Benefits of Renewable Fuel
Floor Speech
BENEFITS OF RENEWABLE FUEL -- (Senate - March 05, 2008)
Mr. THUNE. Mr. President, this last year, Americans sent almost half a trillion dollars, almost $500 billion, overseas to purchase imported oil from other countries around the world. Think about that massive transfer of wealth and what that means for our national security because, in many respects, a lot of those dollars being used to purchase imported fuels are going to countries that are not favorable toward the United States. Of course, some say it is a world market, let the market work.
The difference is that most of our trading partners around the world are people we consider to be at least friends, allies, folks we do business with. They are not countries that are funding organizations that are trying to kill Americans. Regrettably, what we end up doing is funding both sides of the war on terror, because we send almost half a trillion dollars annually to foreign countries, petro dictators around the world who use those dollars to fund terrorist organizations that are designed to kill Americans, and then we end up having, of course, to fund our military to go fight the very same terrorists. It seems like a very misguided policy.
I make that point because I think we have a dangerous dependence on foreign energy. Today, 65 percent of our petroleum comes from outside of the United States. As most of us know, the fuels in this country are mostly petroleum based. The reason I say all that is I think we have an important decision to make in this country about whether we are going to continue to subsidize foreign governments, petro dictators who use those dollars that transfer wealth out of this country to fund terrorist organizations that attack Americans, or whether we are going to make an investment in the United States that provides benefits to the economy in America and provides jobs for Americans. I think that is an important decision we have to make.
For the past several years, this Congress as a matter of policy has tried to put into place incentives to increase the production of renewable energy, and with some degree of success. If you look at last year and this year, by the end of this year, we will be at about 7.5 billion gallons of ethanol produced in the United States. There are some 160, I think, ethanol biorefineries in this country. If you look at it, 22 States are home to some of those, with a collective capacity of over 7.5 billion gallons. There are sixty biorefineries under construction and several plants are in the process of expansion. That is a great story for America and for our agricultural economy. It is also a great story for our national security, in my view.
Lately, we have had a lot of attacks launched on the ethanol industry, and on renewable fuels generally. Many of them have been, again in my view, very misguided and misleading in terms of the reporting that has been done regarding food prices. If you look at several editorials recently, the New York Times went out of their way to discount the impact of high energy prices and worldwide demand for protein as reasons for food price increases. Rather, they decided to blame ethanol by stating, ``The most important reason for the price shock is the rich world's subsidized appetite for biofuels.'' The editorial board claims, ``The benefits of this strategy are dubious.''
A February Washington Post article, entitled ``The Problem With Biofuels,'' leads the public to believe that biofuels will only serve to starve people. The article quotes a university study and states, ``By putting pressure on global supplies of edible groups, the surge in ethanol production will translate into higher prices for both processed and staple foods around the world.''
The food versus fuel debate is an important debate to have. However, it has to be based upon facts and not anti-Ðrenewable fuel rhetoric.
It is a fact that energy prices have a 2-to-1 greater impact on food prices relative to the price of inputs such as corn.
Last year, John Uranchuck of LECG issued a report detailing the impact of rising energy prices on the price of food. According to that study,
Increasing petroleum prices have about twice the impact on consumer food prices as equivalent increases in corn prices. A 33 percent increase in crude oil prices--the equivalent of $1 per gallon over current levels of retail gasoline prices--would increase retail food prices measured by the CPI for food by 0.6 to 0.9 percent. An equivalent increase in corn prices--about $1 per bushel over current levels--would increase consumer food prices only 0.3 percent.
In December 2007, Informa Economics issued a report called ``Marketing Costs and Surging Global Demand for Commodities Are Key Drivers of Food Price Inflation.'' This report also concluded that the price of raw commodities is not the leading component of the Consumer Price Index for food. Rather, this report correctly identified rising energy and transportation costs as leading causes of food inflation.
To place the blame for food inflation on biofuels and the rising prices of certain commodities is simply misguided. According to the U.S. Department of Agriculture, costs of food inputs only account for a fraction of food prices. Specifically, labor, packaging, transportation, advertising, and profits account for 68 cents of every dollar a consumer spends on food.
The long-term outlook for corn prices under the expanded renewable fuels standard is somewhere in the $3.25 to $3.50 per bushel range. To put that into perspective, so the average person around the country can understand what I am talking about, the average box of corn flakes contains about 10 ounces or one ninetieth of a bushel of corn. Even at $4 corn--$4 a bushel corn--that amounts to 5 cents of corn in a box of corn flakes. Think about that. A box of corn flakes. Everybody assumes the farmer, because of high corn prices, is cutting a fat hog, but 5 cents of that goes back into the farmer's pocket. Attributing food inflation to biofuels and corn-based ethanol is simply untrue.
Now, with respect to climate change, because we have heard a lot of discussion as well and criticism of the ethanol industry with regard to how it impacts that debate, critics of renewable fuels have also started blaming climate change on renewable energy. I find that hard to believe, as well, because the purpose of biofuels is to replace petroleum as a fuel source. For years, environmentalists have decried petroleum as a major emitter of harmful carbon emissions. Today, we have a homegrown alternative that is displacing more and more petroleum by the day. Some are claiming now that ethanol is creating more global warming. If our national policy is to manage climate change, falsely blaming ethanol for global warming is not helpful to the cause.
According to the Argonne National Laboratory, regular blends of ethanol, gasoline containing 10 percent ethanol, reduce greenhouse gas emissions by 18 to 29 percent relative to regular gasoline.
As more ethanol is produced and consumed, our Nation's carbon footprint will continue to shrink. In 2006, ethanol use in the United States reduced carbon dioxide emissions by approximately 8 million tons. Such a reduction is the equivalent of removing 1.21 million cars from the road.
As Congress continues to debate climate change legislation and the causes of global warming, it is important to set the record straight. Ethanol production is a carbon sink, not a net producer of carbon emissions. Furthermore, as new types of cellulosic ethanol come online, the carbon-reducing benefits of ethanol are only going to increase.
Ethanol may be able to be blamed for some other transformations in our economy. For one, increased ethanol production is allowing our demand for gasoline to go down and displacing foreign imports of oil. Again, I point to some of the statistics that bear that out. If you look at the amount of ethanol that is being produced in America today--and this is based on a 2007 number--in 2007, the ethanol that was produced, 6.5 billion, in this country displaced the need for 228 million barrels of oil, saving American consumers more than $16 billion or $45 million a day from going to countries, as I said earlier, outside the United States and enriching petrodictators who would do us ill will.
If we look at the impact on tax revenues coming into the Treasury, the ethanol industry generated an estimated $4.6 billion in Federal tax revenue and $3.6 billion in additional tax revenue for State and local governments. So if you couple that with the fact that according to the USDA--and I think this is an important point to make, too, by those who would criticize ethanol--according to the USDA, the increased demand for grain use in ethanol production reduced Federal farm program costs by more than $8 billion last year, meaning that even with the cost of the tax incentive that we use to encourage more production of ethanol, ethanol saved U.S. taxpayers, when you couple that with the additional tax revenue coming into the Treasury and the $8 billion that was saved because the Federal Government was not making farm program payments to farmers in this country, U.S. taxpayers saved more than $9.2 billion as a result of this industry.
Right now, about 50 percent of the gasoline in this country is blended with ethanol, and before very long, we hope that from coast to coast we will have every single gallon of gasoline in this country blended with ethanol.
But my point very simply is: This has been a great success story, one which has benefited and enriched our country, our farmers, people in this country who are working hard making a living contributing to a better quality of life for all Americans, as opposed to shipping all that wealth outside the United States to other countries.
Let me restate what I started by saying at the very beginning, and that is that last year, we spent almost half a trillion dollars, almost $500 billion, in purchasing imported oil. That, again, makes absolutely no sense to me in light of these statistics that I shared. I think as we look at the future of this industry and the promise it holds and the benefit it holds, not only for the economy in this country but also as we get away from this dangerous dependence on foreign sources of energy, renewable fuels, biofuels, have a great future for America, and I believe we ought to be continuing to invest in making sure that those who are involved with that industry--our farmers, those who are constructing ethanol plants around this country, that we provide not fewer incentives but more incentives for this kind of biofuel production that, again, gets rid of the carbon in our atmosphere, cleans up our environment, lessens our dependence on foreign sources of energy, and puts dollars back into the pockets of hard-working Americans, farmers, the rural economy, creating jobs, helping grow the economy right here at home in the United States rather than shipping those dollars to some foreign country where, again, many of these dollars are used to turn around and fund organizations that are designed to undermine America's interests around the world.
This debate will continue to percolate around this country, but when we get into this debate about food versus fuel, it is important we have the facts in front of us because this industry has undergone a lot of criticism of late. As I said before, I think much of it is misguided because it is based on misinformation and wrong facts. We need to have the facts in front of us, and then we can have a meaningful debate. Until that happens, we are going to hear more of these false attacks against an industry that is creating American jobs, helping reduce our dependence on foreign energy, and I hope, in the very near future, we will be able to increase the amount not only of production in this country but the amount of consumption because I believe in the very near future we will start seeing more and more momentum for increasing the blend rate.
Right now, we blend 10 percent ethanol, as I said, in 50 percent of the gasoline in the country. I hope in the future we can increase that to 20 percent. The University of Minnesota completed a study where they compared effects of 10 percent and 20 percent on materials compatibility, driveability--all those types of issues. The result of the data that came from that study was that you can move to a 20-percent blend, a higher blend, an intermediate blend right now and have no impact on any of those issues.
The issue of emissions is still being studied. The renewable energy laboratory in Golden, CO, and the Department of Energy and EPA are undertaking some studies. When that data comes in, I believe it will show what the University of Minnesota study has shown and that is you can go to a higher blend with minimal impact and, in fact, in many cases with a better result; that we should move very quickly. I am going to encourage the administration and continue to try to influence that decisionmaking process in a way that will increase the amount of ethanol that is used in this country so, again, we can achieve the many benefits that I think dependence on American agriculture creates for us as opposed to our dependence upon foreign energy.
I yield the floor.
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