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.

What would Martin Luther think?

Last month the Catholic Church announced the return of plenary indulgences. They need not have. Environmentalists have already claimed the privilege of putting a price on guilt for this century. The new Catholic indulgences will have to take a back seat to carbon credits when it comes to buying your way out of sin.

To be fair, the Catholics will no longer allow you to buy your way out of Hell. They no longer sell indulgences, rather the indulgences can only be granted for doing things that good Catholics should be doing anyway. It is too bad that some environmentalists are not following their example but, instead, insist upon following in the footsteps of the 15th century Catholics and are selling redemption for cash.

For environmentalists, redemption comes in the form of carbon offsets; forgiveness for their role in global warming. For anyone who does not know what a carbon offset is, the essential idea is that companies, or individuals, engage in activities that have a net negative impact on CO2 emissions – planting trees, installing carbon sequestration devices in factories, using renewable power sources rather than traditional power sources, etc – and then calculate the amount of CO2 they have taken out of the atmosphere and sell the right to release that much CO2 to someone who has not reduced their carbon output. The going rate in European markets in 2007 was between 21† and 24† for a pound of emitted CO2.

It has become increasingly popular for those celebrities who wish to appear environmentally friendly to publicly buy these credits to “offset” the carbon expended in their daily lives. Once they have purchased their credits they can blithely jet from their manses in Italy all over the world: confident that they are doing their part to protect the environment.

This confidence in their environmental credentials is the flaw in the carbon credit argument. While, unlike indulgences in past centuries, some carbon credits can actually repair past “sins” by removing carbon from the atmosphere the mechanism by which this occurs is not well understood. This means that the degree to which planting a tree actually offsets carbon is not entirely clear. Furthermore, the regulatory schemes which determine what constitutes a carbon credit, and who can and cannot sell them, are not well defined or sufficiently advanced to ensure that the markets are secure and non-fraudulent. Essentially, there is no way of knowing whether or not those carbon credits purchased to forgive air travel actually equal the amount of carbon that the flight released.

There is, however, an even more fundamental flaw with the practice of offsetting carbon emissions through carbon credits. Like indulgences carbon credits are a forgiveness of “sin” that absolves the sinner of guilt for having committed an action. Whether or not someone should feel guilty for these actions is irrelevant, the essential fact is that, if they are purchasing a carbon credit, they clearly feel guilty for taking that action. By purchasing the carbon credit they therefore, in their minds, absolve themselves of the guilt incurred by releasing carbon into the atmosphere. It is this absolution that creates the fundamental problem with credits.

So long as credits do not directly reduce the amount of carbon in the atmosphere – and to some extent even when they do – there is problem with absolving this guilt. The problem is that guilt provides an enormous incentive to change behavior (Irish Catholics have known this for a very long time and anyone with an Irish Catholic mother can attest to their reliance on this knowledge). By absolving this guilt through the purchase of carbon credits the incentive to change behavior is removed. Rather than make the difficult decision to fundamentally change their behavior people can simply purchase credits to make what they would have done anyway “environmentally friendly.”

Yet, drastic and fundamental change is absolutely necessary. Offsetting carbon emissions will not stop global Warming. It will require a wholesale re-organization of the way which society, especially American society, conducts itself (for a better explanation of this see here). Providing the option of carbon credits simply promotes the myth that business as usual can continue and the environment will be fine.

Even if carbon credits actually do reduce the CO2- levels in the atmosphere, they still provide no incentive to change behavior. It is not possible, or desirable, to simply remove all of the CO2 from the atmosphere and as a result some type of change is still necessary.

While there is a place for a well-ordered carbon credit market, especially as a means of reducing industrial pollution, the presence of a personal market for carbon offsets is not a long-term solution. Rather than encouraging the purchase of these credits, environmentalists would be better served by following the model of the Catholic church and handing out credits to those who car pool, who bike or who minimize flights. In short, those who do what good environmentalists should do anyway.