Thursday, July 12, 2007

Pros and cons of the US Senate Energy Bill

A couple provisions in the last month's US Senate Energy Bill - technically the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007 - received most of the attention:

i) the increase in CAFE standards, and

ii) the renewable fuels standard.

It turns out both provisions have some quirky loopholes that were missed in much of the mainstream media coverage so far.

1. CAFE standards

With all the political hurdles, any change in CAFE standards is an accomplishment. As this well-researched article in Salon carefully explains, the actual goal -- that automobiles sold in 2020 average 35 mpg -- may not be worthy of that much praise.

First, it sets a rate of increase could be matched or surpassed without any policy:

It takes about a decade for the nation's vehicle fleet to turn over -- for new cars to replace old ones -- so any change to CAFE takes years to have a real impact on the average fuel economy of vehicles on the road... if you averaged the mileage of the most fuel-efficient cars, trucks, SUVs and minivans sold in the U.S. today, you'd already get a combined mileage of 31 miles per gallon... cars that Toyota sells in the United States almost meet the 2013 standard already, getting just shy of 35 miles per gallon... In Japan, the current average is 45 miles per gallon.

Second, the bill gives automakers one big out:

If the National Highway and Traffic Safety Administration can show that it's not "cost effective" for automakers to meet the 35 mpg goal, then it won't have to require them to do so.

These new CAFE provisions may actually get weakened further by the US Congress (where Democratic lawmakers from the automobile-producing states hold some sway). Efficiency will increase a bit without regulation simply due to current market pressures. But, as our carrot-munching friend noted in a comment here, without tougher standards or regulation, people may not have enough incentive to shift from the "safer" large vehicles towards smaller more efficient vehicles.

2. Renewable Fuels Standard

The bill sets a new target of 36 billion gallons of renewable fuels by 2022. Opponents of corn-based ethanol cheered the "capping" of its production at 15 billion gallons.

As part of some ongoing research, a colleague and I read through the renewable fuels portion of the bill for the section on corn. Actually, we just searched for the "corn". Nothing. We tried "maize". Nope.

You see, there is no cap specifically on corn. The target is for 21 billion gallons of "advanced fuels". The remainder, 15 billion, can be conventional ethanol.
Flipping back to the beginning of Bill reveals that "advanced" means "fuel derived from renewable biomass other than corn starch." That's where the news of a 15 billion cap came from.

It'll be interesting to discover how this standard will be interpreted. Does a small conversion of corn cellulose or non-starch parts of the corn plant (i.e. relative to the use of the starch in the grain) allow corn-based ethanol production to be included as an advanced fuel? Will conventional fuels created from sorghum, a crop similar to corn grown in drier parts of the US, or from durum wheat be considered advanced fuels?

Perhaps the intent of the authors in structuring the Bill in this manner was benign. At the very least, the language is very curious.

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