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Carbon trading for ethanol

Corn at pumpThe letters section in last week’s Science Magazine (pdf) got us scratching our heads once again about the ethanol path we are headed on, with 39 new plants currently scheduled for opening.

The letters reveal a lot of disagreement about the impact of the processes that underlie corn-based ethanol production. And since the study, many bloggers have pointed out that the use of coal in new plants like Heron Lake Bio Energy largely wipes out any greenhouse gas reductions from ethanol.

Much of the problem is obtuse legislation that neglects the ostensible goals of a switch to ethanol-based fuels. For example, ethanol, however it is produced, gets a $0.51 per gallon tax credit. Ethanol, however it is produced, meets renewable fuel standards in the Energy Policy Act. That’s good news if the aim of the legislation is to promote production of ethanol, but not necessarily good news for the environment.

These laws are blunt policy instruments. We like sharp ones, such as carbon trading. Under the proper protocols, each ethanol plant could create carbon credits according to the specifics of their production process. Gas-fired plants create more credits, coal-fired plants create little to none. Trade in these carbon instruments could be used to encourage lower full-cycle emissions, as well as provide a carbon bonanza for the first to commercialize cellulosic technologies.

We’re a long way off from an economy-wide trading regime, but perhaps biofuels are the right place to start incentivizing the behaviors we want.

Footnote: One zinger in the letters section that shocked us: using current processes that yield about 60 gallons of ethanol per acre, planting the entire state of Iowa with corn would provide only enough fuel to satisfy consumption in the U.S. for about five days. In other words, we’ve got a ways to go before biofuels are scalable enough to support our energy needs.

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