Poet Biofuels: Charting the Future of Ethanol?

From its start on the family farm with a single farm-scale ethanol facility to dozens of multi-million gallon per year biorefineries dotting the Midwest countryside, POET LLC of Sioux Falls, South Dakota, is now the world's largest biofuels producer.

Today at theEnergyCollective.com I've posted an exclusive podcast interview with Nathan Schock, director of public relations for Poet. We discuss biofuels, the company's plans for a next-generation cellulosic ethanol biorefinery, and the future of the ethanol industry.

Head over to theEnergyCollective.com to listen to the full podcast interview and find out more about Poet's cellulosic ethanol plans, hear Schock defend the current excise tax credit for corn ethanol (which theEnergyCollective.com contributor Robert Rapier has argued is now a big waste of taxpayer dollars), and a discussion of the most important policy steps Washington can take to help innovative firms like Poet make commercial cellulosic ethanol production a reality.

Give it a listen.

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New Oil Shock Poised to Strike as Economy Recovers

Originally posted at the Breakthrough Institute

Even with all that has intervened since the summer of 2008, including an historic election and the onset of the worst global recession in decades, the memory of the oil price shocks of the past year are not far from our minds. We'd better keep that memory fresh, because a recent McKinsey report warns that a second major oil shock looms just over the horizon, ready to hit the global economy hard as soon as it begins to recover.

McKinsey's analysts look at a variety of economic scenarios and warn that the global oil supply-demand balance will tighten as soon as the global economy begins to recover, as soon as 2010-2013 (depending on degree of global downturn). At that point, the global supply-demand situation will closely resemble the situation found in 2007 and the first half of 2008, when prices soared to over $140 a barrel, hitting pocketbooks and the global economy hard.

McKinsey predicts that a second oil price shock could cost the global economy $1.5 trillion or more, hitting us hard just as we're trying to stand back up again.

McKinsey recommends a suite of near-term demand abatement opportunities that can help forestall a potential oil shock, including removing subsidies encouraging oil consumption (common in oil producing nations in the Middle East), increasing overall energy productivity, particularly light vehicle fuel economy, switching oil for other fuels in boilers, and encouraging flex-fuel (and I would add, plug-in hybrid) vehicles that can turn to alternative fuel choices when oil price rise.

Interestingly enough though, McKinsey points to "aggressive" investments in clean energy innovation as the key to gaining the upper hand over oil price volatility and its devastating impacts on the economies of the United States and other oil importing nations in the long-term.

McKinsey recommends "continued investment" in "technologies that are currently in the research phase or are nascent [and] will become available in the longer term. ... If pursued with sufficient aggression, and combined with other levers listed above," they say, "such investments could lead to [global oil] demand peaking beyond 2020. The key areas for investment are to support research into [electric vehicles], [next generation] biofuels, and public-transportation infrastructure, the latter particularly in developing countries..." (Executive Summary, pages 14-15).

As with global warming, to ultimately get a handle on oil prices and free our nation from the volatility of global oil markets, we must prioritize energy innovation and the development and deployment of a whole new generation of technologies. And we simply lack the time to wait until the global economy recovers to begin making these investments. If we wait until then, it'll be too late, and the recovering economy will return us to the days of $100+ per barrel oil before we know it.

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Can the Stimulus Lift the Clean Energy Sector Above the Economic Meltdown?

That's the question considered in the latest annual report on clean energy sector trends from Joel Makower and his colleagues at CleanEdge. With an unprecedented investment in clean energy in the stimulus bill passed by Congress last month, you'd think things were looking up for the sector. They are, Makower concludes, but when you're climbing out of the general meltdown gripping the U.S. economy, there's a long way to climb. As Makower writes:

The good news is that clean energy continues on a blistering rate of growth — increasing 53 percent from $75.8 billion in 2007 to $115.9 billion in revenues in 2008, based on our study of three key technologies: solar, wind, and biofuels. And the growth will continue. We forecast that by 2018, these three technologies will have revenues of $325.1 billion.

The bad news: The clean-energy sector faces considerable challenges moving forward. A sinking stock market continues to plague the initial public offering markets, with only a small handful of energy-related IPO listings on U.S. exchanges in 2008. This means that venture capitalists and other investors are faced with a dearth of exit opportunities for their current portfolio companies, making it harder for new companies to garner investments.

Severely tightened credit markets also began to take their toll. In late 2008 and early 2009, the extent of constrained credit became apparent, with a range of clean-energy companies delaying plans, laying off staff, or scuttling projects entirely.

As Makower writes, despite the challenges gripping the sector, overall trends in three core clean energy sectors - wind, solar and biofuels - look robust:

• Solar photovoltaics (including modules, system components, and installation) will grow from a $29.6 billion industry in 2008 to $80.6 billion by 2018. Annual installations reached more than 4 GW worldwide in 2008, a fourfold increase from four years earlier, when the solar PV market reached the gigawatt milestone for the first time.

• Wind power (new installation capital costs) is projected to expand from $51.4 billion in 2008 to $139.1 billion in 2018. Last year's global wind power installations reached a record 27,000 MW. In the U.S., which accounted for more than 8,000 MW, wind installations represented more than 40 percent of total new electricity generating capacity brought online in 2008 — and moved the U.S. ahead of Germany as the world's leading generator of wind energy.

• Biofuels (global production and wholesale pricing of ethanol and biodiesel) reached $34.8 billion in 2008 and are projected to grow to $105.4 billion by 2018. In 2008 the global biofuels market consisted of more than 17 billion gallons of ethanol and 2.5 billion gallons of biodiesel production worldwide. For the first time, ethanol leader Brazil got more than 50 percent of its total national automobile transportation fuels from bioethanol, eclipsing petroleum use for the first time in any major market.

For more, check out the full report, Clean Energy Trends 2009 from CleanEdge.

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In the End: Senate Passes Energy Bill 86-8

The Democratic Majority quickly abandoned any effort (if there ever even was a plan to exert force?) to keep the $13.5 billion renewable energy tax package in the final Energy Bill.

The tax package would have given greatly needed tax breaks to emerging clean energy industries and removed corporate loopholes and subsidies for big oil & gas. Further, a Democratic analysis showed that the $13.5 billion in taxes over 10 years amounted to ONLY 1.1 PERCENT of the net profits that five largest oil companies would be expected to earn given today's oil prices! The Democrats simply allowed the tax package to fall away rather than push – even just a little bit – for a filibuster. Check this list to see if your Congressman was one of the “shameful 40” who stood with big oil and gas, and hold him or her accountable.

The revised Energy Bill gained strong bipartisan support and passed 86-8, with none of the presidential candidates returning to vote AND Sen. Hagel (NE) not voting... anyone know why?

So, we now have a watered-down Energy Bill expected to return to the U.S. House, where it will likely pass easily as-is, and then move to the White House. The White House issued a statement yesterday afternoon that President Bush will NOT veto the bill; it could be signed into law even before Congress moves to its extremely long holiday recess!

Beyond the bitter aftertaste the intial vote, tax package removal, and final passage has left in our mouths, we can feel good about the increase in CAFÉ standards, RFS and the efficiency provisions included in the final bill. These were important steps in the right direction, just not enough by any means... and the dangers posed by other upcoming legislation such as the General Appropriations Bill are quite concerning (to say the least!)

All eyes shift to the Lieberman-Warner global warming bill now; it was voted out of the Senate Environment committee last week, and is expected to hit the Senate floor for a full vote in mid-February. It is absolutely critical that this bill does not suffer the same watered-down fate. What happens there will truly lay the ground for America’s stance on global warming – at home and abroad.

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Senate Energy Bill: 59-40 ... for now

As predicted, the Senate took its second stab at the Energy Bill this morning; the vote was expected to be very close with 60 votes needed to end the cloture vote and move the Energy Bill forward. The Energy Bill currently includes the first overhaul in fuel economy standards in 35 years, a Renewable Fuel Standard (RFS), and a $13 billion clean energy tax package that would close corporate loopholes and repeal subsidies for the big oil and gas companies.

The Senate just failed clearing the cloture hurdle by a mere SINGLE VOTE (59-40)!! Sen. McCain was the only Senator missing from the vote… even the other presidential hopefuls found time in their busy calendars. It is despicable and horribly irresponsible that forty senators stood behind oil and gas companies this morning, rather than an investment in the future prosperity and sustainability of this country. Coincidently, senators have received over $8 million from big oil and gas over the last four years...

Senate Majority Leader Harry Reid has since called to bring the bill back for yet another vote this afternoon. Before the vote, however, Reid and the Democratic Majority, having already stripped the bill of RES, must now likely remove the bill's entire clean energy tax package in order for it to pass – even more disappointing!

Reid should NOT just give in to this reckless Minority! This is an opportunity for the Democratic Majority to show some backbone, rather than just roll over and let the tax provisions fall away from an already watered-down bill. The Democrats could actually push back, and force this bill into a filibuster situation, rather than allow an empty compromise -- which is what will happen otherwise. They could force the shameful 40 to do a little more as they continue to stand behind the oil and gas corporations that are preventing us from developing emerging sectors of our economy.

So, does the bill still include anything worthwhile -- if the taxes fall? If Reid moves ahead with what he pledged earlier today, we will lose the tax provisions. The RFS provision does contain some promising biofuels provisions, including a measure to consider the total global warming pollution generated during biofuel production (rather than just the decrease in oil use), investment in cellulosic ethanol and other environmental protections. The overhaul of the fuel economy standard is also an important step in the right direction. The final bill is still expected to include improved energy efficiency standards for buildings.

Stay tuned for the next vote, or filibuster?

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Keeping Up the Power Shift: Senate Set to Take Second Stab at Energy Bill

Bits and pieces of information are coming in today indicating that the Senate is gearing up to take a second stab at passing an energy bill later this week.

After failing to pass the full energy bill passed by the House last week, Senate leaders negotiated over the weekend to seek a compromise that would net the bill the crucial 60 votes to overcome a Republican-led filibuster threat.

It appears they are nearing that compromise and a second attempt to end debate and pass the bill is scheduled for Thursday, December 13th. If it passes the Senate, the bill will return to the House for passage on Friday before heading to President Bush's desk. Whether or not the President will veto a bill expected to save Americans billions at the pump and on their utilities bills at a time of record high gas prices remains to be seen...

Word has it that the renewable energy standard has been dropped from the bill and that the bill will include a stripped down package of tax incentives for renewable energy. The final makeup of that tax package is still under negotiation and details are sparse, although it is expected to include a two-year extension of critical credits for renewable energy generation, enough to get us into a new President's term and a new Congress.

Clearly losing the renewable energy standard, which would have required large utilities to acquire 15% of their electricity from renewable sources by 2020, is a major disappointment (although Reid has pledged to try to pass it as a stand-alone bill in 2008).

The fact that the Senate has had such difficulty passing an energy bill with strong support for clean, domestic renewable energy is a clear sign that we've got a lot of work ahead of us to keep up the Power Shift! We need to work hard to ensure that political realities change over the next year to closely match what real reality demands of Congress!

However, it still looks like an energy bill well worth passing is heading for a vote tomorrow and it's time again to get on the phone and urge your Senators to get the job done and pass a clean energy bill!

The bill heading for a vote is expected to include:

• The first increase in fuel economy standards in 30 years, up to 35 miles per gallon by 2020. These provisions will save American families $700 - $1000 per year at the pump, with $22 billion in net consumer savings in 2020 alone.


• The best energy efficiency standards in U.S. history, including new efficiency standards for lighting, appliances and boilers and incentives for home weatherization and industrial energy efficiency. The bill also directs the federal government to be a leader in energy efficiency with cutting-edge, efficient building practices and lighting in all federal buildings.


• A "Green Jobs" provision that creates an Energy Efficiency and Renewable Energy Worker Training Program to train a quality workforce for “green” collar jobs -- such as solar panel manufacturer and green building construction worker -- created by federal renewable energy and energy efficiency initiatives. This program will provide training opportunities to our veterans, to those displaced by national energy and environmental policy and economic globalization, to individuals seeking pathways out of poverty, to at risk youth and to those workers in the energy field needing to update their skills.


• A biofuels standard that requires 36 billion gallons of renewable fuels by 2022, including at least 21 billion gallons that come from advanced biofuels that do not rely on corn or other edible feedstocks. While the expansion of corn-based ethanol raises environmental, economic and justice concerns, advanced biofuels using inedible biomass or even algae could displace significant amounts of oil and help decrease greenhouse gas emissions from transportation.


• Some clean energy tax package. The House version of the bill included $21 billion in tax incentives for renewable energy, energy efficiency and plug-in hybrid vehicles, financed in part by reinvesting $13.5 billion in unnecessary tax subsidies for Big Oil in the clean energy technologies of the future. The final Senate version will likely include a smaller tax package but should retain critical renewable energy tax incentives that will ensure the industry can continue to grow, providing more and more clean, domestic renewable energy for America.

So call your Senators today and urge them to finish the job and pass a clean energy bill tomorrow! The future prosperity of this country depends on the success of the clean, domestic energy technologies of the 21st Century, and this bill is a critical first step towards unlocking a clean energy revolution.

You should feel free to let your Senators know you were disappointed that they couldn't pass the House version of the energy bill, but tell them you expect them to still pass a strong bill tomorrow, including critical tax incentives for renewable energy generation.

So what are you waiting for? Get on the phone...

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Pelosi Cobbles Together Strong Energy Bill - Heading for Showdown in Senate

After long hours of negotiations that have stretched long into the night for the past week, House Speaker Nancy Pelosi seems to have cobbled together a deal that will send a strong energy bill out of the House, likely Thursday.

Rumors last month that essentially every major provision but increased fuel economy standards might get stripped from the bill followed by long weeks of speculation have given way today to confirmation that the energy package heading for a House floor vote tomorrow will include some version of every major clean energy provision under consideration: a 35 mpg CAFE standard, a biofuels standard, and in a surprise turn, both a 15% by 2020 national renewable electricity standard and a $21 billion tax package for clean energy sources.

The passage of the bill, expected tomorrow in the House, will be a major victory for Speaker Pelosi, who has fought hard to advance a strong energy bill to the floor over opposition from Republicans, industry and even influential members of her own party - namely influential Michigan Congressman John Dingell.

Even after securing passage in the House, the bill will be heading towards a tough vote in the Senate where opposition from ranking member of the Senate Energy Committee, Pete Domenici (R-NM) will mean the bill will require a filibuster-proof 60 votes to secure passage. And it won't end there: President Bush has re-iterated threats to veto the bill if it includes certain provisions, including a renewable electricity standard and tax provisions financed by ending subsidies for the oil and gas industry.

Details on the components of the energy package below. But first, a look at the tumultuous - and still-unfolding - saga of the 2007 Congressional Energy Bill.

The Energy Bill's Saga

After some Senate Republicans blocked a formal conference committee to reconcile the two version of the energy bill passed by the Senate and House this summer (see previous posts here and here), Democratic leaders opted to move forward without a formal conference. They have instead been meeting in closed sessions to hammer out details on what provisions are in and what are left on the cutting-room floor. They concluded those negotiations late last night and have referred a full bill to the House floor for a vote sometime Thursday.

While the hundreds-of-pages long bill includes scores of smaller provisions, including some excellent new energy efficiency provisions, four major provisions were at the center negotiations - and speculations - this past week:

A 35 mile-per gallon fuel economy standard (35 mpg CAFE) for cars and light trucks, the first increase in fuel economy standards in 30 years. The energy bill passed by the Senate included a 35 mpg CAFE provision while the House version did not. Senior Michigan Democrat and House Energy Committee Chairman, John Dingell had opposed the Senate version of the CAFE provision, pushing for a weaker update to CAFE standards.

A large biofuels requirements (a renewable fuels standard or RFS) that mandates billions of gallons of ethanol, biodiesel and other biofuels for use in U.S. cars and trucks. The Senate bill included a 36 billion gallon by 2022 biofuels standard, including 21 billion gallons from "advanced" biofuels like cellulosic ethanol. The House version had no renewable fuels title.

A 15% by 2020 renewable electricity standard (RES) requiring large electric utilities to acquire 15% of their electricity from renewable sources like wind, solar and geothermal energy by 2020. The Senate narrowly failed to pass a RES this summer, while the House succeeded in passing a standard for the first time in history.

Finally, a multi-billion dollar package of tax incentives for clean energy funded by ending subsidies and closing royalty loopholes enjoyed by the oil and gas industries. During the first "100 days" push, House Democrats passed a $32 billion tax package while the Senate again narrowly failed to pass a tax package; the House energy bill passed this summer did include a $16 billion tax package.

The fuel economy provisions were the source of contention between Speaker Pelosi and Energy Chairman Dingell, who has been a key advocate for the auto industry and fought the 35 mpg CAFE standards.

The latter two provisions were the source of the most conflict between Democrats and Republicans, and between the House and the Senate, and have drawn veto threats from President Bush.

Although of questionable environmental character, the biofuels package, in contrast, is widely seen as the political "glue" that holds the bill together, drawing in "farm state" Republican moderates.

All this led to much speculation and anticipation over the course of what was a very secretive negotiation process, as small bits of information leaked of closed negotiation chambers and rumors spread.

Veil of Secrecy Parted To Reveal Strong Energy Bill

In the end, the bill heading to the House floor will be stronger than many - perhaps most - speculated, including some version of all four major provisions:

The bill includes a 35 MPG fleetwide CAFE standard, although it retains the "flex fuel vehicle loophole" that Detroit automakers exploit to help turn gas guzzling SUVs into 35 mpg machines on paper. The loophole is decreased in later years though. The CAFE standard also keeps separate standards for cars and light trucks/SUVs, potentially leaving the SUV loophole intact. Pelosi has issued assurances though that the seperate standards will still amount to a 35 mpg fleetwide average across all cars, light trucks and SUVs.

Also in the bill is a large biofuels standard, although details are still emerging on the renewable fuels title.

The bill includes the 15% by 2020 renewable electricity standard passed by the House earlier this year, although there have been some small modifications made (a lower price cap on the costs of compliance for example). Like the version passed by the House, utilities can meet up to 4% of the standard with energy efficiency (which I suppose makes it a 11% RES and 4% efficiency standard, although some utilities may opt for more than 11% renewables). The bill does not conflict with the 25 renewables standards already enacted by states.

Finally, in a surprise to many, the bill will include a $21 billion tax package which will be financed in part by ending $13 billion in subsidies for the oil industry. A provision in the original House bill to close unintended loopholes in offshore oil and gas royalty agreements was not included in the new bill.

The bill also includes a number of other provisions intended to advance America towards a clean energy future, including strong new energy efficiency standards and a "Green Jobs" provision intended to create 3 million new skilled jobs in the clean energy economy.

Speaker Pelosi's summary of the bill can be found here.

The Saga Continues... Showdown Looms in the Senate

While the energy bill is expected to pass the House, where simply majority rules, it's fate in the Senate is still unclear. A "supermajority" of 60 votes will be required to move the bill in the Senate past Republican opposition in the form of a filibuster threat, and Senate Majority Leader Harry Reid has said he is unsure whether or not he has the needed 60 votes.

If the bill cannot secure passage in the Senate in it's current form, speculation is that Democrats will begin stripping provisions from the bill until 60 votes can be earned. What the bill looks like at the end of that process is still unclear, and the possibility of a presidential veto looms over the whole thing (sounds pretty familiar...).

Stay tuned (and call your Senators!).

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Legislative Shenanigans Underway on Congressional Energy Bill

At Power Shift this past weekend, we heard that the Congressional Energy Bill was a critical down payment on a clean and prosperous energy future, and Nancy Pelosi and Ed Markey promised to deliver it this fall. They called for our help pushing it through, and now it appears it’s time to follow through. It’s time to step up the power shift!

As Democrat and Republican leaders maneuver, negotiate, and deal on the Congressional Energy Bill this week, there appears to be some nefarious shenanigans underfoot and a possible cave-in on support for renewable energy in process. Now might be time to call your Senators and Representatives...

Energy Bill Shenanigans

First, Senator Pete Domenici (R-NM) is working to strip the Renewable Fuels Standard (RFS) title out of the Senate Energy Bill and attach it wholesale to the Ag Bill currently under debate in the Senate. Domenici claims he's just trying to save the RFS from the potentially floundering Energy Bill, but Senate Majority Leader Harry Reid (D-NV) says he's got more sinister motives.

According to lots of folks, including Reid, Domenici is really trying to kill the Energy Bill with this move.

Remember that Domenici was the man who led the filibuster in the Senate that blocked both the Renewable Electricity Standard and the tax package that would have shifted billions in unnecessary royalties and closed loopholes to provide $32 billion in tax incentives from the oil and gas industries to fund clean, renewable energy.

As David Roberts at GristMill writes,

"The RFS is one of the key planks holding support for the energy bill together, bringing in some midwestern Republicans to compensate for the auto and oil Dems that have bailed [due to fuel economy standrd increases and the shift in subsidies from oil to renewables]. If the RFS falls out of the energy bill, the coalition falls apart."

So by pulling out the Renewable Fuels Standard, Domenici seems to be trying to pull the plug on the embattled Energy Bill. Without the RFS, and the farm-state Rs it brings along, the Energy Bill is unlikely to get the 60 votes necessary to pass filibuster in the Senate (likely led - again! - by Senator Domenici).

And as if that's not bad enough, Mr. D. is also trying to tack on his beloved massive loan guarantee for new nuclear power plants to the Ag Bill.

Yeah, "what do nukes have to do with agriculture?" Well, not much, but Domenici plans to try to make it germane by calling the federal loan guarantees "loan guarantees for renewable fuel facilities." Then in a bit of wonderful D.C. trickery, the amendment lumps nuclear power plants within the list of eligible "renewable fuel facilities." Nice one Pete.

The loan guarantees, which total $50 billion in the Senate version of the Energy Bill, would essentially put John and Jane Q. Taxpayer on the hook for any loan defaults by new nuclear power plant developers. The guarantees are necessary because no sane investment bank would finance a new nuclear power plant given the risk and uncertainty in permitting a new nuke.

So when Wall Street won't foot the bill for new nukes, let's put our taxpayers on the hook, or at least that's Senator Domenici's philosophy here. Good thing nuke developers have never defaulted on loans before ... oh wait!

All part of retiring Senator Domenici's legacy of fighting renewable energy. He can't retire soon enough, if you ask me.

Possible Cave-in on Renewable Energy Brewing

So, with influential Republicans working to kill the fragile coalition supporting the Energy Bill, embattled Democratic leaders are considering jettisoning the support for renewable energy in the House version of the Energy Bill.

According to rumors flying around D.C. and across the blogosphere, Speaker of the House Nancy Pelosi and Senate Majority Leader Reid are considering stripping the 15% by 2020 Renewable Electricity Standard (or Renewable Portfolio Standard) and the $32 billion tax package for renewable energy from the Energy Bill in order to try to keep increased fuel economy standards in the bill.

Stripping the RES and the tax title would mean Dems had been forced to cave on just about everything that President Bush has complained about and Senator Rs had fought against.

The 35 mpg by 2020 increase in CAFE standards is critical, especially at a time when oil is trading at nearly $100 per barrel. However, the support for clean, homegrown renewable energy in the Energy Bill is equally critical and the Democratic Leadership needs to be clear that the RES and tax title are not ballast to be thrown overboard in stormy waters.

It's time to send Pelosi, Reid and your own reps and senators a clear message that the Energy Bill must include all three provisions: increased fuel economy standards, a renewable electricity standard, AND a tax package for clean, renewable energy.

Let President Bush veto a critical energy bill at a time of record high energy prices and explain that to the American people. Let House and Senate Rs explain why they blocked efforts to save Americans energy and money, help kick our oil addiction, invest in clean, homegrown, renewable energy sources and put America on a path to a sustainable and prosperous energy future.

But DO NOT cave in.

This isn’t the “change” we voted for in November 2006, and we’ll be voting for new leaders in 2008 if our current set can’t get the job done. We’re behind you Pelosi, but not if you cave. We want a Power Shift, and we’ll get it!

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Before We Get Drunk on Ethanol, Let's Make Sure We Get It Right

Not all biofuels are created equal: in fact, depending on how they are produced, biofuels like ethanol and biodiesel can be environmentally destructive, raise the price of food, and even hurt efforts to tackle global warming.

Biofuels - ethanol and biodiesel - present a potentially important (partial) solution to concerns about global warming and our over-reliance on oil. However, to paraphrase a great LA Times op ed on the ethanol craze, alcohol is best enjoyed in moderation, and the same goes for these alcohol-based biofuels.

So before we all get drunk on ethanol, we'd better take a close look at the benefits and potential drawbacks of biofuels and make sure we get it right.


The Benefits - In Pursuit of Energy Independence and a Safe Climate

Biofuels offer the potential to displace foreign oil and depleting fossil fuels with a more sustainable and domestic fuel while reducing greenhouse gas emissions.

Still, depending on how they are produced, ethanol and biodiesel require considerable fossil fuel inputs - diesel for tractors, natural gas for fertilizers, fuel to transport the feedstocks, and typically fossil fuels to produce the biofuels at a biorefinery. So while the biofuel itself may be made from renewable crops and contains only carbon that was absorbed from the atmosphere during the growth of the plants, the total net benefit of biofuels after taking into account inputs is far from carbon neutral nor fossil fuel free.

Exactly how much net benefit there is to biofuels depends largely on the production methods and feedstocks and has been the subject of much debate. While some have repeatedly made the case that conventional biofuels - corn-based ethanol and soy or rapeseed-based biodiesel - take even more fossil fuels to produce than the offset, the consensus has been that conventional biofuels offer a moderate reduction in fossil energy use and greenhouse gas emissions - on the order of a 10-30% reduction when compared to conventional petroleum-based gasoline and diesel.

Next-generation biofuels produced from cellulosic feedstocks - a fancy term for a wide variety of generally inedible plant matter including wood, straw, and grasses as well as agricultural wastes like corn stalks and rice hulls - are an exciting prospect and could maximize the potential for biofuels to offset oil and fossil fuel use and greenhouse gas emissions.

Making ethanol or biodiesel from cellulosic feedstocks can be a much more energy efficient process than conventional corn or soy-based biofuels, can be made from inedible crops and even agriculture, forestry, or urban waste materials.

However, next-generation, cellulosic biofuels are currently in the early stages of commercialization. The first pilot and commercial scale cellulosic biofuel refineries are under construction or on the drawing boards these days and how long it will take to fully scale up and commercialize the emerging biofuel technology remains to be seen.


Up in Smoke - How Slash and Burn Agriculture Wipes Out the Climate Benefits of Biofuels

Land use changes - most notably the loss of tropical forests - account for about 20 percent of total global greenhouse gas emissions - roughly the same as both the total annual emissions from the United States or China.

That's right: slash and burn agriculture can be just as large a threat to the climate as China's rampantly growing economy or the hundreds of millions of cars plying American highways!

So if we're going to start replacing oil with biofuels, we'd better not be trading one problem - rampant oil consumption - for another equally devastating problem - accelerating the conversion of tropical rainforests into farm and grazing lands.

Unfortunately, that's exactly what we're beginning to see, with massive swaths of tropical forests, savannas and grasslands - all productive carbon 'sinks' - being slahed, burned and replaced by biofuels plantations. Massive expansions of palm oil plantations in Malaysia and Indonesia, soy and sugar plantations in Brazil, and jatropha plantations in China's forested Southeast have all been proposed to feed the growing global demand for biofuels.

Slashing massive swaths of forests to clear the way for biofuel plantations clearly amounts to a devastating ecological loss. These tropical and semi-tropical forests are some of the most biologically-diverse habitats in the world and have already been devastated by traditional timber and agricultural demands. It's no wonder the Worldwatch Institute has called China's biofuels expansion "an ecological disaster," and the same can be said for similar biofuel expansion plans across the world.

But even beyond the massive loss of biodiversity and habitat when forests are converted to biofuel plantations, the destruction of these forestlands also wipes out any global warming benefits of biofuels.

According to a new study published in Science last week ($ub req., see this New Scientist summary) the climate benefits of ethanol and biodiesel are completely wiped out by tropical deforestation.

When you destroy forestlands, grasslands, savannas and other wilderness, much of the carbon stored in the ecosystem's living matter ends up in the atmosphere - burned, decomposed or otherwise oxidized. Additionally, forestlands represent an important carbon sink, 'breathing' carbon dioxide out of the atmosphere and storing it as trees and other plants grow.

The loss of these important natural carbon 'scrubbers' more than makes up for the moderate reductions in greenhouse gas emissions from burning biofuels instead of gasoline or diesel: according to the study, it would take up to a century for the benefits of biofuels to recoup the initial loss of the tropical forestland and the emissions associated with slashing and burning the land to make way for biofuel plantations!

"We cannot afford that, in terms of climate change," says Renton Righelato, co-author of the new study.

Furthermore, the study concludes that the climate benefits of biofuels are trumped by reforestation efforts, even in temperate climates. "You get far more carbon sequestered by planting forests than you avoid emissions by producing biofuels on the same land," says Righelato.

The study's authors found that reforestation would store and sequester between two and nine times as much carbon over 30 years than would be saved by burning biofuels produced on the same amount of land instead of gasoline (see bar chart below).

[Graphic: the carbon savings from burning biofuels instead of gasoline (top six bars) compared to the carbon emissions resulting from clearing tropical forestland for biofuel plantations (red bar) and the carbon savings from reforestation efforts (bottom three bars). Figures are expressed as metric tons of carbon equivalent saved or emitted per acre devoted to biofuel production or reforestation. (Source: New Scientist)]


No Free Lunch When Fuel Competes with Food

We all know the old adage: there's no such thing as a free lunch. Well, when fuel competes with food, everyone's lunch gets more expensive (as the LA Times accurately observes).

The vast bulk of global biofuels production utilizes edible feedstocks like corn and soy. As demand for corn to make ethanol has soared, corn prices have shot up, nearly doubling in the past year. Record high prices are encouraging a record acreage of corn planted in the United States - the highest in 63 years - and prices for other foods are on the rise as farmers plant corn in acreage they have otherwise planted wheat or soy.

Prices for all kinds of food have soared in the first half of 2007 (see chart below) and the LA Times op ed reports that grocery-store food prices rose 8%. It's unknown how much of that hike is attributable to corn, and rising fuel and fertilizer costs are certainly a major factor in rising food prices, but soaring demand for corn for ethanol production is certainly playing a significant role as well.

[Graphic: Food prices on the rise in 2007. (Source: McClatchy Newspapers)]

Middle class Americans may be able to shrug off higher prices at the grocery store, but increasing food costs hit lower income folks harder.

And if low-income Americans are feeling the crunch, things are even harder in the developing world. When you get buy on just a few dollars a day, doubling corn prices are no small matter. Rising corn prices have already launched public outcry and even riots in Mexico, which depends on imported American corn for tortillas and other affordable, nutritious stables.

Producing biofuels from inedible cellulosic feedstocks could provide a solution to this fuel-or-food dilemma, although producing energy crops like switchgrass - an excellent biofuel feedstock and native North American grass that once dominated much of the Great Plains - on limited agricultural land could continue the competition between biofuels and foodstuffs.


Clean Green Fuels? - Other Environmental Effects

Industrial farming to produce biofuel feedstocks, particularly corn, consumes large amounts of water and chemical fertilizers, herbicides and pesticides. Many of these chemicals seep into waterways, polluting the water and providing nutrients for algae blooms that suck up all the oxygen and kill everything else. A 'dead zone' the size of Connecticut and Delaware put together has repeatedly formed in the Gulf of Mexico, caused by algae gorging on chemical fertilizers carried into the Gulf by the Mississippi river.

Additionally, farmers ordinarily rotate crops annually to avoid soil exhaustion, but high corn prices encourage them to plant corn in the same fields year after year. This high-intensity farming accelerates the loss of topsoil and depletes soil nutrients and the only way to make this work is to pour on more fertilizers, further exacerbating problems.

Finally, while ethanol may be "cleaner burning" when it comes to many pollutants and is a better fuel additive or "oxygenate" than toxic MTBE, burning ethanol in high concentrations could increase certain air pollutants. A recent Stanford University study argued that E85 - a blend of 85% ethanol and 15% gasoline - produces so much ozone, a key ingredient in smog, that if it were used in Los Angeles instead of gasoline, it would raise ozone-related deaths 9%.


Don't Throw the Baby Out With the Bathwater - If We're Smart, Biofuels Still Have a Role to Play

Given all of these concerns about increased use of ethanol and biodiesel, should we just bag the whole idea and move on to something else? No, I would argue.

When it comes to confronting the climate crisis and ending our oil addiction - two massive problems - we're going to need all the tools we can get. Biofuels, if done right, still have an important role to play in reducing our reliance on oil and our contribution to global climate change.

I present the above concerns about biofuels because understanding the potential pitfalls, problems and limitations of biofuels - both conventional and next-generation - will be crucial to developing the standards that are necessary to ensure that biofuels can help make a dent in our oil addiction and help solve the climate crisis without exacerbating other environmental problems.

We should focus on developing cellulosic biofuels that rely on readily available cellulosic biomass in existing waste streams - timber slash and mill residues, urban wood wastes, agricultural residues, etc.

These feedstocks offer the least environmental impacts, do not compete with food crops, and according to this study (pdf) are available in large enough quantities to be worth pursuing - roughly 3/4 of a billion dry tons each year, or enough to produce around 75 billion gallons of ethanol or biodiesel if estimated yields from next-generation biorefineries prove correct.

That is enough biofuel to provide about 1/3rd of all the energy consumed by cars and light trucks in the United States.

Additionally, unlike producing ethanol from corn, which typically requires large amounts of coal or natural gas, converting cellulosic biomass to biofuels requires little or no fossil fuel inputs. In fact, cellulosic biorefineries should be able to utilize the lignin portion of the biomass left over after the cellulose is removed to produce all of the energy inputs for the refinery process and even produce electricity for export (potentially offsetting electricity from coal or natural gas).


Getting on the Right Path - Time for a New U.S. Biofuels Strategy

To be done right:

Biofuels should not come from edible feedstocks, including corn, soy or wheat.

Biofuels should preferably be produced from readily-available, existing waste streams of cellulosic biomass.

If produced from an energy crop, sustainable harvesting practices should be employed, the crops should be grown on existing farmland and should be planted as part of a regular, sustainable crop rotation so as to not compete with foodstuffs.

The full, lifecycle greenhouse gas emissions of all biofuels should be considered, including (and especially) emissions from land use changes. Under no circumstances should a biofuel feedstock be utilized that results in the clearing of rainforest or other wilderness areas or results in a net increase in greenhouse gas emissions.

Employing these kinds of standards in our public policy would necessitate a dramatic shift away from heavily supporting corn-based ethanol and soy-based biodiesel.

It would necessitate the creation of environmental sustainability standards for the U.S. biofuels industry and would imply a ban on imported biofuels from countries that do not adopt satisfactory sustainability standards on their own domestic biofuels industries.

It would require a focus on commercializing next-generation cellulosic biofuel technologies and exploring the most sustainable feedstock sources and harvesting/collection methods.

So, given all of the concerns about biofuels, why aren't any of our elected officials calling for a change in direction for the U.S. biofuels industry? Why do we continue to subsidize the corn ethanol industry to the tune of several billion dollars a year? Why do all of the presidential candidates pay at least lip service to corn ethanol, even those like Hillary Clinton and John McCain that have been openly critical of corn ethanol in the past?

Well, the political power of agri-giants like ADM and Cargill and the importance of corn-growing Iowa in presidential elections are certainly standing in the way of a sensible biofuels policy. It's hard to find another explanation for an energy policy that is so clearly designed to do little to actually solve any of the problems it's supposed to solve while so clearly benefiting narrow but politically powerful special interests.

The latest Senate energy bill continues this trend with a massive 36 billion gallon/year by 2022 biofuels requirement, 40% of which will likely come from good old corn-based ethanol, necessitating a quadrupling in the U.S. corn ethanol industry! (To be fair, the bill does require that 60% of the standard is met with next generation biofuels...)

It's time for a change in American energy policy when it comes to biofuels. It's time to actually have an energy policy when it comes to biofuels, and not a massive agricultural subsidy program disguised as an energy policy.

Let's heed the warnings of climate scientists, ecologists and rioting Mexican peasants: the path we're on right now means biofuels exacerbate the climate crisis, amount to an environmental disaster, and drive up prices for food around the world.

But there's another path, a path where sustainably-harvested, next-generation biofuels coupled with a dramatic increase in fuel efficiency and the adoption of plug-in hybrid electric vehicles makes gasoline a thing of the past.

It's time to get ourselves on the right path.

[A hat tip to Glenn Hurowitz at Gristmill]

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Bush Administration Threatens Veto of House Clean Energy Bills

Two House bills, if passed, would redirect subsidies and close royalty loopholes for oil and gas industries to provide tax incentives, bonds and R&D investments for clean energy technologies, increase energy efficiency standards, create green jobs and direct the federal government to be a leader in reducing energy use and greenhouse gas emissions.

Two important clean energy packages scheduled to head to the House floor tomorrow have been threatened with presidential veto, according to a Bush Administration "Statement of Administration Policy" released today (pdf).

The Bush Administration describes the two clean energy bills as implementing "unnecessary and duplicative new Federal energy efficiency and R&D bureaucracy and global climate and worker training programs" and "strongly opposes" provisions in the bill that would redirect subsidies and close loopholes currently enjoyed by the oil and gas industries.

H.R.3221, the New Direction for Energy Independence, National Security, and Consumer Protection Act contains a package of clean energy legislation that would increase R&D investments in clean energy technologies, raise efficiency standards for appliances and lighting, and direct the federal government to become a leader in reducing energy use and greenhouse gas emissions, among other provisions.

H.R.2776, the Renewable Energy and Energy Conservation Tax Act, is a companion tax package that would expand tax incentives and bonds for renewable energy, energy efficiency and renewable fuels as well as incentives for consumers to purchase plug-in hybrid electric vehicles and energy efficient appliances.

To pay for the package of clean energy incentives, the two bills would repeal approximately $16 billion in tax breaks for oil and gas companies and close a tax loophole that, according to House Speaker Nancy Pelosi, "allows big oil and gas companies to game the system by understating their foreign oil and gas extraction income." H.R.2776 also closes the so-called “Hummer” Tax Loophole that provides an extra tax incentive for businesses buying luxury SUVs, while exempting vehicles that are used for legitimate business purposes.

The two bills are very similar to H.R. 6 passed by the House during the "First 100 Days" push. H.R. 6 went on to the Senate where the version passed out of the Senate in June failed to include the tax provisions (see previous post). The two new bills are the House leadership's second attempt to get a strong package of clean energy incentives into Conference Committee with the Senate and eventually onto President Bush's desk, forcing him to sign the legislation or make good on veto threats.

A summary of both clean energy bills can be found at House Speaker Nancy Pelosi's website.

According to Speaker Pelosi:

"This legislation [H.R. 3221 and H.R. 2776] puts us on a path toward energy independence, strengthens national security, grows our economy and creates new jobs, lowers energy prices, and begins to address global warming. It does so by investing in the future. Specifically, we will invest in new energy technologies and innovation to create new jobs; improve energy efficiency for a wide range of products, lighting and buildings; make the federal government a leader in reducing energy usage and greenhouse gas emissions; and strengthen research and diplomatic efforts on climate change to protect our planet."

Not so, according to President Bush, who's Statement of Administration Policy says:

"The stated goal of energy reform by the new majority in the House of Representatives was "to achieve energy independence, strengthen national security, grow our economy and create jobs, lower energy prices, and begin to address global warming." The Administration is disappointed that the House has produced no such legislation, and instead is planning to consider H.R. 2776 and H.R. 3221, two bills that are not serious attempts to increase our energy security or address high energy costs. In fact, the combination of these two bills will result in less domestic oil and gas production, higher taxes to disadvantage a single targeted industry, and duplicative energy efficiency and R&D efforts that are largely underway already.""

According to the statement,

Because H.R. 2776 and H.R. 3221 fail to deliver American consumers or businesses more energy security, but rather would lead to less domestic oil and gas production, higher energy costs, and higher taxes, the President’s senior advisors would recommend that he veto these bills.

Although the President's statement plays lip service to renewable energy and conservation and touts the $12 billion of investment "in clean, safe advanced energy resources" made under the Administration's watch - mostly to 'clean coal,' hydrogen and advanced nuclear energy technologies it should be noted - the specific complaints with the two House clean energy bills outlined in the administration statement center around the bill's impacts on the oil and gas industries.

The administration complains that repealing tax incentives and subsidies for oil and gas industries - or "raising taxes" as the administration describes it - would "lead to higher energy costs to U.S. consumers and businesses" and "puts U.S. industries at a disadvantage to their foreign competitors."

The administration also "strongly opposes language that would force holders of certain deepwater oil and gas leases issued in 1998 and 1999 ... to either renegotiate the terms of the leases, pay an excessive fee, or face being barred from future oil and gas leasing in the Gulf of Mexico."

In a simple drafting mistake that has cost the U.S. government billions of dollars, more than 1,000 Clinton-era leases for deep water oil and gas drilling in the Gulf of Mexico failed to include provisions that require companies to share a portion of the revenue they receive from the sale of oil and gas produced on federal lands when prices reach a certain level. These royalty payments are standard in most federal leases and ensure the government a cut of the profit when oil prices soar as they have in recent years.

The fix proposed by H.R. 3221 would reinstate the royalties on Gulf oil and gas production when prices rise to a level - over $34.73/barrel for oil and $4.34 per million Btu for gas - where proponents of the bill argue incentives are not necessary to encourage exploration. Holders of the Clinton-era leases would be required to re-negotiate the lease terms to include the royalty provision or be banned from bidding on future Gulf exploration leases. Fixing the mistake in the old leases is expected to raise over $6 billion in revenue over the next 10 years.

H.R. 2776 would also end a special manufacturing tax deduction for oil and gas companies enacted by Congress in 2004. The deduction reduces the effective corporate tax rate for U.S. oil and gas production to 32% from the 35% standard for other manufacturing industries. The Democratic bill would bump the rate for the oil and gas sector back up to the normal 35% rate, raising another $8-10 billion in revenue.

The revenue raised by these two provisions would be pumped into tax incentives and bonds for renewable energy, efficiency, biofuels and plug-in hybrid electric vehicles as well as investments in research and development of innovative clean energy technologies contained in the two clean energy bills.

The administration statement also says President Bush "strongly opposes" provisions in Title VII of H.R. 3221 which the administration claims "would have a significant negative impact on current Federal efforts to increase traditional and renewable domestic production."

While Title VII does include some provisions for studying and recommending efforts to reduce impacts of wind power development on wildlife and birds - a provision that as far as I know is not opposed by the American Wind Energy Association - the bulk of Title VII focuses on ensuring greater accountability for oil and gas companies drilling on public lands and also includes the provision fixing the Gulf oil and gas royalties problem discussed above and it is presumably these provisions that have drawn the administration's ire.

Finally, the Bush Administration "strongly opposes" provisions in both bills that would require companies to pay workers prevailing wages if they receive federal tax incentives authorized under the clean energy bills.


Apparently harnessing and promoting American innovation to increase our energy independence and start on a path to a new, clean energy future while creating thousands of new jobs, reducing American's energy bills and slowing rising greenhouse gas emissions doesn't pass muster with the Bush Administration, so long these efforts are funded by removing billions of dollars of taxpayer-funded subsidies for his friends in the oil and gas industries - even while they are enjoying record profits.

And god forbid we require companies to pay workers prevailing wages if they want to enjoy federal tax beaks! That's downright un-American!

The message the Bush Administration sends in this Statement of Administration Policy seems perfectly clear to me: President Bush is on the side of oil and gas special interests, is fine with paying workers below prevailing wages and will stifle efforts to advance American energy independence, build a new energy economy and tackle climate change, even if those efforts are supported by a majority of United States Congress and the American people.

We've all known Mr. Bush is to put it nicely particularly chummy with his old oil and gas industry friends (others might say he's "in the oil and gas industry's pockets"), but I'm not sure there's ever been a clearer statement of where his loyalties lie than this latest Statement of Administration Policy!

This is simply despicable.

I hope the House calls President Bush's bluff and passes the two clean energy bills tomorrow.

Let Mr. Bush explain to the American people why, after Congress finally passes bi-partisan legislation to address rising energy costs, increase American energy independence, create a new energy economy thousands of new jobs and take a first step towards solving the Climate Crisis, he decided to veto the bill in order to protect an industry recording obscene and record profits while American's pay an arm and a leg at the pump.

Go for it Mr. President...

[A tip of the hat to Ilyse Hogue at MoveOn.org for spreading the word about the veto threat.]

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News From My Backyard: Oregon Legislature Wraps Up Landmark Session for Clean Energy

The 2007 Oregon Legislature closed a landmark session advancing clean energy legislation and putting Oregon on the map as a clean energy leader.

The Oregon Legislature wrapped up it's 75th Legislative Assembly on June 28th, ending a session that can only be considered a landmark year for clean energy and the environment.

The 2006 Elections saw Democrats strengthen their majority in the Senate and squeak out a one vote majority in the House while Oregonians re-elected Governor Ted Kulongoski who made clean energy a top priority of his second term. The Governor and the Legislature certainly delivered this year, passing a slough of bills this session promoting renewable energy generation, renewable transportation fuels, increased energy efficiency and even took an initial step towards addressing climate change.

Here's a recap of the flurry of activity in Salem this session:

Renewable Energy Standard: Perhaps the most high profile, and arguably the most important, piece of clean energy legislation to pass this session was the 25% by 2025 Renewable Energy Standard legislation, the Oregon Renewable Energy Act (SB 838).

The standard enacted by the Act requires Oregon's three largest utilties - Portland General Electric, Pacific Power and Light (PacifiCorp) and the Eugene Water and Electric Board - to acquire at least 25% of their electricity from clean, homegrown renewable energy sources like wind, solar, geothermal and ocean energy by the year 2025. The utilities face interim targets of 5% by 2011, 15% by 2015, and 20% by 2020 as well.

Oregon's numerous smaller publicly-owned utilities are required to meet smaller standards of just 5% or 10% by 2025, depending on their size. However, if any of these utilities invest in new coal-fired power plants, they lose their exemption from the full standard and must meet the full 25% by 2025 requirement. Oregon's public utilities had argued that the 25% standard was unnecessary for them, since they relied largely on hydropower to meet most of their load. This provision provides a strong incentive to put their money where their mouths are and stay away from investments in dirty, coal-fired power plants.

The Oregon Renewable Energy Act will require Oregon utilities to generate approximately 1,500 average megawatts (aMW) of renewable energy generation by 2025, enough to meet the needs of 1.25 million average Oregon homes. Increasing Oregon's use of clean, homegrown renewable energy sources will also strengthen Oregon's economy, increase the state's energy independence, help hedge against volatile fossil fuel costs and make a major dent in greenhouse gas emissions from the electricity sector.

Given this win-win-win-win-win situation, it's no wonder the Oregon Renewable Energy Act was supported by a remarkably broad and diverse range of constituencies, received strong, bipartisan support in both the Senate and House and was hailed by Governor Kulongoski as "the most significant environmental legislation ... in more than 30 years.”

In addition to establishing the Renewable Energy Standards, the Act requires all Oregon utilities to offer their customers a voluntary green power product, extends the public purpose charge on PGE and Pacific Power customers' bills to 2025 and re-dedicates the renewable energy portion of those funds to support small, 'community-scale' renewable energy projects less than 20 megawatts.

If you're curious, there's plenty more on the Oregon Renewable Energy Act at the Powering Oregon's Future site.

[Full Disclosure: I maintain the Powering Oregon's Future site and am responsible for much of its content. I also worked directly to help pass the Oregon Renewable Energy Act in my position at the Renewable Northwest Project].


Biofuels: Succeeding where it failed last session, the Oregon Legislature also passed a bill promoting the use of renewable biofuels in the transportation sector. The biofuels bill, HB 2210, includes a package of tax incentives promoting the production of biofuels and feedstocks in Oregon.

The bill also includes a renewable fuels standard requiring the use of ethanol and biodiesel in gasoline and diesel fuels sold in the state, but only after biofuel production in the Oregon and the Northwest reaches a substantial level, to ensure that the standard will support a local, homegrown biofuels industry.

Fuel stations will be required to sell at least a 2% blend of biodiesel in their diesel fuel once biodiesel production in Oregon, Washington, Idaho and Montana reaches at least 5 million gallons per year and a 5% blend once production in the Northwest states reaches 15 million gallons per year. A 10% ethanol blending requirement will also kick in for gasoline sold in the state once ethanol production within Oregon reaches 90 million gallons per year.

The bill also directs the state government to use biofuels in fleet vehicles and stationary backup power generators and provides a $200/year tax incentive to individuals who use biodiesel (B99/B100) and ethanol (E85) for transportation and solid biomass from agricultural or forestry wastes for heating.

The biofuels bill received very strong support, passing the House 53-4 and the Senate 24-3.


Clean Energy Tax Incentives: The Legislature also expanded two popular and successful tax incentives supporting renewable energy and energy efficiency investments. Eventually rolled into an omnibus tax package, HB 3201 , expansions of Oregon's Business Energy Tax Credit and Residential Energy Tax Credit passed with unanimous support in the House early in the session and finally passed the Senate in the final days of the session.

The tax bill expands the Business Energy Tax Credit (BETC), which businesses and corporations can claim on investments in solar, wind and other renewable energy systems, energy efficiency investments as well as investments in manufacturing plants used to produce clean energy technologies or components. The credit is expanded from a credit worth 35% of eligible project costs, capped at $3.5 million, to a whopping 50% credit, capped at $10 million.

The BETC expansion also includes a new $9,000 tax credit available to homebuilders for solar electric and solar water heating systems installed on new construction single family dwellings.

Additionally, the tax bill expands the Residential Energy Tax Credit, available to homeowners who invest in renewable energy systems, efficient appliances, weatherization and other home efficiency retrofits. Homeowners can now claim the credit on more than one investment in a given year, allowing them to claim a credit on both a solar electric system and a solar water heating system installed in the same year, for example. The bill also raises the maximum credit for fuel cells and small wind power systems to $6,000 (up from $1,500), the same maximum credit available for solar photovoltaic systems.

The Legislature also passed two other tax bills aimed at clearing up important problems in the tax code. One bill, SB 819, fixed a problem in the interaction between the Business Energy Tax Credit and Oregon's corporate income tax 'kicker' refund which hampered businesses ability to take full advantage of the credit.

The other bill, known as the Solar Teamwork Bill (HB 3488), amended the exemption given on property taxes leveled against the increased property value due to renewable energy investments, like the installation of solar arrays. The exemption now applies to systems installed by a third party on a property-owner's property, as long as that system is a net metering system or otherwise designed to primarily offset on-site electricity use. This provision will help encourage distributed generation for renewable energy by not discouraging building owners from allowing alternative energy systems to be installed on their buildings because of increased property taxes.

HB 3488 also directs the Oregon Public Utility Commission to authorize the state's two large investor-owned utilities to provide low interest loans for customers who install solar arrays.

Finally, an uncontroversial tax credit bill, SB 875, added ocean wave energy to the list of BETC-qualifying renewable energy resources.


Solar on Public Buildings: Rounding out a series of measures that ought secure Oregon's position as a leading pro-solar state, HB 2620 also passed this session and provides that public improvement contracts for construction or major renovations of public buildings appropriate at least 1.5 percent of the total contract price to pay for the installation of solar energy technology, including solar electric, solar water heating and solar space heating systems.

It's solar on every public building in Oregon from now on!


Energy Efficiency: A bill establishing minimum efficiency standards for a number of additional home and commercial appliances not previously covered by efficiency standards passed the Legislature this session as well. While not including as many appliances as originally hoped, SB 375 will help Oregonians save energy, reducing our energy costs and environmental impacts.

Unfortunately, a bill requiring all major facility projects to be planned, designed, constructed and renovated to meet sustainable building standards died in the Senate Ways and Means committee and a bill requiring the state government to reduce energy use 20% by 2015 passed the House 44-14 but died in a Senate committee. [Well we had to leave something left to do next session, right?]


Global Warming: Last but definitely not least, the 2007 Legislature passed it's first piece of legislation specifically addressing global warming in Oregon!

Originally seen as a long shot, three global warming bills were introduced early this session in the hopes that the large clean energy agenda might move quickly, allowing the Legislature to move on to specifically tackle global warming. In reality, the measures were introduced largely to lay the groundwork for upcoming sessions, and while public hearings were held on the bills, it wasn't expected that they would pass until future sessions.

Well, while two bills were indeed dropped after two hearings, as the session neared it's end, it looked like one, the Global Warming Integration Act, just might have some legs and the Act, HB 3543 managed to squeak passed the finish line right before the end of the session.

The Global Warming Integration Act codifies greenhouse gas emissions reduction goals (10% below 1990 levels by 2020 and 75% below 1990 levels by 2020) and creates the Oregon Global Warming Commission which will coordinate local and state efforts to halt growth of greenhouse gas emissions. It will also fund a new Oregon Climate Change Research Institute within the Oregon University System.

The bill not only passed, it passed with a bipartisan 40-16 vote in the House with moneys fully appropriated to not only fund the commission's activities, but also fully fund the research center. Not at bad ending to a busy session for clean energy advocates and a hopeful sign for the chances of future global warming legislation!


Next Steps: In the face of such a landmark session for clean energy legislation - clearly the most significant session for energy legislation since Oregon's electricity restructuring law passed in 1999 - you might be wondering what's left to do to complete Oregon's transition to a clean energy state?

First, while the clean energy provisions passed this year will certainly make a major dent in the state's greenhouse gas emissions and help promote a sustainable energy future, work has just begun to specifically tackle climate change. The Global Warming Integration Act is a nice step forward, but far from the end of the road, and the Legislature is likely to consider a cap and trade program and an emissions performance standard, both designed to limit global warming pollution from the electricity sector, when next they meet (perhaps as early as a short special session in early 2008 - the Oregon Legislature normally meet biennially).

Additionally, Oregon would probably be smart to follow in the footsteps of other states pushing renewable energy development, including Colorado and Texas, by working to establish renewable energy resource zones and expedite investments in electricity transmission to tap the resources in those zones and bring them to population centers.

I hope the Legislature also revisits the two energy efficiency and green building bills that died this session and takes a hard look at how Oregonians can push energy efficiency to the max. Stronger building codes that include advancements in sustainable and energy efficient design would make sense, and there are always updates to appliance and lighting codes that can help us squeeze more out of the same amount of energy.


A Session to be Remembered: While there's always more work to be done, the 2007 Oregon Legislature should go down in history as the year Oregon took a giant step towards a sustainable energy future. 2007 was clearly the 'Year of Clean Energy' in Salem. Let's hope 2009 (or even 2008) is the 'Year of Global Warming Solutions'...


[A very appreciative tip of the hat to the folks at the Oregon League of Conservation Voters' SalemWatch newsletter whose diligent reporting kept me up to date all session on the wide range of clean energy bills moving through the legislature.]

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Thoughts on the Senate Energy Bill - Final Grade: B-

Final Senate energy bill a good step forward but missing several important provisions

The Senate passed a new energy bill late Thursday night that among other things will require the first major increase in fuel economy standards in two decades and includes a hefty renewable fuels standard (see previous post).

The media has already begun calling the energy bill "sweeping" and "broad" and is hailing the bill's passage as a "victory" for Senate Democrats and clean energy advocates.

I followed the progress of the bill closely for the past couple of weeks (see previous posts here, here, here, and here) and my reaction to the bill is much more lukewarm. I think the bill can be at best considered a partial victory; it's a clear step forward, but leaves a lot left out several important provisions and warrants, in my opinion, a final grade of a B-

Steps Forward - What is in the Bill

First, the bill deserves praise for what is does include:

The increase in fuel economy standards is LONG overdue, and is a common-sense, effective and economic step towards reducing our oil dependence. 35 mpg by 2020 is not bad (I'll discuss the fuel economy standards a bit more later - we certainly could have been more aggressive). It will mean a significant decrease in oil consumption and a corresponding decrease in greenhouse gas emissions from the transport sector and will do both while saving Americans money.

Democrats do deserve credit for fighting off strong opposition from the auto industry to keep the 35 mpg by 2020 standard intact despite several proposals that would have weakened the standard. Additionally, the new standards close both the SUV loophole and the 'buy a hybrid, save a hummer' scenario that plagues current CAFE standards, two clear improvements in policy. The new CAFE standards should be considered a clear victory.

The renewable fuels standard will help reduce fossil fuel dependence and reduce global warming emissions ... somewhat. I'm not a big fan of expanded use of corn-based ethanol - it offers only marginal fossil fuel use and greenhouse gas emissions reductions while driving up food costs and sucking up subsidies that could be better spent elsewhere.

However, the new 36 billion gallon renewable fuels standard does specify that at least 60% of the standard must be met by "next generation" biofuels such as cellulosic ethanol, which offers considerable fossil energy and greenhouse gas reductions compared to gasoline. This provision should provide a strong incentive to invest in cellulosic ethanol production infrastructure, although the absence of the tax package from the bill (more on that below) will mean the financial incentives that should go along with this standard are missing for now.

Additionally, the energy bill includes provisions that will help ensure that biofuel production is environmentally sensible - i.e. doesn't increase water or air pollution or greenhouse gas emissions - and specifies that "next generation" biofuels must result in at least a 50% reduction in lifecycle greenhouse gas emissions relative to gasoline. This is smart, as we want to ensure that we don't simply trade one environmentally destructive fuel choice for another.

The bill directs the Executive Branch - the Office of Management and Budget (OMB) - to develop and publish an action plan to cut oil consumption in the United States by 2.5 million barrels per day by 2017, roughly equivalent to the total current imports of oil from the Middle East. The amendment also targets a reduction of 7 million barrels per day by 2026 and 10 million barrels per day by 2031.

While this is just a plan and not a requirement, the bill does direct and authorize the secretaries of federal agencies - departments of energy, defense, agriculture, etc. - to implement the policies recommended by the action plan and certainly wont hurt matters. This provision essentially calls on the President and his cabinet to utilize existing laws to their fullest extent and will hopefully result in the adoption of proactive policies by the Executive Branch.

The bill includes new federal appliance and lighting efficiency standards (although I don't know what the details are yet, so I'm not sure if they go far enough; they're certainly a step forward at the very least) which will help Americans save energy and money at home and at work.

The bill includes expanded support for research, development and deployment of electric drive vehicles, including plug-in hybrid vehicles as well as research into light weight vehicle construction materials and other technologies to reduce vehicle energy consumption. While I still think the federal government should be more aggressive in promoting the development of plug-in hybrid vehicles - my pick for best short-to-medium term solution to slash oil use and greenhouse gas emissions from the transport sector - this is also a good step in the right direction.

The bill also deserves a bit of praise for what stayed out of the bill: no support for coal-to-liquids synthetic fuel production and no support for expanded coal, nuclear or oil use. We need to be moving away from business-as-usual energy sources and on to a new, sustainable energy future, and while it falls a bit short, the energy bill at least keeps us from expanding our dependence on fossil fuels.

Bill Falls Short - What's Missing

Still, the energy bill is only a partial victory in my mind. It does a good job of addressing the transportation sector - with increased fuel economy, biofuels and electric drive vehicles provisions - but it largely ignores the electricity sector, the other major contributor to U.S. global warming pollution.

Despite receiving support from a majority of senators, a minority of senators blocked the 15% by 2020 renewable energy standard proposal that would have helped our electricity sector transition away from fossil fuel dependence and towards renewable energy independence.

Developing our nation's abundant, homegrown renewable energy resources is critical to the development of a sustainable energy future, and the absence of this key provision from the Senate energy package dings it a few points in my mind.

Also missing is an equally crucial package of tax incentives, loans and other financial incentives that would support a variety of clean energy technologies, from wind, solar, geothermal and other sources of renewable electricity to advanced biofuels, electric drive vehicles and carbon capture and storage technologies.

A $32 billion tax package that would have shifted subsidies from the oil and gas industry to support renewable energy, energy efficiency and other clean energy technologies was left out of the bill, again blocked by a minority of senators.

This is a major disappointment and leaves the Senate energy bill incomplete - it lacks the financial incentives to push forward the clean energy technologies we'll need to achieve the standards in the bill and truly put America on a path to a sustainable energy future.

Finally, while we're finally moving in the right direction with a 35 mpg by 2020 fuel economy standard, and it was all Democrats could do to preserve that standard, as the following graph (courtesy of Green Car Congress) illustrates, it really isn't that impressive when you look at fuel economy standards in the rest of the world, and even right here in several U.S. states.

As the graph above illustrates, even with the 35 mpg by 2020 standard, in thirteen years American fuel economy standards will be at about where China and Japan are today, the EU was five years ago and where the states that adopt California's tailpipe standards will be in just five years.

Summary and Final Grade

In summary, the bill is clearly a step forward - it avoids backsliding, doesn't shower any more money on the oil, coal and nuclear industries, includes several long-overdue provisions and deserves credit for what it does include. But it's a long way from the 'giant leap forward' in energy policy we truly need at this point.

I was hoping for an A+ - a truly comprehensive energy package that sets America on a course for a new, sustainable energy future.

Indeed, I think Americans are demanding just such a bill: we're fed up with Congress doing little to fight America's oil addiction, end our reliance on fossil fuels and do something about the climate crisis. This bill will help each of those pressing issues, but falls short of a comprehensive solution.

Final grade: B-

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Senate Passes Energy Bill But End Product is Far From Comprehensive

Energy bill passes Senate with renewable fuels standard and fuel economy provisions but lacks important tax provisions and a renewable energy standard.

In what can at best be considered a partial victory for clean energy advocates and the Democratic leadership, the Senate passed a stripped down energy package last Thursday night. Shortly before midnight, the Senate voted 62-32 to end debate on the bill, HR 6, and then quickly passed the bill with a 65-27 vote.

While a compromise was reached that preserved a 35 miles per gallon (mpg) by 2020 increase in fuel economy standards, the first major increase in fuel economy standards in two decades, the final energy bill was far from the 'comprehensive' energy package Senate leaders had originally promised.

The bill ultimately excluded an important tax package that would have shifted $32 billion in tax incentives from the oil and gas industry to support alternative and renewable energy and energy efficiency. It also left out a renewable energy standard requiring electric utilities to obtain at least 15% of their electricity from renewable energy sources (see previous post).

In a parliamentary maneuver to block more controversial proposals, Senate Republicans required cloture votes on nearly every amendment offered to the energy package as well as on the final vote to approve the bill itself, meaning that any amendment needed 60 votes to pass (enough to block a threatened filibuster).

Thus, while both the tax package and the renewable energy standard had support from a majority of senators, both provisions were left out of the final bill.

“Republicans continue to pander to the big oil and energy companies,” Senate Majority Leader Harry Reid (D-NV) complained after conceding defeat on those issues. “Republicans repeatedly demonstrate that they do not care about the priorities of the American people, throwing up roadblocks at every turn instead of working with us...”

The tax provision (Amendment 1704) fell just three votes shy of the 60 needed to reach cloture (it failed 57-36).

An amendment offered by Senator Jeff Bingaman (D-NM) that would have created a nationwide renewable energy standard for electric utilities never received an up or down vote, although all indications are that it was also just a few votes shy of 60 and was supported by a majority of senators.

Bingaman had circulated a compromise energy standard proposal (pdf) on Wednesday seeking to shore up support for the standard, but Republicans blocked this compromise as well. The revised energy standard amendment would have moved the 15% renewable energy target back two years to 2022 and would have given individual states the option of allowing their utilities to meet up to 4% of the standard with energy efficiency investments rather than renewable energy generation (making it a 4% energy efficiency and 11% renewable energy standard by 2022).

Debate over the national renewable energy standard will now shift to the House where debate on a 20% by 2020 standard is expected. A resurrected Senate proposal could also be attached to future energy legislation later this session and both Senator Bingaman and Senator Reid have pledged to continue pushing for a national renewable energy standard this session.

Despite these disappointments environmentalists [and anyone concerned about climate change!] scored a victory by keeping support for coal-to-liquids (CTL) synthetic fuel production out of the final energy bill. Two competing CTL amendments failed on Tuesday (see previous post), and the final bill moved without any tax incentives or fuel standards for CTL fuel.

Environmentalists and several progressive grassroots groups have been pushing hard to keep CTL out of the bill (see previous post), arguing that CTL fuels will exacerbate global warming pollution and involves expanded strip mining and mountain top removal, environmentally destructive practices used to mine coal.

First Fuel Economy Standard Improvement in Decades; Closes "SUV Loophole"

The most notable provision in the final energy bill is a first major revision to corporate average fuel economy (CAFE) requiring automakers to increase the average fuel economy of their vehicles to 35 mpg by 2020.

The new standards would for the first time establish a single fleet-wide fuel economy standard applicable to both cars and light trucks and SUVs, closing the so-called 'SUV loophole' that sets separate, lower standards for SUVs and light trucks.

Cars are currently required to average 27.5 mpg and SUVs and light trucks - which now account for roughly half of all new vehicle sales - are required to average only 22.2 mpg. Fleet-wide average fuel economy requirements are therefore roughly 25 mpg. The new standards would require an overall fleet-wide average - including both cars and light trucks - of 35 mpg by 2020, an increase of roughly 10 mpg in 10 years.

The minimum fuel efficiency requirement would vary for different classes of vehicles based on vehicle weight and size, but all vehicle classes would be required to increase their fuel economy by 10 mpg over today's levels by 2020 and manufacturers would be required to meet an overall fleet-wide average of 35 mpg.

The vehicle classes will be established by the Department of Transportation’s National Highway and Transportation Safety Administration (NHTSA).

Creating several new attribute-based vehicle classes should also help end the 'buy a hybrid, save a hummer' syndrome (see previous post). Currently, with only two vehicle classes - one for cars and one for light trucks - purchasing efficient vehicles on the leading edge of a vehicle class - a hybrid Toyota Prius or Ford Escape for example - essentially amounts to a 'free pass' for auto manufacturers to crank out more gas guzzling SUVs and luxury sedans at the trailing edge of a vehicle class. Creating several separate vehicle classes will help end this counterproductive scenario.

The new fuel economy standards apply to all light duty vehicles up to 10,000 pounds in weight and applies to model years 2011 and beyond.

The original fuel standard proposal had called for a 4% annual increase in fuel economy standards for each year after 2020. This requirement was dropped in a bi-partisan compromise aimed at shoring up support for the 35 mpg standard in the face of a much weaker automaker-backed proposal offered by Michigan Senators Levin and Stabenow. Car manufacturers had lobbied ferociously to fight the 35 mpg standard and backed the weaker Levin-Stabenow proposal which would have created a 30 mpg by 2022 standard and kept the separate standards for cars and light trucks.

The bill now says that from 2021 to 2030, NHTSA must set fuel economy standards that are "the maximum feasible" and ratchet these standards up at a reasonable rate, without specifying a specific rate.

Finally, while not specifying a particular efficiency standard, the energy bill directs NHTSA to develop and require improvements in the fuel economy of medium and heavy duty vehicles over a 20 year period as well.

Environmental groups and Democratic Senators, though disappointed by the setbacks on renewable energy, nevertheless hailed the vote on higher mileage requirements as a long-sought victory that could eventually reduce American gasoline consumption by more than 1 million gallons of gasoline a day and cut greenhouse gas emissions from the transportation sector.

“We are thrilled,” said Kevin Curtis, a lobbyist for the Pew Campaign for Fuel Efficiency. “This is the first time in decades that the Senate has passed a significant increase in fuel economy standards.”

“Today, the Senate roundly rejected the automobile industry’s scare tactics,” said Michelle Robinson, director of the Union of Concerned Scientists’ clean vehicle program.

A Biofuels Bananza - Energy Bill Includes 36 Billion Gallon Renewable Fuels Standard

In addition to increasing fuel economy standards, the energy bill calls for dramatic expansion in the use of renewable fuels including ethanol and biodiesel.

The energy bill establishes a renewable fuels standard of 36 billion gallons per year by 2022. The standard includes a requirement for advanced biofuels, which does not include ethanol derived from corn starch, to meet 60% of the total renewable fuel requirement by 2022.

However, without the tax package that would have provided tax breaks and subsidies to support the development of renewable fuels infrastructure, the bill is missing the package of financial incentives intended to support this renewable fuels standard.

The final energy bill includes an amendment offered by Senator Bingaman and passed on Wednesday that contains a number of provisions to make sure biofuel production would remain environmentally sensible. These provisions call for studies on environmental impacts of biofuels and include a requirement that advanced ("next generation") biofuels have "life cycle" global warming emissions at least 50 percent less than that of conventional gasoline.

The biofuels standard received major support from lawmakers from farm states, which already benefit from government supports for corn-based ethanol and stand to gain even more by expanded support for both conventional and advanced biofuels such as cellulosic ethanol made from agricultural residues like corn stover or dedicated energy crops like switchgrass.

Farm state Senators, many of them Republicans, also lobbied hard with their colleagues to drop their opposition for the tax package which would have expanded tax incentives for biofuels as well as wind power development, much of which is centered in mid-West and Western states.

“We’re taxing the oil industry to get a renewable energy industry started,” Senator Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said on the Senator floor. “I hope you’ll understand that God only made so much fossil fuel and that there’s got to be a follow-on if we’re going to have growth in our economy.”

Other Energy Provisions

The energy package passed by the Senate includes the following other provisions:

Calls for a new a consumer labeling program that includes greenhouse gas emissions along with fuel economy ratings.

Calls for ensuring that 50% of vehicles sold in the US are alternative fuel vehicles by 2015, including but not limited to flex-fuel vehicles, hybrids, electric vehicles, fuel cells and others.

Anti-price-gouging provisions that unlawful to charge an "unconscionably excessive" price for oil products during a time of designated national emergency.

A controversial provision known as "NOPEC" that makes it illegal for foreign governments to engage in oil or gas price cartels - e.g. OPEC - and allows the Attorney General to bring foreign governments to court for violations. (This provision is largely symbolic but is nonetheless controversial and may invoke a veto from President Bush who warns it will harm relations with Middle Eastern states).

New appliance and lighting efficiency standards.

A requirement that the federal government purchase at least 15% of its electricity from renewable energy sources by 2020 and accelerate the use of more efficient lighting in public buildings.

Establishes a public program and funds other initiatives that provide training for jobs that are created through renewable energy and energy efficiency initiatives with authorized funding of $100 million per fiscal year.

Electric-Drive Transportation Program to promote the development of plug-in electric vehicles, deploying near-term programs to electrify the transportation sector, and including electric drive vehicles in the fleet purchasing programs.

Gives the U.S. Secretary of Energy authority to establish 'national interest transmission corridors' for clean energy; expands the “federal backstop” transmission siting role given to the Department of Energy and the Federal Energy Regulatory Commission in the Energy Policy Act of 2005.

Directs the Executive Branch to develop and publish a plan to reduce oil consumption by 2.5 million barrels per day by 2017, 7 million barrels per day by 2026 and 10 million barrels per day by 2031.

Green Car Congress has a full list of the literally hundred plus amendments offered to the energy package in the Senate including the results of any votes on these amendments.

Debate Moves to House; Bush Veto Possible

The energy package now awaits action by the House which is expected to begin debating energy legislation next week. However, after facing a storm of criticism and division within their own caucus, House Democratic leaders agreed on Monday to drop the most controversial issues from this summer's energy bill debate, including CAFE standards, support for coal-to-liquids fuel and perhaps the national renewable energy standard as well.

In a memo circulated among Energy and Commerce Committee members on Monday, Chairman John Dingell (D-MI) wrote that several issues floated by the committee in a draft earlier this month need more consideration, according to Energy and Environment Daily (subscription required).

"These issues are important, and we are committed to addressing them and others when we take up comprehensive climate change legislation in the fall," Dingell wrote. "This will also give us the needed time to achieve consensus on these issues if at all possible."

Translation: Congressman Dingell has apparently decided to effectively punt until later in the year the entire fuels title, which contained an alternative fuels mandate, a low-carbon fuel standard, a boost in corporate average fuel economy (CAFE) standards and coal-to-liquids provisions.

According to E&D Daily:

The move comes after two weeks of closed-door negotiations among senior Democrats, some of whom vigorously objected to the proposed language. In particular, many Democrats -- among them Speaker Nancy Pelosi (D-Calif.) -- said they would not support a bill that contained language the would block California and other states from setting their own GHG emissions rules for motor vehicles.

The controversy on this and other issues forced the committee to postpone a markup of Dingell's draft legislation, and Pelosi and Dingell had been meeting over the last few days in an effort to hash out a compromise.

According to Dingell's memo, Pelosi has signed off on the deal and thinks the pact could pave the way for smoother passage of a summer energy package.

It therefore looks like both the Senate and House energy bills will be missing important clean energy provisions with the House measure likely to include some provisions absent from the Senate version - most notably a package of clean energy tax incentives - and vice versa - the Senate bill includes CAFE standards and a renewable fuels standard. This will leave a lot of details up to conference committee later this year which will be tasked with syncing up the House and Senate energy packages.

And to add further uncertainty to the mix, a presidential veto is still a real possibility, depending on what provisions are present whatever energy package finally passes Congress. President Bush has said that while he supports the biofuels standard, he is unhappy with much of the Senate proposal, particularly the CAFE standards, the anti-price gouging provisions and the "NOPEC" amendment.

According to an Oregonian/AP article:

The White House said the president would be urged to veto an energy bill that includes the price-gouging measures, arguing that they amount to price controls. The president also repeatedly has said he opposes Congress mandating a specific mileage number for auto fuel economy. Bush believes the Transportation Department should be given increased flexibility to set a standard.

The future of the energy package is thus still largely uncertain. Stay tuned...

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