Can the Midwest Replace the Mideast?

As biofuels become America's hottest new energy source, a campaign begins to ensure they benefit the environment

Posted: 31-Jan-2006; Updated: 15-Aug-2007

Homeland security: Turning crops into fuel brings money to struggling American farmers and reduces dependence on foreign oil. (Credit: Gene Alexander/USDA)

The 255 residents of Lakota, IA, had to scrimp to finance a new plant to turn local corn into fuel. Last year, those farmers reaped $5 million in dividends, a 25% return.

Today’s hottest domestic energy market doesn’t involve derricks and black gold, but corn stalks, manure, even palm-oil waste from making M&Ms. The Wall Street Journal calls the biofuels rush "the biggest investment movement in rural America in decades." While new oil refineries go begging for a home, Midwestern towns welcome ethanol plants, hoping for new jobs and markets for their crops. The jump in oil prices helped, pushing ethanol’s price up 40% in two years. So did the 2005 Energy Bill, which mandates annual production of 7.5 billion gallons of biofuels by 2012. Though focused on conventional grain ethanol, the bill also credits "cellulosic ethanol" made from agricultural wastes, biodiesel made from fats and oils, and biogases, like the methane from feedlots that can be captured and burned.

A growing number of cars on the road can run on gasoline mixed with ethanol. Advocates say biofuels will reduce dependence on foreign oil: one consortium of growers, the Agricultural Working Group, has called on farmers to meet 25% of America’s energy needs by 2025. Biofuels also are touted as a way to reduce petroleum emissions that contribute to global warming.

Not all biofuels are created equal

But -- and this is a big one -- the emissions reductions from biofuels vary enormously, depending on how crops are grown and how the fuel is made. Do farmers forgo plowing to keep carbon in the soil? Do they cut back on nitrogen fertilizers, which release a potent warming gas? Is the fuel made from the grain or, more efficiently, from "stover" -- the stalks and leaves? (Find out more about growing fuel that's good for the planet.)   

As yet, the market takes no account of those questions. "The existing market sends no signal to these fuels that there’s value in being low-carbon or low-energy input," says Environmental Defense policy analyst Sara Hessenflow Harper. "You get tax credits for ethanol no matter how it’s produced."

To build the right market incentives, Environmental Defense has begun working with commodities groups and farmers to develop a low-carbon certification for biofuels. Ultimately, when national carbon caps are in place, certified ethanol will command a premium price. Even before that, the regulations we helped develop in California -- requiring automakers to cut global warming pollution 30% -- should get the market rolling.

Production has increased sevenfold since 1980 but remains a "drop in the bucket" compared to the 300 billion gallons of oil the U.S. consumes each year.

The potential for carbon reduction is immense: Turning the 400 million tons of U.S. agricultural wastes currently available annually into cellulosic ethanol would provide 35 billion gallons of fuel, equivalent to about two-thirds of the petroleum that we now import from the Middle East -- and cut America’s global warming pollution 5%.

Many of the technologies needed to make low-carbon ethanol already exist. In pilot projects in Kansas, Louisiana and the Pacific Northwest, we’re helping no-till farmers measure and sell the carbon they keep in the ground. In New York, we’re helping dairy farmers do the same with captured methane: By burning the gas for power, they cut its global warming impact 18-fold.

And new technologies are emerging. A Canadian company using a fungal digestive enzyme to break cellulose into sugar predicts its $300 million refinery will make ethanol for $1 a gallon. E3 Biofuels of Omaha has created a closed loop: an anaerobic digester converts manure into methane gas, which powers an ethanol plant; the leftover mash is fed to the cattle.

As a key step toward reaping the potential of such innovations, our chief scientist Dr.William Chameides has developed a balance sheet comparing the global warming impact of various biofuels.

In the tradition of Environmental Defense, we are not trying to guess the best technology in advance, but setting an ambitious environmental performance standard and letting the market find the cheapest and best way to meet the goal.

Find out more: How to grow fuel that's good for the planet

From the January-February 2006 issue of Solutions