Biofuel mandates

Biofuel mandates never made any sense. Critiques of American biofuel mandates go back decades, arguing that creating the ethanol to blend takes more energy than you get out of the stuff at the end. 

New Scientist ran a column a couple of weeks ago arguing that biofuel mandates should be abolished, now, as part of the response to war in Ukraine. It's one way of quickly getting more land into food production, and out of value-destroying biofuel production. 

It is an odd time for the New Zealand government to reaffirm that it wants a biofuel mandate.

The Prime Minister says the Government's planned biofuels mandate will help create long-term stability in the fuel market, something she says recent price volatility has shown a need for.

None of that makes much sense. Cutting a small bit of petrol or diesel out of a fuel mix, to add in something that's a heck of a lot more expensive, might very slightly reduce price variability of the finished product if biofuel costs are less volatile than global fuel costs, but at a price that hardly worth paying. It's like saying that you avoid price volatility in aluminium by requiring that silver be added to aluminium foil. 

Biofuel mandates are bad to start with, but they're doubly-silly when transport is in the Emissions Trading Scheme. If carbon prices rise sufficiently, maybe biofuels will become a cost-effective way for fuel companies to avoid having to buy as many costly carbon permits. Biofuels then get brought into the system when it makes sense to bring them in. Mandating it forces things, regardless of cost-effectiveness.

A lengthy snip from the New Scientist piece below. 

The war in Ukraine has already caused food prices to shoot up as global markets anticipate a loss of wheat and maize exports from one of the world’s largest producers of these crops. But Europe and the US could more than compensate for the loss of Ukraine’s exports by diverting crops destined to be made into biofuels into food production instead. This would bring food prices down and help prevent a major global food shock.

On 9 March, Ukraine banned most food exports to try to ensure that its people don’t go hungry as Russian forces invade.

Food prices were already at the highest levels for 40 years, says Matin Qaim at the University of Bonn in Germany. This is for many reasons, including poor harvests because of extreme weather driven by global warming.

Quickly increasing the supply of food crops is difficult. But a large proportion of food crops aren’t eaten but converted to biofuels. Globally, 10 per cent of all grain is turned into biofuel, says Qaim.

In the US, a third of the maize grown is converted into ethanol and blended into petrol. Around 90 million tonnes is used for ethanol, nearly double the 50 million tonnes exported by Ukraine and Russia, says Qaim.

In the European Union, 12 million tonnes of grain, including wheat and maize, is turned into ethanol, Qaim says, around 7 per cent of the bloc’s production.

The EU also produces large quantities of biodiesel. It turns 3.5 million tonnes of palm oil alone into biodiesel, says Qaim. “That’s almost the amount of sunflower oil coming out of Ukraine and Russia.”

Governments have the power to change this, says Ariel Brunner at Birdlife International. “Because the biofuel market is entirely driven by subsidies, you can unplug it literally with the stroke of a pen,” he says.

If the US and Europe were to decrease their use of ethanol made from grain by 50 per cent, they would effectively replace all of Ukraine’s exports of grain, Tim Searchinger at Princeton University has calculated in response to a question from New Scientist.

“This is one of the few really quick things we can do,” says Brunner. “We are literally burning a hell of a lot of food.”

One country has already done just this. On 11 March, the Czech Republic ended its mandate requiring ethanol to be blended with petrol. It did this to reduce the costs of fuel rather than food, but Brunner is calling for other countries to follow suit.

“It absolutely would make a difference. It would begin to relieve prices immediately.” says Jason Hill at the University of Minnesota in St Paul. “It would also send a signal that can be acted on immediately by farmers. Northern hemisphere farmers are deciding now what to plant.”

The US Environmental Protection Agency has the power to waive the requirement to blend ethanol into fuels, says Hill. “The EPA could very quickly send a signal that ethanol is not needed.”

Temporarily halting biofuel mandates wouldn’t be popular with farmers. The powerful agrobusiness lobby in the US is currently demanding the opposite, that biofuel production is increased in response to the rising oil price, says Hill.

The government's biofuels factsheet notes that more than 60 countries have biofuel mandates. They'll have to cut the Czech Republic from the list I guess.