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The Ethanol Mandate to Nowhere

Cellulosic ethanol continues to be a failure.

11:00 PM, Nov 23, 2009 • By DAVE JUDAY
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Perhaps the greatest irony of all, however, is that cellulosic ethanol was supposed to be our path to energy independence. The U.S. Senate Democratic Policy Committee even issued a press release shortly after the 2007 EISA was passed claiming that "The Democratic Energy Bill Will Promote Energy Independence." Instead, the U.S. Department of Energy has given grants to much foreign controlled technology.

Abengoa, a Spanish company, received a grant to put a crop waste-based plant in Kansas. BlueFire, a company chosen because of their "proven technology" in cellulosic fermentation, received a grant to work on converting landfill waste into ethanol. Their technology is now employed at their Izumi, Japan, ethanol mill. Iogen, a Canadian company, is planning on building a plant in Idaho to turn wheat straw into ethanol. Novozymes, the Danish owned company that operates a lab in North Carolina, will provide the enzyme technology to another grantee, POET, a U.S. company that is turning (guess what) corn cobs into ethanol in Iowa. And the project funded by the State of Tennessee? It is a joint venture between DuPoint and the Danish Company Danisco. Subsidizing foreign technology doesn't seem to jibe with the goal of U.S. energy independence.

The bottom line is this. President Carter, in 1979 and 1980, invested more than $1 billion (for context, remember the federal budget was $590 billion then; it is $3.1 trillion today) in ethanol--including cellulosic--technology and development. Carter proposed the goal of 10 percent of total fuel use being made up by corn and cellulosic ethanol by 1990. Corn ethanol was eight-tenths of one percent of motor fuel supply in 1990; today it is about 8.5 percent of fuel supply. Cellulosic production did not exist in 1990.

Today, 30 years and billions of dollars later, cellulosic fuel is not just subsidized, its use is mandated. The goal still is to become about 10 percent of the fuel supply in 10 years. And still, cellulosic ethanol production can't meet its mandate. Sound familiar? It is time to wipe the slate clean, eliminate the cellulosic fuel mandate, and re-think U.S. biofuels policy.

Dave Juday is a commodity market analyst.