Corn Foolery

U.S. environmental policy is to be dictated by the concerns of energy generation yet again. This time it is not the oil and gas companies or the coal companies that are to blame but the farmers of the Midwest. Not content to simply destroy the biological diversity of the Great Plains or ruin the soil quality through mono cropping they have now gotten into the global warming game as well.

Rep. Peterson (D-MN) is the man most directly responsible for this but it is really the corn farmers of the Midwest who do not want the cash cow of biofuels to disappear. What I am referring to are the changes made late last night in the Waxman-Markey Bill climate bill that will now restrict the EPA’s ability to regulate the Ethanol industry.

Last month the EPA proposed a rule that would have required “lifecycle emissions” to be calculated into the Carbon footprint of the fuel. This means that the land use changes undertaken when production of the corn needed to produce the type of ethanol that comes out of the Midwest would have to be counted as part of the production cycle’s carbon footprint. This does two things: first, it significantly reduces the environmental appeal of corn based ethanol fuels (more on that below) and, second, under any type of permitting scheme in which ethanol produces are required to hold permits or credits for the emissions they produce it increases costs of production and makes ethanol less competitive with traditional oil based fuels.

But if this change makes ethanol more competitive isn’t that a good thing? Economically, for the farmers? Yes. Environmentally? No, not at all. The principle of a carbon cap-and-trade system (what Waxman-Markey is essentially creating) is that polluters have to pay for their pollution. Either this cost is internalized, or better, passed on to the consumer as a way of making them pay for the environmental damage that their lifestyle causes. This price signal, in theory, then induces people to change the way they live to a more sustainable lifestyle. As Yvo de Beor noted, “you can eat strawberries in the dead of winter, providing that you pay the environmental cost associated with getting those strawberries to you at that unsustainable moment in time.” You either pay for the correction of the emissions that your strawberry passion causes – through sequestration projects – or you just learn not to eat strawberries in January if you live in Boston.

Yet, this internalization of costs is precisely what the changes to the Bill are designed to avoid. Using a fuel that has fewer tailpipe emissions is fine. However, the full environmental impacts of the production of the fuel must be considered. The use of corn ethanol, when viewed from the perspective of its entire lifecycle is at best only slightly more appealing, and at worst, it is just as bad, as oil based fuels. The annual carbon emissions caused by global land use change – peat mining, deforestation, turning grassland into farm land, etc – are greater than the emissions caused by every car, truck, train, ship or plane in the world. The change in Waxman-Markey explicitly ignores this reality and allows midwestern farmers to produce corn-based ethanol at a fraction of the proper, sustainable, cost.

The counter-argument to all of this is that a price system like the one proposed, where people pay for their unsustainable lifestyles has a disproportional impact on low-income families. Those who can afford to pay the extra cost of strawberries in January will do so while those who cannot will be forced to choose something else. There is some truth to this. However, the reality is that there is no other option. The U.S. emits approximately 20 tons of CO₂/captia annually. The IPCC calculated sustainable amount? 2 tons/capita annually. We cannot continue to live the lifestyle to which we have become accustomed. We must choose a more sustainable lifestyle because technology is not changing fast enough to permit us to live the way we have been while emitting less CO₂.

This is not to suggest that the policy should be entirely regressive. Under a properly managed cap-and-trade system, the permits are auctioned of to companies with the auction revenue going to the government. If there are concerns about the regressivity of the program the auction proceeds can be used to compensate low-income families for the increased cost of carbon intensive goods. This must be done carefully however because the price signals cannot be entirely muted. They should simply be equalized, as best as possible, across socio-economic levels.

Corn-based ethanol is not the answer to American energy needs or to a more sustainable future. The changes in Waxman-Markey are a step backwards for progress towards a world that emits less CO2 and here is to hoping that the final house bill does not include these mistakes. Failing that, one must hope that the Senate has a better grasp of what it means to create a climate bill that recognizes the realities of global climate change and is aggressive enough to properly address them.