Bingaman Promotes Subsidizing Shift to Algae-Based Fuels

Bingaman Promotes Subsidizing Shift to Algae-Based Fuels
August 3, 2010

Bonner R. Cohen

Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position... (read full bio)

Buoyed by a just-released Congressional Budget Office (CBO) report raising doubts about continuing subsidies for corn-based ethanol, Sen. Jeff Bingaman (D-NM) is calling for new incentives to promote algae-based fuels instead.

Ethanol Industry Already ‘Mature’
The CBO report, “Using Biofuel Tax Credits to Achieve Energy and Policy Goals,” points out U.S. taxpayers subsidize corn-based ethanol to the tune of $7 billion per year. Since 1980, ethanol subsidies have totaled $41.2 billion in current dollars, according to the report.

Bingaman described corn ethanol as “a mature technology whose market share is protected,” adding, according to the New Mexico Independent on July 16, that Congress should scrutinize the subsidy and “weigh all factors, including the credit’s very high cost to taxpayers.”

Tax Credit Reduction Considered
Feeling the heat from their constituents regarding soaring budget deficits, Capitol Hill lawmakers are increasingly eager to show disgruntled voters they are being fiscally responsible. Ethanol subsidies, which are not popular in those parts of the country where corn is not grown for fuel, make for an inviting target.

Responding to growing voter unrest, the House Ways and Means Committee is considering reducing the 45-cents-per-gallon tax credit for ethanol to 36 cents. The tax credits go to oil companies that blend ethanol with gasoline.

EPA Decision Pending
The ethanol industry is aware the political winds have shifted. Bob Dinneen, president of the Renewable Fuels Association, said ending the subsidy would wipe out 40 percent of the corn ethanol industry.

“We need to have that tax credit renewed,” Dineen told a July 21 board meeting of the Renewable Fuels Association.

Meanwhile, Growth Energy, a South Dakota-based rival of Dinneen’s group, has proposed phasing out the tax credits and redirecting the money to ethanol’s infrastructure needs, including blender pumps and an ethanol pipeline.

Adding further confusion to the ethanol debate is the long-delayed decision by the Environmental Protection Agency (EPA) on whether to allow the percentage of ethanol blended in gasoline to rise from 10 percent to 15 percent. If, as expected, EPA goes along with the increase, the ethanol industry would receive a much-desired additional boost.

Algae Alternative?
As the corn ethanol drama sorts itself out, Bingaman hopes algae-based fuels will receive more attention. A recent Department of Energy (DOE) report, “National Algal Biofuels Technology Roadmap,” sees some promise in algae-based fuels, but not in the near term.

The report points out there are “several aspects of algal biofuel production that have combined to capture the interest of researchers and entrepreneurs around the world.  These include: (1) high per-acre productivity, (2) non-food-based feedstock resources, (3) use of otherwise non-productive, non-arable land, (4) utilization of a wide variety of water sources (fresh, brackish, saline, marine, produced, wastewater), (5) production of both biofuels and valuable co-products, and (6) potential recycling of CO2 and other nutrient waste streams.”

Will Activists Accept It?
As for the commercial viability of algae-based fuels, the DOE report expresses caution. The report says “many years of both basic and applied science and engineering will likely be needed to achieve affordable, scalable, and sustainable algal-based fuels.”

Another potential challenge to the commercialization of algal biofuel is its source. Will it come from nature or, more likely, will it have to be genetically modified to reach its potential as a viable fuel? If it is the latter, then GM algae-fuels are likely to face the same sort of opposition from environmental activists and regulators that has overshadowed the development of other genetically engineered crops.

Government Involvement Questioned
In the American Recovery and Renewal Act of 2009, better known as the Obama stimulus package, the administration targeted $800 million for research into biofuels, including algae-to-biofuel processes.

“We are learning with algae what we learned with other energy alternatives on the government dole—they need all these taxpayer handouts for a reason,” said Ben Lieberman, senior policy analyst for energy and environment at the Heritage Foundation.

“Nevertheless, algae-based fuels or any other renewable energy source should not be dismissed out of hand. But it’s a sure bet that the ultimately successful ones will succeed due to efforts of the private sector, independent of any government involvement and government attempts to pick winners and losers.”

Bonner R. Cohen, Ph..D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy.

Bonner R. Cohen

Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position... (read full bio)