Obama Under Pressure Over Role of Ethanol in Energy Policy

Environmental groups are unhappy with his support of corn-based ethanol during the campaign.

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Environmentalists agree with President-elect Barack Obama on many points, but his policy on ethanol isn't one of them.

In the ongoing debate over the future of the country's energy policy, biofuels occupy a unique and precarious position: reviled in some quarters, championed in others. Ethanol producers have enjoyed meteoric rises in the amount of ethanol they can make and sell, but they also have been accused of harming the environment, prompting food riots abroad, and throwing away government money on unsustainable endeavors.

Environmentalists are asking Congress and the next administration for a far-reaching overhaul of the current biofuel policy.

They want sharp cutbacks on ethanol subsidies, tougher environmental regulations, more investment in advanced biofuels research, a new appreciation of scientific data, and acknowledgment of the ripple effects that biofuel production can have around the world. Some of these requests will conflict with energy policies likely to be set forth by Obama, who strongly supported ethanol subsidies when he was in the Senate.

This is not to say there is no room for compromise. Much of the desire to change the status quo rests upon the use of corn as the primary—virtually the only—source of commercially available ethanol. In the campaign, Obama and his advisers, while reiterating his support for corn-based ethanol, stressed that the future of biofuels lies not with corn but with nonfood alternatives like grasses, husks, and waste products. Those biofuel sources, they argued, are more energy-efficient and have a smaller impact on the environment and food prices. Congress said the same thing when it approved a giant tax credit for cellulosic ethanol earlier this year.

But since celluosic ethanol has yet to reach large-scale commercial production, the present situation presents some difficult choices for the next administration. What should the government do about corn ethanol subsidies? What can it do to get advanced biofuels developed more quickly? And do the benefits of ethanol, corn or otherwise, outweigh the costs?

For environmentalists, the answer to the funding issue is straightforward: Cut the subsidies. According to the Energy Information Administration, ethanol receives more than three quarters of all federal subsidies for renewable fuels, a category that includes wind and solar power. Many see such expenditures as not only a waste but also as an insidious danger. "We don't want to see any investments in what we consider to be false solutions, such as biofuels that can increase global warming pollution," says Shawnee Hoover, legislative director for Friends of the Earth.

Such a move would save several billion dollars annually. But it also would likely undercut, if not cripple, an industry that already is struggling financially and employs thousands of people. One alternative, some in the industry say, would be to reduce the handouts for corn ethanol (one such reduction took place earlier this year) and instead help companies working on more advanced biofuels. "All we are asking is that policy be technology neutral—that lawmakers don't advantage one party," says Paul Woods, CEO of Algenol Biofuels, which has developed technology to produce ethanol from algae. "Right now, we have no support at all, which is ridiculous."

Another dispute is playing out between environmentalists and the industry over the question of measuring the impact of biofuels on the environment. By law, biofuels have to be cleaner, in terms of greenhouse gas emissions, than gasoline. Last year, Congress instructed the Environmental Protection Agency to prepare guidelines to make sure that the rule was being followed. (The EPA's response is due soon.)

But determining what counts or doesn't count under such measurements isn't an easy task. Because land is often cleared to grow crops for fuel, many say biofuel production "leads to substantial releases of soil- and plant-carbon" that should be counted as emissions, as several prominent environmental groups wrote in a letter to the EPA last month. Biofuel proponents disagree, arguing that current models are unreliable and immature. The outcome of this debate, both sides say, could have a profound impact on the future of biofuel policy in the United States.