The Billion Gallon Challenge

The Union of Concerned Scientists shares its vision for incentivizing greener biofuels.
By Jeremy Martin | March 10, 2011

Energy security, jobs, and a healthy environment—Americans can’t agree on much these days, but we all want these three things. We’ve even named them: a clean energy economy. The biofuels industry has an opportunity to help build America’s clean energy economy, but not without a significant shift in biofuels policy—a shift that will require the support of the whole industry. Whether you’re a scientist like me or make your living developing fuel from corn, soy, municipal waste or perennial grasses, we all want an abundant supply of domestic energy that supports large numbers of jobs, reduces our dependence on oil and protects the environment.

Over the past decade, supportive federal and state policies have allowed the industry to grow rapidly and biofuels now represent nearly 10 percent of all transportation fuel sold in the United States. These policies were enacted in many cases using an argument that “what is good for the father is good for the son.” In other words, support for first-generation biofuels would help launch second- and third-generation technologies, such as cellulosic biofuels. Unfortunately, while existing policies have expanded production of corn ethanol and other conventional biofuels, advanced biofuels have been left behind. 

Shaky financial markets, volatile fuel prices and the uncertainty inherent in commercializing a new technology have also helped stifle advanced biofuels development. But the country’s economic forecast is improving. There is now an opportunity to move cellulosic biofuels out of the laboratory and into our fuel tanks. It is time to adopt a new set of policies that will help get advanced biofuels back on track by launching the first billion gallons of cellulosic biofuels production and meeting the new challenges facing the industry today.  

The challenge is indeed daunting. Most sober analysts recognize that we can’t reach 36 billion gallons in 2022, as mandated in the renewable fuel standard (RFS), based on corn and soybeans alone. We need to rapidly ramp up production of cellulosic fuels to meet our energy security goals. Despite the mandate, the U.S. EPA (which administers the RFS) was forced to lower the 2010 requirement for cellulosic biofuels from 100 million gallons to a mere 6.5 million gallons. Without new policies, this disappointing trend is not likely to change any time soon.

Last summer, the Union of Concerned Scientists published a report, “The Billion Gallon Challenge,” in which we laid out our policy proposal that will allow the biofuels industry to play a leading role in the clean energy future for the United States. We need a set of new policies to create the financial climate for investors to fund the first 20 cellulosic biorefineries and enable production of the critical first billion gallons. To help companies secure financing, UCS is calling for an investment tax credit of 30 percent and loan guarantees for the first billion gallons of cellulosic biofuel production (phasing out rapidly as the technology is proven).

At the same time, we should be moving away from today’s volume-based biofuel tax credits towards performance-based policies. Since the RFS already mandates biofuels, it makes sense to craft our tax credits to reward producers who go beyond the bare minimum required by the RFS to provide cleaner and higher energy density fuels. We propose a unified Biofuels Performance Tax Credit, which supports all the different biofuels based on their ability to displace oil and surpass the minimum standards of the RFS. But a unified policy does not mean one size fits all. All biofuel producers can benefit, but the size of the tax credit will depend upon cleaning up their production processes. Corn ethanol producers will be rewarded for adopting the latest production technologies and low carbon energy sources, and all biofuel producers will have an incentive to invest in energy efficiency.

Over the past three years, ethanol industry trade groups have not helped the cause of advanced and cellulosic biofuels. As corn ethanol boomed and cellulosic biofuel was stuck in a holding pattern, industry trade groups like Growth Energy and the Renewable Fuels Association have been perpetually on the attack: attacking the science behind life-cycle accounting, especially indirect land use change; pushing to change the ethanol blending rules before the testing was complete; using all their political capital on getting a short term extension of the Volumetric Ethanol Excise Tax Credit, a policy even they acknowledge has outlived its usefulness. While I realize industry insiders may think they were fighting the good fight, to those outside the biofuels industry, it read like a page from the Exxon-Mobil playbook.

These aggressive tactics unified and galvanized a powerful opposition, from the Wall Street Journal to the New York Times; from Friends of the Earth to the Tea Party. The tide of public opinion turned against the industry. Suddenly the biofuels industry was isolated and identified in the public eye as part of the problem, rather than part of the solution.

UCS joined the voices opposing VEETC extension because, while we believe biofuels are vital to reducing our oil dependence, we can’t get there with the failed policies of yesterday. Meeting the Billion Gallon Challenge will demonstrate that biofuels are part of our clean energy future. A comprehensive tax credit that encompasses all the different biofuels, such as the Biofuels Performance Tax Credit, will drive improvements in conventional biofuels while also providing support for the next generation.

Over 1,000 scientists and economists have signed a statement in support of the Billion Gallon Challenge, but scientists don’t build biorefineries, so obviously industry needs to play a leading role. In the current political climate, it is going to be tough to get significant support for anything, and our best hope is to pull together. Your colleagues struggling to establish advanced biofuel technology need your support. Yet, despite the difficult circumstances, the future for biofuels and its role in America’s clean energy future is bright.

If you agree with us that biofuels have a bright future that involves both conventional and cellulosic biofuels, then let’s get behind smart, cost effective policies that build on the RFS and invest in the next generation. Together we can chart a practical, navigable course to reduced oil dependence, stable jobs and a healthier climate. I hope you will join us in working to meet the Billion Gallon Challenge.

Author: Jeremy Martin
Senior Scientist, Union of Concerned Scientists
(202) 223-6133
jmartin@ucsusa.org