May 5, 2009

Obama Sets Up Biofuels Working Group

Chris Stevens

Chris Stevens

Communications Director

Center for a Livable Future

cornThe blogosphere is abuzz today over the just-announced Biofuels Interagency Working Group, which throws a lifeline to the troubled ethanol industry. The group, headed by the secretaries of the Department of Energy, Environmental Protection Agency and the Department of Agriculture, has been given the charge by President Obama to make biofuels friendlier to the environment while encouraging the development of more of those “flex-fuel” cars that are so popular in the Midwest.

The formation of the working group—the administration’s first major statement on the touchy issue of enthanol use and production—will spell relief for the depressed industry, which has shuttered production facilities and delayed or canceled building new plants due to lower gas prices, higher costs for corn, and the credit crunch. Through the working group, the government will assist in refinancing some of the troubled operations and guaranteeing loans for construction of new biofuel projects. Recent earnings announcements from companies heavily-invested in the government-subsidized enthanol program have been dismal. ADM, for one, said today their third quarter profit dropped 98 percent, with a $167 million decline in the biofuel division alone.

The formation of the working group may take some of the heat off of the long-expected ethanol standards from the EPA. When Congress called for the increased use of ethanol a few years ago, they also told EPA to demonstrate that ethanol would contribute less to global warming than other fuels. According to an Associated Press article today, the EPA says that corn ethanol, as made today, will not meet a congressional requirement that ethanol produce 20 percent less greenhouse gas emissions than gasoline. The jury is still out on the indirect impacts of the biofuels industry on greenhouse gas emissions. Scientists and environmental groups say the impact of land use—the conversion of forests to biofuel crop land—should be factored in when setting standards for ethanol production.

National Farmers Union President Roger Johnson wasted no time today applauding the creation of a Biofuels Interagency Working Group. The purpose of the Working Group, according to the statement, is to continue to analyze contentious issues such as indirect land use effects. “There is currently no scientific agreement or certainty to quantify domestically produced ethanol impacts on land use change,” Johnson said.

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