There’s hope for the beleaguered biofuels industry if government policies and export opportunities bear fruit.
That’s the conclusion reached Tuesday, January 26, at the Iowa Renewable Fuels Summit, which was held in a virtual forum because of the COVID-19 pandemic.
Monte Shaw, executive director of the Iowa Renewable Fuels Association, described the state of Iowa’s biofuels industry as “battered, but battling for a better future,” during his remarks.
Iowa is the national leader in ethanol and biodiesel production with 42 ethanol refineries capable of producing 4.5 billion gallons a year and 11 biodiesel plants with the capacity to produce more than 400 million gallons annually.
Because of poor economic conditions, two dozen ethanol plants have shut down production and another two dozen are running below their capacity, according to a recent estimate by the Renewable Fuels Association.
Ethanol processing consumes between 40% and 50% of Iowa’s corn. Half of Iowa’s biodiesel production comes from soybean oil.
“Our industry just suffered through the triple whammy of RFS exemptions, lost export markets, and COVID demand destruction piled on top of each other,” Shaw said. “Yet, here we are. Which is what I love most about this industry. The power of biofuels to propel the rural economy is so great that the people in this industry will simply never give up. That, my friends, is the state of the Iowa biofuels industry in 2021: battered, but battling for a better future.”
Shaw called ethanol industry’s performance in 2020, “something out of a zombie apocalypse movie, but ethanol producers will never give up” and, he said, he is optimistic for the future. One of the reasons to be optimistic is the newly-inaugurated Biden administration, which Shaw said he believes will be supportive of biofuels.
The Iowa Renewable Fuels Association is urging Biden to repair the damage done by the Trump administration, which appointed two fossil fuels advocates to run the Environmental Protection Agency (EPA) and which granted a plethora of exemptions for blending ethanol with gasoline to oil refineries. There also were some problems, Shaw noted, with decisions made by the Obama Administration.
Biofuels in Washington
In a policy discussion called “New Direction: Biofuels Policy in 2021 and Beyond,” four Washington, D.C., lobbyists for biofuels said that biofuels producers and farmers can profit by stressing the environmental benefits they bring to the table.
Tom Daschle, former U.S. Senate Majority Leader and CEO of The Daschle Group, said an evenly divided U.S. Senate means President Joe Biden will have to rely on senators in the political middle from both parties to accomplish his legislative agenda.
“Climate (change) will be one of the highest priorities in the Biden administration,” said Daschle. The Biden administration will have an aggressive regulatory and legislative agenda, he noted, but there is little hope that Biden’s environmental agenda can pass without bipartisan support for programs that reduce carbon and greenhouse gases (GHGs).
Ethanol can deliver lower carbon emissions, he said, because farmers are able to sequester carbon in their fields and ethanol assists in cleaner air. “Corn presents two options for reducing carbon,” he explained. First, there is the sequestration of carbon on the production side and, second, there is corn-based ethanol’s ability to provide a cleaner burning and higher octane fuel on the other side. “I hope we can build broader coalitions with that recognition,” he added.
Jon Doggett, CEO of the National Corn Growers Association since 2018, said biofuels advocates build support by determining what problems they can solve for somebody else. The biofuels industry did that years ago when it promoted itself as a way to gain energy independence from foreign oil. Now, Doggett said, the biofuels industry needs to impress people that ethanol can reduce pollution and clean the air. “We have a great story to tell and a great track record” in solving problems like energy independence and the environment, he said. “Let’s tell the story.”
Chris Bliley, senior vice president of regulatory affairs at Growth Energy, stated that it’s not only innovation at biorefineries that is needed, but innovation on the farm to reduce carbon. Farmers can capture carbon with their corn crop and that capture can result in a drastic reduction in carbon emissions. “Those are the things we can do to drive innovation,” he said.
Kurt Kovarik, vice president for federal affairs with the National Biodiesel Board, stated that bipartisan solutions that will have to be reached to overcome the current political gridlock in Washington. “Biofuels, I think, will come out in a good place because of our bi-partisan support,” Kovarik said. “I’m optimistic we’ll fare pretty well.”
Kovarik said that there has been an enormous amount of support shown for decarbonization of the environment and biodiesel has shown that it can reduce greenhouse gases in heavy equipment, trucks, airplanes, and other diesel-burning engines. “Biofuels can provide carbon reduction today,” he stated.
The Washington, D.C.-based panel members also endorsed the nomination of Tom Vilsack as Secretary of the U.S. Department of Agriculture for the second time.
Doggett said the biofuels and agricultural industries owe a huge debt of gratitude to Tom Vilsack for his successful eight years as the secretary of agriculture during the Obama administration. “We will have to deal with climate change and Vilsack will be good person to give our perspective in those discussions,” Doggett said. “Tom Vilsack is a good, straight-up guy. He’s one of us.”
Kovarik also said Vilsack will be good for biofuels. “He will be a key advocate for us to defend our industry,” Kovarik stated.
In a panel discussion concerning new opportunities for ethanol exports, Terry Branstad, former Iowa governor and former U.S. Ambassador to China during the Trump administration, said exports of U.S. ethanol and dried distillers’ grains (DDGs) have been hurt by Chinese tariffs erected in retaliation for U.S. tariffs on Chinese products imposed by the Trump administration.
Branstad said that discussions were held with Chinese trade officials before he left China as the ambassador, but the U.S. needs to keep the pressure on so the Chinese fulfill their commitments to buy more U.S. agricultural products under the Phase One trade agreement. It will be important, he noted, that the new administration’s trade negotiators continue to pressure the Chinese to meet the commitments they have made to purchase more ethanol and DDGs.
Chinese consumers are concerned about the environment, Branstad says, which he learned while he was ambassador there; using ethanol is a way for the Chinese to address their air pollution problem.
Ryan LeGrand, CEO of the Washington, D.C.-based U.S. Grains Council, said purchases of U.S. DDGs by the Chinese also will benefit U.S. farmers. There is demand for the DDGs because the Chinese hog industry is trying to recover from depopulation of its hog herd because of African swine fever. Also, DDGs are needed for poultry and beef production that needs to increase because of the cutback in Chinese pork production caused by the African swine fever outbreak.
LeGrand noted that China has banned adding food waste to hog rations and that has led to more corn meal demand and, hopefully, of DDGs, too. Hagan Rose, accounts manager for the United States and Canada at Eco-Energy, predicted that China will be making more purchases of U.S. ethanol. “I’m certainly optimistic,” he said.
As for exports of U.S. ethanol to Mexico, which was once considered a promising market for U.S. ethanol, LeGrand said that prospects have dimmed because the Mexican oil industry is working to slow ethanol imports. “I still think we have tremendous potential in Mexico, but things are moving slowly,” he said. The U.S. Grains Council will continue to work to develop the U.S. ethanol market in Mexico to benefit U.S. farmers, ethanol producers, and Mexican fuel consumers, LeGrand said.
Rose noted that Canada, which is the second-largest buyer of U.S. ethanol, is expected to buy more U.S. ethanol to meet its new Low Carbon Fuel Standard. As U.S. ethanol producers and farmers improve their carbon capture techniques, their carbon emissions rating will improve. “I’m very excited about that opportunity,” Rose said.
As Canadian prospects have improved, a 20% tariff on U.S. ethanol that has been enacted by Brazil has hurt U.S. ethanol sales to Brazil.
Branstad noted that U.S. trade negotiators need to insist on fairness and reciprocity with China and now with Brazil. Brazilian ethanol enters the California market duty-free, he noted, but U.S. ethanol faces a 20% tariff when it enters Brazil, which is not fair.
Potentially growing export markets for U.S. ethanol can be found in India, the Philippines, Southeast Asia, North Africa, and the Middle East, the panelists concluded.
Future U.S. ethanol export prospects are good, Rose said. “We won’t see a huge increase in ethanol exports in 2021, but the potential is there long term for increasing demand for US ethanol.”
Farmers can boost ethanol and agricultural exports by supporting organizations like the U.S. Grains Council, the American Soybean Association, and other agricultural groups, Rose noted. Farm groups have spent years building relationships that are critically important to opening markets for U.S. farm products.
Farmers need to continue to innovate to lower the carbon score for their crops and the fuels made from them. “We tell farmers to make yourself as carbon-friendly as possible,” Rose said.