing a good crop. In 2009, they were sitting on wait, hoping things would change — quickly.
“Contracts for $485 were offered in Virginia in mid-March, but were taken off the table. Whether these limited contracts were filled or removed because of a lack of takers is uncertain. Instead of going higher, the second round of contracts were for $440-450. Needless to say that didn’t excite many growers either.
“In South Carolina, the same $440-$450 contracts were offered on a limited basis, but again few farmers were quick to jump at the offer. Farmers simply can’t wait much longer to make planting decisions in the upper Southeast. In the largest peanut producing state, Georgia, some of the planting decision deadlines have come and gone and some acres designated for peanuts have already been planted to corn.”
The article added that, “Long-time peanut analyst Tyron Spearman says a number of factors have come together at exactly the wrong time to create a bad situation for the entire peanut industry. Too many peanuts is the big problem, but that problem is compounded by a number of other factors.
“The economic recession worldwide has caused people in most industries to cut back — agriculture is not an exception. Getting financing for buying large quantities of peanuts is a problem these days, he says. And, the increase in the value of the U.S. dollar has slowed peanut exports to a trickle.”
Keith Good
