White House Favors National Fuel Standard

The saga continues. During the Bush administration California passed a law that would require a 30% reduction in emissions by 2016. The idea was to encourage burning of less fuel or burning it more efficiently, whouch would improve gasoline mileage and reduce emissions. The law would also speed the entry of electric vehicles into the marketplace. The overall goal is reduce CO2 emissions that contribute to global warming and climate change.

But the California law requires a waiver from federal law to proceed. EPA during the Bush administration refused to grant that waiver and the newly installed Obama administration instructed EPA to rereview the waiver application. Many thought this would mean that the waiver would be granted and California could proceed.

As always, however, the issue is more complicated than the oversimplified picture ideologues in various camps would have you believe. In fact, if California proceeds it is likely to be followed by about a dozen other states. But many states would not follow suit. This would result in a patchwork of emissions standards that makes it very difficult for manufacturers to adjust their practices. It is especially difficult for the auto industry, which as we all know is undergoing some trying times.

Meanwhile, there is a less stringent federal regulation in the works that would stimulate the vehicle design changes needed to satisfy a congressionally ordered fleet average of 35 miles per gallon by 2010. That amounts to about a 40% improvement over current industry performance. Both President Obama and auto industry representatives indicated this past week that a single national standard for fuel efficiency would present a more manageable system. The goal would be to address both California's desire for more stringent standards and the need for consistent standards across the distribution area. Otherwise there is the potential of having to produce cars meeting different standards depending on where they are shipped (or driven post consumer purchase as individuals relocate around the country).

Congress, EPA, the President, and industry are all contributing to the debate. After the Congressional hearing last week it was still unclear which direction legislation would go, though the single standard seems a more efficient way to address the issue.

Unintended Consequences - Ethanol is Up/Ethanol is Down

News came this week that USEPA Administrator Lisa Jackson won't decide for several months the tricky issue of how much ethanol should be blended into gasoline. EPA is in discussions with the Department of Agriculture and the Department of Transportation, who are coordinating on the possible raising of the amount of ethanol blended in the US supply, all while trying to agree on a policy for regulating vehicle emissions.

Why is this important? Well, the current US standard is that ethanol can be 10% of the gasoline mixture (whereas in Brazil the mandate is 25% ethanol, mostly from sugar cane). Current law in the US requires that 11.1 billion gallons of biofuels (mostly corn-based ethanol) must be used this year in accordance with the Renewable Fuels Standard. But ethanol demand has fallen because the high prices of gasoline made people drive less, which in turn helped to decrease the price of gas. Add in the large subsidies given to ethanol producers to ramp up production a year or two ago and the now the worldwide recession, and ethanol producers are suddenly operating at about 85% capacity and struggling to pay the bills. One company, VeraSun Energy Corp., the second largest US ethanol maker, actually filed for bankruptcy protection late last year. Raising the ethanol standard would help keep ethanol use high even as fuel consumption drops.

Meanwhile, other issues have been raised as to whether corn-ethanol is a good fuel option or not. The increased use of corn for fuel rather than food had wide-ranging impacts not only on direct costs of eating corn, but also on the costs of beef, milk and other foods that rely on corn as feed. Given that ethanol actually reduces fuel-economy, and the technological difficulties of fuel delivery systems (e.g., corrosion of iron parts, internal wear, and spark generation), some have argued that it is not a viable alternative to gasoline. Yet others point to its advantages as a renewable resource and note that non-food vegetation (i.e., cellulosic) ethanol is being developed, as will innovations to automobile and other fuel delivery systems. All innovations necessitate further downstream innovations (and subsequently, jobs), they say.

What this means, of course, is that we need to be aware of the interconnectedness of our technologies. Changes to one can impact others. So merely switching from one fuel source to another isn't enough - we need to be aware of all the other impacts that such a switch might necessitate.