Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

The White House ripped the legislation, releasing a statement (see text here) that called it "bad for American taxpayers," and saying the bill would increase spending by as much as $20 billion and failed to include what it called "much-needed farm program reforms." Although much of the statement focused on subsidies to wealthier farmers at a time of record crop prices, it also singled out the sugar-to-ethanol provision for special criticism:

"The farm bill not only fails to reform the sugar program but actually increases government intervention to drive up sugar prices. This law would support sugar at nearly double the world market price and control supplies to assure that domestic growers meet 85 percent of domestic consumption. Any excess supply, which could be available for food production, would be owned by the government only to be auctioned to ethanol facilities at a huge loss."

In her statement praising the legislation, Pelosi also cited some of the bill's aspects related to fuels production:

"To help transition biofuels from corn, the farm bill reduces the current tax credit for corn-based ethanol and creates a new tax credit to promote the production of cellulosic biofuels."

What happens next is not certain, although Pelosi's hometown newspaper, the San Francisco Chronicle reported that Bush's opposition "sets up an effort" by Democrat Pelosi and congressional Republicans to override the president's likely veto (see story here). The Chicago Tribune reported that lawmakers planned to take up the bill next week and send it to the president's desk (see story here), and the Washington Post agreed that  a vote could be held next week (see story here). 

(White House photo)

Bush, however, on Tuesday ripped the bill for not doing enough to cut subsidies for wealthy farmers:

"The bill Congress is now considering would fail to eliminate subsidy payments to multi-millionaire farmers. America's farm economy is thriving, the value of farmland is skyrocketing, and this is the right time to reform our nation's farm policies by reducing unnecessary subsidies. It's not the time to ask American families who are already paying more in the check-out line to pay more in subsidies for wealthy farmers. Congress can reform our farm programs, and should, by passing a fiscally responsible bill that treats our farmers fairly, and does not impose new burdens on American taxpayers." 

Whether Bush's remarks were enough to derail the bill was a matter of some debate. Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation told Bloomberg she believed the chances of a presidential veto were about 30 percent (see story here).    

Meanwhile, some critics of subsidies for corn-based ethanol weren't persuaded by the bill's cut in subsidies.

"I guess you could say [it] is a step in the right direction but it certainly does not go far enough," Scott Openshaw, communications director for the Grocery Manufacturers Association, told Climate Law Update Tuesday.  The trade group represents the food, beverage and consumer products industries and has pushed for an elimination of corn-to-ethanol subsidies, believing they contribute to higher commodity prices.

"We kind of feel like it's bad to take your lunch and put it in your car," Openshaw said. However, he praised the legislation's support for cellulosic ethanol, which is made from non-food plant material.

A spokesman for the Renewable Fuels Association, representing the ethanol industry, could not be reached for comment Tuesday. The organization has vocally defended ethanol, including that made from corn, from charges it is contributing to skyrocketing food prices and other global ills(see recent RFA background statement here; see Climate Law Update story here).

(White House photo: President Bush at April 29 news conference)

The Time article contained the most scathing critique of a fuel that had been touted as a major factor in the effort to slow climate change:

"But several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it's dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline."

The biofuel industry does receive encouragement from the federal government, including last year’s Energy Independence and Security Act that required a five-fold increase in renewable fuels by 2022 (see White House fact sheet and text of legislation). The magazine reported that last year the country produced about 7 billion gallons of ethanol, costing taxpayers $8 billion in subsidies.

Time described a complex domino effect that starts with the demand for the fuels in the United States and elsewhere and ends up promoting the destruction of forests that, ironically, could help soak up the excess carbon dioxide in the atmosphere that contributes to global warming:

"In Brazil, for instance, only a tiny portion of the Amazon is being torn down to grow the sugarcane that fuels most Brazilian cars. More deforestation results from a chain reaction so vast it's subtle: U.S. farmers are selling one-fifth of their corn to ethanol production, so U.S. soybean farmers are switching to corn, so Brazilian soybean farmers are expanding into cattle pastures, so Brazilian cattlemen are displaced to the Amazon. It's the remorseless economics of commodities markets. 'The price of soybeans goes up,' laments Sandro Menezes, a biologist with Conservation International in Brazil, 'and the forest comes down.'"

The article appeared before last week’s report from the U.S. Department of Agriculture that suggested some shifts in the American farming pattern. That document (see text) said that corn planting is actually expected to decline by about 8 percent this year, with other crops, including soybeans, increasing significantly. Among others, a New York Times (see story) account of the report suggested that the changes could hike corn prices and cause difficulties for the “struggling” companies that make ethanol.

Nevertheless, suggestions that the ethanol industry is part of the climate change problem, rather than the solution, drew a sharp response from Matt Hartwig, a spokesman for the Renewable Fuels Association, an industry trade association. Hartwig said biofuels offer society the opportunity to begin moving toward a more sustainable future.

 “How did we get in the situation we find ourselves in today?” Hartwig said in an interview with Climate Law Update. “It wasn’t because of biofuels; it was because of a reckless use of our fossil fuel resources.”

The organization also issued its own written defenses of the industry and responses to the USDA report. The industry association noted that farmers themselves have had to react to rising fossil fuel prices and it attacked the scientific evidence cited by biofuel critics (see public statements here, here and here). 

Hartwig, who blamed much of the recent push-back against biofuels on criticisms coming from the oil, food and livestock industries, said ethanol production has helped strengthen corn prices. But he said that is by no means the only factor at work. He cited such pressures as the global demand for corn for food for people and livestock; the weak dollar that encourages exports and market speculation. And he bristled at the notion of a causal relationship between biofuel production in the United States and deforestation elsewhere.

“An acre of corn used for ethanol production here does not directly result in an acre of rainforest in Brazil being cut down,” Hartwig said. “They’ve been cutting down the rainforest for decades, long before the ethanol industry came into being.”

For instance, the association refuted the asserted connection between ethanol production and foreign impacts, including rainforest destruction. It noted that American corn exports generally have held steady and shipments of distiller's grains, a byproduct used for animal feed, have actually increased. At the same time, without renewable sources such as biofuels, fossil fuel use is destined to increase, the industry statements said.  

The association's Web site demonstrates that the latest brew-up isn't the first.  "Oil and Food Industry Attacks on Ethanol Misleading and Diversionary," proclaims one press release; "Wheat Prices Are High, But Not Because Farmers Planted Less," says another. And talk about subsidies: The association cites a study showing the U.S. government spends as much as $140 billion a year -- on military might to protect the oil shipping channels out of the Middle East. 

A report appearing in a USDA publication earlier this year appeared to lend some support to the biofuels industry position that ethanol production and higher food prices do not necessarily go hand-in-hand, at least for long. It cited a spike in corn prices in the 1990s that led to a "short-lived" impact on some foods. But the article concluded (see full text here): "For the most part, food markets adjusted to the higher corn prices and corn producers increased supply, bringing down price." 

Not all alternative energy sources took a punch from the media. A CNN report glowingly referred to algae as “the ultimate in renewable energy,” and cited several benefits, including its ability to help sequester carbon from power plants (see story).

And stationary power sources continued to gain lots of attention. Schwarzenegger last week, for instance, joined with Southern California Edison in announcing the nation’s largest rooftop solar installation project by a utility company (see Edison press release and Schwarzenegger press release).

In Ohio, Gov. Ted Strickland and legislative leaders unveiled a new $1.57 billion economic stimulus package that includes $150 million to help make the state "a powerhouse of renewable and advanced energy production such as wind, solar and clean coal (see press release here)." The announcement did not include many details of the program in a state that is both a big producer and consumer of coal (see Ohio Coal  Association background information).  

And in Northern California, Pacific Gas & Electric Company announced it had signed a deal for up to 900 megawatts of solar thermal power. The utility signed contracts with BrightSource Energy Inc. for 500 megawatts of electricity from three projects and it took out options for another 400 megawatts (see PG&E statement).

Meanwhile, the American Wind Energy Association released its latest list of who's on top in the industry. It found Texas to be the leading wind energy state, leading in both total installed capacity and in the amount of new projects added in 2007. Other leaders were California, Minnesota, Iowa, Washington, Colorado, Illinois and Oregon. Iowa generated 5.5 percent of its electricity from wind, the highest of any state, according to the findings. The study also found that FPL Energy operated the biggest farms and Vestas had installed the largest turbines in the United States (see press release and complete text of study).    

(Photo of organic corn crop, courtesy USDA Agricultural Research Service)

“Clean energy has moved from the margin to the mainstream and the proof is in these numbers,” Pernick said in a statement announcing the report. “Amid last year’s plummeting housing prices, rising foreclosure rates and record high oil prices, clean energy continued to provide a bright spot in an otherwise sluggish economy.”

Wind constituted the largest component of the global increase in capacity, REN21 reported; solar voltaics connected to the grid comprised the fastest growing energy technology. The United States was the leader in new wind capacity added each year, as well as ethanol production, according to REN21. Clean Edge, meanwhile had figures showing wind power sales jumped by an estimated 68 percent in 2007 to $30.1 billion compared to a year earlier, equalling the generation of 20 conventional fossil-fueled plants.

Ethanol production also spiked in the United States, according to another report, this from the Renewable Fuels Association, an industry group. It estimated that the country produced 423,000 barrels of ethanol per day, an increase of more than 34 percent from a year earlier (see press release and economic report).

Meanwhile, a California company, Ausra, Inc., issued a report (view press release and report here), which concluded that more than 90 percent of the United States electrical grid and auto fleets’ energy needs could be met by solar thermal power. The company happens to be the developer of such technology, which uses fields of mirrors to generate heat and drive steam turbines.

Several forces appeared to be driving the global renewable industry’s numbers, experts noted. According to New Energy Finance’s press statement:

"Among the key factors pushing [the] numbers sharply upwards in 2007 were government policies around the world to promote renewable power and cleaner fuels, oil prices approaching $100-a barrel and rising corporate and investor awareness of the opportunities in clean energy.

One of the themes of 2007 was geographic diversification. Western Europe and North America continued to enjoy sharp increases in VC/PE, public market and project investment – but the momentum spread out to include other developed economic regions such as Eastern Europe and Australia. Even more significant was the pick-up in activity in emerging economies, with China moving strongly ahead with projects in wind, biomass and energy efficiency, Brazil seeing huge investment interest in its sugar based ethanol sector, and Africa starting to see renewable energy and efficiency as partial answers to its power shortages."

In speaking to Climate Law Update, Clean Edge's Pernick also cited the fact that while the costs of fossil fuels were on the rise, the technology used for wind and solar is getting cheaper. In addition, he said many governments are taking steps, such as imposing renewable portfolio standards requiring utilities to supply customers a certain amount of power from renewable sources. The governments, he said, are interested in attracting jobs and other economic gains.

“They’re competing to be clean tech leaders,” Pernick said.

He also noted that to reduce greenhouse gas emissions, public officials are moving toward establishing a price on carbon, either through cap-and-trade systems or other market means.

“There’ll be mandatory markets,” he said.

Investment, said experts such as Micael Liebreich, chairman and CEO of New Energy Finance, must accelerate. While 2007 was strong, he said in the company's statement, “on our estimate a further, fivefold increase is required for major countries to meet their own ambitious targets for reductions in greenhouse gas emissions.”

Clean Edge’s report, however, also warned that some clouds remain on the horizon. Those include the rising impact of biofuel production on food supplies and commodity agriculture prices and the uncertainty over production tax credits for renewables. And, despite the recent gains in renewables, they still represent only about 3.4 percent of global power generation, according to the REN21 report. That doesn’t include large hydropower projects, accounting for about 15 percent of the generation total.

Which brings us to Hoover Dam. And another new report, this one prepared by researchers at the Scripps Institution of Oceanography. According to a statement from the American Geophysical Union, which has accepted the paper for publication, the Scripps researchers have put 50-50 odds on Lake Mead, which lies behind the dam, running completely dry by 2021, given expected climate change scenarios and if future water demands are not reduced. That’s, of course, bad news for hydropower, since water from the lake pouring through turbines generates enough electricity for an estimated 1.3 million people in the West.

Meaning there might be even more riding on the development of the renewable industry.  

(Photo of Hoover Dam: U.S. Bureau of Reclamation)