Beneficial Biofuels:Policies that Deliver Real

Environmental Performance

Pierre BullMoving Ahead 2010Columbus, OHMay 3, 2010

Four Critical Objectives for Sustainable Biofuels

1. Energy security

2. Greenhouse gas emissions

3. Biodiversity

4. Sustainability of the food supply

Tilman, D., et al. (2009) “Beneficial Biofuels—The Food, Energy, and

Environment Trilemma” Science. Online: http://www.sciencemag.org/

Biophysical Potential

According to studies by the National Research Council and the Union of Concerned Scientists, the U.S. can produce between 370 and 550 million tons of biomass for energy use by 2020 from sustainably sourced lands and feedstocks.

U.S. Policy Context

• 1978 Energy Tax Act restructured into the Volumetric Ethanol Excise Tax Credit (VEETC) in 2005.

• 2005 EPACT EPA Renewable Fuel Std. (“RFS-I”) in 2007

• 2007 California Executive Order S-01-07 California Air Resources Board (CARB) finalizes comprehensive lifecycle GHG performance accounting framework for CA Low-Carbon Fuel Std. (CA-LCFS) in 2009

• 2007 EISA EPA Renewable Fuel Std. (“RFS-II”) in 2010

• 2009 Waxman-Markey Climate Bill (ACES 2009) … Proposed carbon offsets and federal renewable electricity standard

• 2010? Senate Proposed Comprehensive Energy and Climate Legislation …

NRDC Asks

Accurate accounting of carbon emissions including indirect land-use change from biomass feedstocks

A sound definition of “renewable biomass” in potential Clean Energy Legislation

Reform the Biofuel Tax Credit (VEETC)

A Good Start: Carbon Accounting in RFS II Rule

• The RFSII rule builds on a robust, science based process

• The final RFSII rule confirms that there are major differences between different types of biofuels.

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SOURCE: EPA, RFS2 Final Rule Life Cycle Analysis Supplemental Materials, downloaded April 5, 2010.

A Sound Definition of Renewable Biomass

• “Renewable biomass” in EISA 2007 was a positive step to preclude the most destructive sources of biomass from being used to make biofuels—avoiding sensitive habitat and ecosystem destruction.

• More sustainability safeguards are needed to protect critical wildlife habitat, soil productivity, and biodiversity in natural forests and grasslands.

• We should protect the natural forests that remain from conversion to less diverse, planted forests or energy crops.

Reform the Biofuel Tax Credit (1)

• Despite original good intentions, incentives like the Volumetric Ethanol Excise Tax Credit (VEETC) for biofuels development are outdated– RFS mandate

– Emerging environmental concerns

• 2009 GAO Report on the VEETC– Pays oil company blenders $0.45 for each gallon of ethanol used

– Subsidy pays industry to comply with federal law under the RFS

– At a cost to American taxpayers of $4 billion in 2008, est. $5.3 billion in 2010 and $6.7 billion by 2015.

• What is missing from current tax policy is a requirement for real, measured performance in delivering expected environment and climate benefits above and beyond those already required under the RFS.

Reform the Biofuel Tax Credit (2)

• A technology-neutral, performance-based credit will lead to better biofuels

• To remedy this, we propose reforming the mix of existing federal biofuel tax credits—including the ethanol blender’s credit—into one performance-based tax credit that is– Budget neutral

– Streamlined

• Specific components of a greener biofuels tax credit– Climate performance first ½ of the new tax credit (up to $0.50/gal)

– Environmental performance second ½ of the credit (up to $0.50/gal)

– Convertible tax credits (from production-based to refundable investment tax credits) for the first billion gallons for best performing biofuels (those qualifying for $0.80/gal)

Contact Info

Pierre Bull

pbull@nrdc.org

212-727-4606

http://www.nrdc.org/renewables