Liberate biofuels from abroad

This is written by James K. Glassman and published in

He served as the US Under-secretary of State for Public Diplomacy and Public Affairs in 2008 and 2009. He is executive director of the George W. Bush Institute in Dallas, Texas.

With the demand for energy on the rise you would expect the prospect of adding palm oil, a relatively inexpensive, renewable biofuel, to the mix would be greeted with enthusiasm by government officials.

But instead of embracing palm oil as a fuel, the Environmental Protection Agency (EPA) is trying to discourage its use in the United States, and the agency’s recent actions are raising questions about protectionism and ideological bias.

Palm oil is a vegetable oil, like canola and soybean, but carrying a more concentrated punch. It can be used for both transportation – where it’s mixed with petroleum-based diesel to create a cleaner-burning fuel — and for electricity generation.

How valuable is palm oil in the current energy environment? Consider a recent editorial in the Honolulu Star Advertiser, which praised the Hawaiian Electric Co.’s plans to build a facility to convert palm oil to biodiesel and use it as a “badly needed and affordable fuel for the utility.” The editorial adds, “Of all possible biofuels, palm oil is king for its affordability, efficiency, and eco-friendliness.”

The reason that biofuels like palm oil are eco-friendly is simple. “Since they are derived from plants,” writes Elisabeth Rosenthal in the New York Times, “biofuels absorb carbon while they are grown and release it when they are burned.” Through the process of photosynthesis, plants absorb carbon dioxide, the primary greenhouse gas, from the atmosphere. So a palm tree plantation, which is typically cultivated for 25 to 30 years, acts as a carbon sink, sucking in the greenhouse gas and reducing the amount in circulation.

Palm oil has another advantage for the United States. The two top global producers, by far, are a pair of democracies with tremendous strategic importance – Indonesia, the nation with the largest Muslim population in the world, and Malaysia, which ranks 17th.

For all these reasons, it was a surprise – and a particularly unpleasant one – when the EPA ruled in December 2011 that palm oil does not qualify as “a feedstock to produce biodiesel and renewable diesel under the Renewable Fuel Standard (RFS) program.”

The RFS mandates the blending of biofuels, mainly ethanol produced from corn, into petroleum-based fuels in stages, up to 36 billion gallons by 2022. But the EPA has to approve the fuels as being bio-friendly enough.

The standard that palm oil has to meet is a reduction of 20 per cent in greenhouse gas emissions over its “lifecycle” – which includes not just what gases palm oil fuel spews into the atmosphere when it’s burned but also what gases are released in the growing of palm trees and the production of the biofuel.

The EPA calculated that the reduction of gases was 17 per cent for biodiesel made with palm oil, “compared to the baseline petroleum diesel” it replaces. That’s three points short. The EPA is now asking for public comment on its analysis.

I am not going to get into the technicalities, but a study released by Neste Oil, a biofuels company based in Finland, found that lifecycle reductions for palm oil were 52 per cent.

My worry is that misguided protectionism and a preference for ideology over science may be at work here. What’s especially disturbing is that the U.S. seems to be following the lead of Europe in both these respects – not to mention the lead of California.

On December 29, 2011 a US District Court enjoined the California Air Resources Board from enforcing the California Low Carbon Fuel Standard, the state’s version of the EPA’s RFS mandate, because California violated the Commerce Clause of the U.S. Constitution and impermissibly discriminated against out of state biofuel additives – in this case, ethanol produced out of state.

The US has had a 54-cent-a-gallon tax on imported ethanol – a trade barrier, along with subsidies for U.S.-produced ethanol – that mainly targets Brazil, which makes the biofuel from sugar cane. Congress did not renew the tax or the subsidies when it adjourned at the end of the year, but don’t bet against them being revived. There’s a long history of protecting U.S. producers. Palm oil would, of course, pose a threat to American oilseed farmers and biofuel producers.

Meanwhile, Europe has set the protectionist pace with its Renewable Energy Directive, targeted in large part at the US soybean industry. That directive, even more onerous than the RFS, has already led to threats of trade retaliation and World Trade Organization complaints.

The European Union (EU)’s calculations of lifecycle reductions for palm oil and other oilseeds are also being challenged.

“We have found a remarkable difference between the carbon reduction performance of certain biofuels calculated by the European Commission’s Joint Research Centre and a range of scientific studies,” wrote Gernot Pehnelt of the Friedrich Schiller University of Jena, Germany, and author of a research paper on palm oil emissions. “Our results indicate default values for greenhouse gas emission savings potential of palm oil biodiesel…beyond the 35 per cent threshold.”

And then there’s ideology. Palm oil, which, as the New York Times put it, was once considered a “dream fuel.” Now it is the favorite whipping boy of the political-environmental movement, from Greenpeace to Friends of the Earth to World Wildlife Fund (WWF) on down.

The complaint is that forests are being chopped down for palm tree plantations. In fact, Malaysia, especially, is trying to strike a balance: maintaining vast stretches of forest while at the same time putting land into cultivation for a crop that provides not just sustenance to low-income farmers but greenhouse-gas mitigation for the world – at a level of 17 million tons of carbon dioxide a year, “the equivalent to the annual emissions of three million passenger cars and light trucks.”

Farmers in the US deforested long ago and are benefiting from the proceeds. But, to the romanticists and radicals of the global environmental movement and their political supporters in Europe and the United States, farmers in developing nations are fair game.

It’s time to liberate markets and allow consumers to make their own decisions about the biofuels they want. Perhaps the most sensible step is for developing nations to challenge the US and Europe in the World Trade Organization. Less expensive energy and a cleaner planet hang in the balance.

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