Biofuels: The Economics of Environmental Impact

By Gabriel Medina

California buys much of its ethanol from the states in the nation's Corn Belt- including a third of Nebraska's annual production. That amounts to about $1 billion of the approximately $3.5 billion dollars in ethanol that Nebraska sells every year. However, new state and federal environmental standards regulating greenhouse gas mean biofuels produced in Nebraska and other states must meet new requirements to continue to reach restrictive state markets like California. Adam Liska, University of Nebraska-Lincoln assistant professor of biological systems engineering, studies the
greenhouse gas balance and the climate change implications of producing biofuels compared to using fossil fuels- and how Nebraska's ethanol can meet those new state and federal standards. He said the Environmental Protection Agency (EPA) and state-level regulators use science-based calculations to determine the greenhouse gas footprint of fuel and if it meets those requirements, the fuel can be sold to markets with stringent regulations and also can be eligible for billions of dollars in federal subsidies.

"A third of our ethanol production in Nebraska is subject to the calculations of the footprint in California to enable our ethanol to be imported into that state," he said. "Understanding how these calculations are done is really pretty important for the state of Nebraska, as these regulations could begin to restrict ethanol imports in 2013."

Biofuels vs. Fossil Fuels
"When we think about developing biofuel systems, we want to determine whether those biofuel systems are more harmful for the environment or less harmful than our existing fossil fuel systems," Liska said.

The EPA has specific sustainability standards for biofuels, he said. They are also interested in the greenhouse gas footprint, or the carbon footprint, of the fuel. Liska is most interested in understanding the carbon footprint of the fuel and whether some fuels are above or below that EPA standard.

"Overall, corn ethanol has generally been shown to be less harmful in global warming than gasoline. So, traditional fossil fuels, that we can just pump out of the ground and use, those are generally shown to be greater contributors to climate change," he said.

Liska, whose research interests focus not only on biofuels and greenhouse gas emissions, but also on energy security, said the U.S. uses about 20 million barrels of oil per day and imports about 11 million barrels per day.

"We have this 140 billion-gallon-per-year transportation gasoline market and we have to think about what are the fuels that we can produce economically, on a very large scale, to make a dent in that," Liska said. "We're producing, in the Corn Belt, about 13 billion gallons a year of ethanol. That's substituting about 10 percent of our domestic gasoline, and that's a pretty good start."

Economic Stability of Agriculture
Liska said that besides generating $3.5 billion in annual sales, Nebraska's ethanol industry has generated 13,000 high-paying jobs in the past 10 years.

"Overall, agricultural commodities in Nebraska are about $9 billion in sales. Corn alone is $5 billion
annually," he said. "We're talking about billions of dollars in increased revenue for Nebraska farmers, which then increases state taxes as well, and state revenue. And state tax revenue goes to pay for roads and schools and jobs for lots of people," he explained. "We are heavily-based in agriculture and ethanol has made our economy much stronger," adding that Nebraska's low unemployment rate is largely attributed to the state's stable agricultural economy.

Ethanol production is likely to increase the price of grain by using close to 40 percent of U.S. corn production for that product, he said. That increased price of grain not only brings in additional revenue to the state, but has also increased the market for corn. "It has strengthened a lot of auxiliary industry around ethanol," he said.

Sustainability of Biofuels
Liska said sustainability of biofuels currently depends onnthe stability of the crops grown to produce the specific biofuel. In the case of ethanol, corn production in the Corn Belt has been increasing for the last 60 years, so yields have been increasing and more acres have been planted to corn, soil erosion has been reduced and lesser amounts of pesticides have been required. Overall, the Corn Belt has had stable production.

"We could have problems with diseases and weather, as weather from a changing climate becomes more variable," he said. "That's one of the problems with biofuels- you're dependent on the weather, and variability in weather happens from year to year," he added. Some years there may not be enough rain, some years there may be too much rain- both could hurt yields.

In addition to his work on the environmental impact of biofuels compared to fossil fuels, Liska has multidisciplinary collaborations with other University of Nebraska faculty in studies of soil carbon issues, water issues, biodiversity, and greenhouse gas emissions from livestock production.

Liska said he does not receive research funding from either the oil industry or the biofuel industry. His research is funded by organizations such as the U.S. Department of Energy; the U.S. Department of Agriculture; the University of Nebraska Agricultural Research Division; the Nebraska Center for Energy Sciences Research and through that, from the Nebraska Public Power District.