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Time for a new approach to ethanol mandates

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Mark Rohr Mark Rohr
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Mark Rohr is chairman and CEO of the Celanese Corp., a member of the Domestic Fuels Solutions Group.

After contending with a political firestorm, on Nov. 16, 2012, the Environmental Protection Agency announced that it will not temporarily waive federal requirements for blending ethanol into America's fuel supply. Corn farmers and many ethanol producers are happy because they want no change in the status quo. But critics of the ethanol requirements who wanted the requirements suspended include eight U.S. governors, 200 members of Congress, livestock producers, environmentalists and United Nations officials concerned with world hunger.

When such a broad coalition indicates that something is broken, it behooves policymakers to consider how to fix it. This recent furor should motivate Congress and the Obama administration to take a new approach to the ethanol mandates, which are codified in the renewable-fuel standard that was last modified in 2007.

Critics of the RFS rightly point out that because ethanol is produced almost exclusively from corn, food prices have spiked in the U.S. and abroad and the environment has been degraded. But while some critics want Congress to reduce the amount of ethanol required for America's fuel supply, this would make it more difficult to wean ourselves off foreign oil. Instead, policymakers should revise the RFS to promote new alternatives for ethanol production, using technologies that were unavailable in 2007.

Adding more ethanol to our fuel supply is a great idea, but relying so heavily on corn-based ethanol is not. Mandates in the RFS have forced about 40 percent of the U.S. corn crop to be used for fuel this year, even in the midst of a record-breaking U.S. drought. World Bank researchers — among many others — have blamed the depletion of corn from our food supply for soaring global food and feed costs. According to an American Farm Bureau Federation survey, the average cost of a Thanksgiving dinner this year was about 35 percent higher than it was in 2005, when the RFS was passed. The U.S. government should be doing everything possible right now to curb food prices, rather than ignoring the problems inherent in corn-based ethanol.

The RFS encourages other sources of ethanol, mandating a gradual increase in its production from non-corn sources such as grass, tree bark and municipal waste — "cellulosic" ethanol. But these advanced biofuels have shown little promise. As a result, the EPA has had to revise the requirement for cellulosic every year to something well short of the 500 million gallons that was originally mandated for ethanol production in 2012. Clearly, cellulosic will not be commercially viable to meet even minimal short-term RFS requirements. Over the long term, Congress has mandated that 36 billion gallons of ethanol be produced by 2022, and that 21 billion gallons come from non-corn sources. Relying on cellulosic technology to reach this ambitious goal is just wishful thinking, not sound policy.

When Congress picked corn as the winner in 2007, it did not account for the advances in technology that would occur, enabling the cost-effective production of ethanol on a mass scale from new sources. For example, new methods for making fuel-grade ethanol from hydrocarbons like natural gas, an abundant U.S. resource — and other sources — are now available. The current RFS does not include hydrocarbons on its list of approved ethanol sources, stifling competition and giving the advantage to a small sliver of industries. It should be amended to make room for new ethanol sources in the marketplace. Excluding them from the RFS program inhibits the growth of our domestic energy economy at a time when other countries, like China and Indonesia, are moving ahead rapidly in the alternative fuels race.

Congress should push for change by passing a bipartisan bill introduced earlier this year by Rep. Pete Olson, R-Texas, the Domestic Alternative Fuels Act of 2012, which would modify the RFS to allow for a broader range of domestic alternative fuel sources. Its passage would mean that ethanol produced from readily available and inexpensive hydrocarbons — except for petroleum — could compete in the U.S. transportation fuels market. It would also open the door for more, desperately needed innovation.

The Obama administration has taken an "all-of-the-above" approach to America's energy needs, incorporating both conventional and alternative sources. It must work with Congress to develop the same approach to ethanol production.

New ethanol technology could bring much-needed relief to high food prices, inject fresh growth and innovation into the alternative fuels industry, create new jobs and further reduce our reliance on foreign oil. Both Congress and the Obama administration should embrace this opportunity and not let a narrow group of special interests dictate such an important part of our energy policy. Let's use all the technologies that are available to us, and put smart innovations to work for the American economy.