Today on the podcast, everything you need to know about biofuels and how the Renewable Fuel Standard has failed consumers, taxpayers, and the climate. Host Steve Ellis is joined by journalist and author Michael Grunwald and TCS Senior Policy Analyst Sheila Korth.

Episode 48: Transcript

Announcer:

Welcome to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending and tax issues facing the nation.

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And now a host of Budget Watchdog AF, TCS President, Steve Ellis.

Steve Ellis:

Welcome to All American Taxpayers Seeking Common Sense. You’ve made it to the right place. For over 25 years, TCS, that’s Taxpayers For Common Sense, has served as an independent, nonpartisan, budget watchdog group based in Washington DC. We believe in fiscal policy for America that is based on facts. We believe in transparency and accountability because no matter where you are on the political spectrum, no one wants to see their tax dollars wasted.

Today on the podcast, we’re going to tell you everything you need to know about biofuels and how the renewable fuel standard has failed consumers, taxpayers, and the climate. Joining me from TCS is Sheila Korth, Senior Policy Analyst with a focus on agriculture, energy, and climate policies, and journalist Michael Grunwald, who writes a column about food and climate for Canary Media, a nonprofit newsroom covering clean energy. He also has a book coming out, his third, about how to feed the world without frying the planet.

Sheila and Michael, welcome.

Sheila Korth:

Good to be here, Steve.

Michael Grunwald:

Thanks for having me, Steve.

Steve Ellis:

Dear podcast listeners, there’s a good reason for the timing of this most important discussion. Just last week, the Biden Administration made headlines when they announced the volume of corn ethanol and soy biodiesel that must be blended into US transportation fuels through 2025. And trust me, if you’re new to biofuel policy, the number alone, 20.94 billion gallons won’t tell you much. We need to start this sad story from the beginning.

Sheila, let’s get this started. What was the original intent of the Renewable Fuel Standard or RFS and biofuel subsidies in the US?

Sheila Korth:

Dating back to 2005, we had the first Renewable Fuel Standard enacted by Congress in the energy bill. Then they came around two years later, that’s Congress, and enacted what’s known as the RFS2, the Renewable Fuel Standard Two, and we just referred to it today as the RFS, but technically it’s number two. And they greatly expanded the number of gallons of biofuels, mainly corn ethanol and soy biodiesel that must be blended into the US transportation fuel supply every year.

So by the year 2022, that’s last year, we were supposed to have 36 billion gallons of corn ethanol, soy biodiesel, but not only those fuels, a lot of advanced biofuels, and that’s where we haven’t seen those produced to date. We’ve fallen greatly short of those mandates. But President Bush even in his 2006 State of the Union referenced these advanced biofuels that we were supposed to have for sure by last year, things made from corn cobs and perennial grasses, but we haven’t seen a lot of production of those to date. So the original intent of the RFS, the Renewable Fuel Standard, was to reduce greenhouse gas emissions, increase energy security, and increase the production of those biofuels that are not produced from food crops.

Steve Ellis:

So Sheila, so what’s the current state? You’re talking about that we haven’t really done the cellulosic. So how much of biofuels is this advanced biofuel and how much is it just the same old, same old corn and soybeans?

Sheila Korth:

Yeah, most of the RFS, the Renewable Fuel Standard, the biofuels mandate, is derived from these so-called first generation biofuels or an ethanol and soy biodiesel that are produced from food crops. But when the RFS was enacted and Congress, when they also started to subsidize the industry very heavily, they assumed that we would have, again, these biofuels from switchgrass and corn cobs called cellulosic biofuel,. And they were supposed to make up about 16 billion gallons of those 36 billion gallons by last year. But in the announcement from the Environmental Protection Agency last week, we’re only going to have about 5% of the cellulosic biofuels that we were supposed to have when Congress enacted the RFS a long time ago.

Steve Ellis:

So just a tiny percentage. And even though we were supposed to transition and it was just corn ethanol and soy biodiesel bridge, it seems more like it’s been a crutch and something that they’ve been hanging onto in the ag sector.

So Michael, we mentioned this EPA announcement last week, and part of the reason why we were having on here is because you just had an excellent op-ed in the New York Times and it really presaged this announcement and made your prediction. So what did they say in this announcement and what does it mean, at least from your perspective?

Michael Grunwald:

Well, look, the RFS was originally proposed during the Iraq war, and the idea was that it was going to be all about American energy independence, and then they would also mention, “And it would also increase farmer incomes,” which of course is the real reason to do this thing. You’re going to increase demand for these crops.

And then later, they started to say, “Oh, and it’s also going to reduce greenhouse gas emissions,” when we decided we cared about that, and that’s been just an additional talking point. There was always this idea that, as Shelia mentioned, that we were going to move from food-based crops to waste crops or second generation biofuels. I do think it’s important to recognize that even though they talk about corn ethanol and soy biodiesel are supposed to be these bridge fuels, from a climate perspective, there’s not that much of a difference as long as you’re using land.

If you’re growing fuel, even if you’re growing switchgrass, you’re essentially driving deforestation and hurting the climate. I have heard some that it was after my op-ed raised some alarms about this idea that, hey, they’re going even deeper into some of these biofuels that are first generation that everybody except the industries themselves hate. They did scale that back a little bit. There’s not as much corn ethanol as there was in their draft proposal, even soy biodiesel, which they are pushing a little harder than they were in the past, but not as hard as they pushed in their actual draft.

So there’s a sense that increasing push for advanced biofuels with a little bit less of first generation biofuels. But as you said, the advanced biofuels have never panned out just economically. And so essentially, it’s the status quo in some sense, given the politics of this, that’s probably good because this generally only gets worse. But since it’s a pretty bad status quo, it’s not great.

Steve Ellis:

Right. And that’s a good point about the land implications no matter what you’re growing for fuel.

But then also part of their limitation, if I’m not mistaken, is that you can only blend so much ethanol into the fuel supply, that you basically have some limitations on we’re only using this much gasoline. Most US cars can’t burn over a certain percentage of ethanol, isn’t that right?

Michael Grunwald:

Under the regulations, but they’re of course simultaneously trying to lift those regulations. Right now it’s standard when you go to any random fuel tank and put gas in your car, assuming it’s not an electric car, it’s going to be 10% ethanol. And then there are some places where you have 85% ethanol if you have a particular flex fuel car. That used to be all the rage in the alternative fuel set before electric vehicles turned out to be way better.

But there is a push to increase to E15, and particularly over the summer, you’re seeing a push for more E15. And essentially, I don’t think that the technology is necessarily the limiting factor on how much ethanol they’re going to be able to jam into your tank. I think it really has more to do with what the politics will bear. They’ll always find a way, if they can, to create a new artificial market for their corn that they can’t shove into pigs or Twinkies.

Steve Ellis:

You’re listening to Budget Watchdog All Federal, the podcast dedicated to making sense of the budget, spending and tax issues facing the nation. I’m your host, TCS President, Steve Ellis, and we now continue with Michael Grunwald and Sheila Korth.

Okay, Mike, with all these negative consumer climate environmental impacts, who’s the real winner with the RFS?

Michael Grunwald:

Well, it’s the farmers as always. It was funny, as Sheila mentioned, in 2007, they announced that they would jack up the RFS to 36 billion gallons. Initially, there was talk that it was going to be 36 billion gallons of corn. They ended up capping that at 15 billion gallons. And the idea was that it was going to be a bridge, but of course, it was a bridge to nowhere. And as you guys are familiar with, taxpayers, and so what you had, you had this 15 billion gallons that was almost instantly that they had 15 billion gallons of corn. They already had a ton of these ethanol refineries built, they’re all over the Midwest, and they got to 15 billion right away, and they’ve never gotten one drop more, because without these very lucrative credits and mandates and basically without the government putting their thumb on the scale for corn ethanol, there’s absolutely no reason to brew any. So it’s always been 15 billion.

And the fear was that they would increase that and say like, “Okay, well you can have 20.” And I think it’s really fortunate that they didn’t do that because it really is true that if they said 20 billion gallons, the next year they’d have 20 billion gallons of ethanol. Instead, they’ve set more ambitious targets for maybe from switchgrass, from stover, from all kinds of things that aren’t a crop. And some would say, unfortunately, I would say, quite fortunately, nobody’s ever really been able to make that work. And so they can say whatever they want, they can set whatever target, but even with the lucrative subsidies and the really draconian mandates, that just hasn’t happened yet.

Steve Ellis:

Got it. Yeah. Well, and we certainly know where a lot of that corn and soybeans are grown, particularly the corn, and it’s in Iowa, which has a noted political activity every four years. And you included in your op-ed, an interesting anecdote about biofuels that was in the show, West Wing, care to share?

Michael Grunwald:

It was in an episode called King Corn, and this was when Matt Santos was running for president, the Jimmy Schmitz character. And Josh Lyman, who of course, used to be President Bartlett’s political aid and then went to work for this long shot Hispanic guy running for president. And Santos was talking about how ethanol is stupid, ethanol is wasteful. Why are we doing this? It’s crazy. And Josh basically told him, “Look, if you come out against ethanol, you’ll have as much chance of getting a single vote in the Iowa Caucus as Bambi would have of getting elected president of the NRA.”

And so there’s really this incredible tradition of pandering to Iowans by supporting basically unlimited amounts of ethanol. And it’s always been bipartisan. Trump was for it, Biden was for it, Obama was for it. George W. Bush before him. And the few candidates who actually have been against ethanol subsidies in their regular life, like Michael Bloomberg once made this credible speech before the United Nations about how basically putting green in our fuel tanks was a crime against humanity and was starving the poor. Bernie Sanders said it was wasteful. It was a corporate welfare. John McCain came at it from the right, more from a taxpayer perspective. When they all ran for president in Iowa, they all flip flopped. It’s pretty predictable and pretty pathetic.

Steve Ellis:

Yeah, I remember Senator McCain was totally against ethanol in his 2000 campaign, which of course, he lost the nomination to the future president George Bush. But then in 2008 when he did eventually become the nominee, his way of backing down about that was both through saying, “Well, it’s just against some federal support, not against ethanol.” And of course, as he would often do, used some humor and said, every time he spoke at anywhere in Iowa, he talked about having a glass of ethanol with his breakfast every morning.

Michael Grunwald:

Yeah, I remember Al Gore, who was another former and current ethanol critic, but went through one period where he was a lot friendlier to ethanol. And I remember he was quoted saying that he did have this odd affinity for the farmers in Iowa during a certain period in his life.

Steve Ellis:

Well, there seems to be beginning of an unholy alliance, it’s now the Liquid Fuels Alliance because it’s against EVs. And so that’s something that we’re watching pretty closely because that’s two pretty powerful forces aligning.

But also the Democrats have de-emphasized the Iowa Caucuses as well, and I don’t think anything’s going to change. There’s still a powerful farmer sort of not just lobby, but I want to support the farmers, and this is good. And there’s been so much talking about ethanol that it’s a good thing that it’s going to be hard to change the electorate on that.

So Michael, one of the things that we also talked about here is this belt and suspenders. It’s like you’ve got both a mandate to create biofuels and we subsidize at the same time. That’s pretty duplicative, right?

Michael Grunwald:

Yeah, but this is true of all agricultural policy in the United States. We have these loan deficiency payments and you have crop insurance, and then you have countercyclical payments, and there’s infrastructure payments, there’s ethanol mandates, there’s rural development subsidies that also seem to help people get their conservation payments that it seems to get diverted more into fences and feed lots than actual conservation. And it’s all basically an elaborate way of putting more money in farmer’s pockets.

One thing, I don’t even remember if I mentioned it in the op-ed, but I think a lot of these farm programs are super wasteful, and they’re basically ways of redistributing money from the 99% of Americans who don’t farm to the 1% of Americans who do. And they’re all justified behind this, I think pernicious idea that the rural heartland has better values and that there’s something beautiful and noble about people who are farming the government.

But ultimately, it is what it is. The politics are absurd. Nobody wants to come out against farmers, even for some reason, senators who don’t really have many farmers in their state or certainly don’t have in many of the row crop farmers who get all the subsidies. What’s so particularly pernicious about these biofuel programs is that they’re not just redistributive or regressive or wasteful, they’re bad. These are bad for the climate. These are bad for the environment. These are directly and indirectly promoting wetland destruction and deforestation at a time when we need the opposite.

So I’m always hoping, okay, if the world is going to take its $500 billion a year in annual agricultural subsidies, if we’re going to take that as a given, let’s just divert it towards the harmless stuff or maybe even some good stuff that can help farmers get more efficient or more environmentally friendly, certainly not less environmentally friendly, and promoting some of these biofuels that in many cases, are twice as bad as just using gasoline from a climate perspective. This was bad before we had an alternative. This used to be basically the only form of alternative fuel or alternative energy there was not that long ago. But now we’ve got these electric vehicles that work and they’re better and they’re greener and they’re cleaner. It makes it even more preposterous.

Steve Ellis:

Budget Watchdog AF listeners, you can’t see her, but I can guarantee you that Sheila was nodding her head along. And I will tell you that if I didn’t know better, I think Sheila would think you were gunning for her job, Michael. Certainly. But I think that speaking from the heartland, Sheila, our Oracle of Omaha, what do you think about what Michael just said?

Sheila Korth:

I love that you mentioned farm subsidies, and I believe you wrote an amazing article in time back in 2007, coming to Northeast Nebraska, and I think it’s called The Tale of Two Farms, comparing and contrasting my corse farm and another very large farmer. I’m actually from that town. So I really appreciate your work at the time and bringing light to these important issues and making the great point that the two are related and there’s a lot of money going out the door that’s unneeded or that’s unnecessary.

Steve Ellis:

Sheila, there’s been some doom and gloom here. Is there any light? Have we had any taxpayer wins on biofuels?

Sheila Korth:

We have, Steve, the ethanol tax credit, VEETC, as it’s known, was eliminated finally at the end of 2011 after a bipartisan vote in the Senate earlier that year. There are an array of other taxpayer subsidies that live on, a lot of them were passed in the Inflation Reduction Act. There are others that are embedded in the tax code or are part of these energy tax extenders that get extended every few years that we’ve worked on at TCS for a long time.

One of them is the biodiesel tax credit. It’s $3 billion a year, which is a lot of money. It’s one of the most expensive energy tax extenders. And it goes, as Michael said, directly benefits the farmers out here in the heartland. I won’t go into all of the taxpayer subsidies, but we do have a resource on our website where we tallied them up, just those in the Inflation Reduction Act that was enacted recently. And as was already mentioned, these are just layers of subsidies upon a government mandate. So the biofuels already mandated to be used, and then we throw more subsidies on top.

Steve Ellis:

Yeah, Budget Watchdog AF faithful, we try to keep this podcast tight so we don’t have enough time to list all the various subsidies that are going to biofuels.

To your point though, Sheila, and Mike’s point, the administration after administration showers the biofuel industry with their affection, what’s the most recent news even since the RFS announcement last week?

Sheila Korth:

Just today, Steve, we see a press release from the US Department of Agriculture, USDA stating that they’re going to shovel that $500 million for ethanol blender pumps and other biofuel infrastructure projects out the door. So that was enacted in the Inflation Reduction Act, but the money’s now going out the door, and it’s not the first time that the administration has spent money on ethanol blender pumps and the corn ethanol industry that has received taxpayer subsidies for decades. This actually goes all the way back to the time when VEETC was axed, the ethanol tax credit when it ended in 2011, USDA came around and said, “Oh, biofuels industry, if we’re going to get rid of your $6 billion a year tax credit, we need to give you something else in exchange. We’re going to give you some ethanol lender pump subsidies instead.”

So that’s where that started. And the USDA has just been finding different ways to continue shoveling those subsidies out the door. They’ve created different acronyms called HBIIP and BIP and even taken money from the Commodity Credit Corporation, which I know we got to give a shout out to Josh Sewell, our colleague who isn’t on today, but he’s written papers about how USDA is just able to pull money out of thin air to send toward this industry. And we actually provided a Golden Police Award to then secretary of the USDA, Tom Vilsack and now secretary as well, for shoveling this ethanol blender pump money out the door from USDA.

Steve Ellis:

And podcast listeners. Just to explain a blender pump, it’s basically, if you remember earlier, Michael talked about E85, and so the idea of a blender pump is that you could get E15 or E10 out of it, but you could also change it to getting E85. And so it’s like retrofitting at these various gas stations so that you could have these type of pumps, and they can have the infrastructure needed for those. So it’s another way of subsidizing the ethanol industry. It’s going to the infrastructure needed to use more ethanol, but it’s still definitely a major subsidy to the ethanol industry.

So one other thing, going back to your op-ed, Michael, that really struck me is that we’ve talked a lot about just how the ethanol subsidies cost a lot, how it’s the food versus fuel, that it has this environmental degradation associated, the amount of water, the amount of fuel used. But one point that you raised that I hadn’t really thought about before, it takes a hundred acres of biofuels to equal the amount of energy production on one acre of solar. So that’s pretty staggering statistic.

Michael Grunwald:

That’s right. And I think, look, maybe some of your listeners are like, “We shouldn’t be spending taxpayer money on climate.” And I get it, that some people feel that way. I don’t feel that way. I think the government should be very aggressively pushing things that actually do help the climate. But that’s so stark. And basically the way to explain it is that land is very good at storing carbon. It’s very good at growing food, and it’s really bad at growing energy. And fortunately, we have other ways to produce energy.

You mentioned, yes, it’s about a hundred to one, but if you also think about that electric vehicles are about three times as good as internal combustion engines at converting energy into mobility, so that acre of solar panels will get your car about 300 times as far as an acre of biofuels.

And again, of course, doesn’t have all these other problems. It can’t be overstated that we’re sitting here, we just went through last year, one of the worst food crises in really in modern times after there are these severe droughts in Africa and the war in Ukraine wiping out these bread baskets, and suddenly you had food prices going way up. We got to remember that for these biofuel programs, higher food prices are a feature, not a bug. That’s the point of it. They’re intended to increase food prices. That is the point. They want to increase the price of grain to put more money into farmer’s pockets, because they’re noble, heartland virtue and all that stuff. And we love our farmers, which great, but that is coming right out of the pockets of eaters.

And so when you add to the idea that this is a climate catastrophe masquerading as a climate solution, I just think if you’re looking for your wasteful farm subsidies to start with, let’s start with the ones that are having these really bad effects on starving people in the developing countries, on ordinary people who are seeing the price of, in Mexico, their tortillas, in the United States, their Coca-Cola. You name it, anything that has corn or grain in it or vegetable oil for that matter, this is having real impacts. Get rid of that first.

Steve Ellis:

Michael, to your point, we have talked about, last podcast, Budget Watchdog AF listeners know that we talked about paying the price, our recent report about the cost of climate change, the taxpayers are already bearing and that the costs are rising. Basically the last decade was 35% higher in post-disaster spending than the previous five. And so it’s going up.

And then not only that, you mentioned about famine and instability, that also increases defense costs and things along those lines as well. And so we certainly recognize that we are paying the price, as we said in that. And the other statistic that gets to what you were talking about, and this is more than just the United States, but a landmass larger than California is being used to produce less than 4% of the transportation fuel that was used in 2020.

So again, it’s putting a lot of resources into a very small return.

Michael Grunwald:

There was talk that maybe they would try to make electric vehicles and electrification eligible for some of the RFS large S, and of course, that didn’t make it into the final goodie bag. So it’s unfortunate. If you’re going to do this stuff, and they are, because of the political cloud of farmers, you would wish they would do it in a slightly less insane way.

Steve Ellis:

Totally agreement on slightly less insane way, not sure about expanding subsidies, is it the way to undo them? So we’ll have to differ a little bit there.

Michael Grunwald:

I should say though, I guess part of what I’m saying is that I think taxpayers should feel really good about a lot of the investments that have been made in solar, in wind, in electric vehicles, and even when some of them have gone into a cylindra that’s gone bad, I think that the idea of that we are going to try to provide alternatives to an unsustainable way of making energy and making electricity, I think that’s a noble idea. But then once you see like, oh, well, this turns out to be a really bad idea, let’s not do that one. And this is the worst one.

Steve Ellis:

Well, all right. Well, that gets me to a point, and I’ll say that, listeners, Michael certainly knows about cylindra. His second book was on the stimulus actually, and his first book was on the Everglades.

You may have already tipped your hand at this, but you’ve covered a lot of issues in your work over the years at the Boston Globe, the Washington Post, Time, and Politico, and I’m happy to say that TCS has been fortunate to work with you on some of those. In your estimation, where do the biofuel subsidies and the mandate rank in stupidity? Are they on the Mount Rushmore waste?

Michael Grunwald:

I mean, yeah. To me, they’re at the top because of the… It’s sort of the dumb and destructive, not just dumb problem of biofuels. And I am going to, in my book and when I finish it, I do tell the story of how these, particularly the RFS came to be and came to expand and how people came to realize how destructive it was. And it’s a crazy story. When they were first talking about it, there was one venture capitalist who came and testified before Congress. “Don’t worry, I know people don’t like corn ethanol, but in 10 years, we’re going to have 35 billion gallons of cellulosic ethanol. And in 20 years, it’s going to replace all of the gasoline in the United States.” And we’re like almost 10 years in, and cellulosic ethanol is like 0.2%. So I don’t think they’re going to make it. And like I said, it’s had all these unintended consequences and some intended consequences that are really rough, not only for taxpayers, but for the planet and the poor.

Steve Ellis:

All right. So it sounds like corn ethanol and biofuels are at the tippy top of waste, not just on the Mount Rushmore, but standing on top of it.

Michael Grunwald, author and columnist for Canary Media, thank you for joining Sheila and me on the podcast today.

Michael Grunwald:

Well, thanks for letting me bang my spoon on my highchair about this very important issue that’s clearly a little too close to my heart.

Steve Ellis:

Absolutely. Well, there you have it, podcast listeners. Biofuel subsidies, climate nightmares masquerading as climate solutions. Learn more about the increased cost to taxpayers coming from climate and our new paying the price report available on our website, Taxpayer.net.

This is the frequency, mark it on your dial, subscribe and share, and know this, Taxpayers For Common Sense has your back, America. We read the bills, monitor the earmarks, and highlight those wasteful programs that poorly spent our money and shift long-term risk to taxpayers. We’ll be back with a new episode soon. I hope you’ll meet us right here to learn more.