Analysis Shows Major Benefits from Renewable Fuels

Legislation to increase use of renewable fuels in the United States could boost the domestic economy by US$300 billion and create 300,000 jobs by 2016, according to the National Biodiesel Board.

WASHINGTON, DC, US, 2002-01-16 [] Use of ethanol, biodiesel and other domestic fuels would generate an additional $71 billion over the next 15 years, according to John Urbanchuk of AUS Consultants in the report, ‘An Economic Analysis of Legislation for a Renewable Fuels Requirement for Highway Motor Fuels.’ The U.S. Congress is considering legislation that would require vehicle fuel to contain a minimum renewable content, and the study examines the “broad implications” of increased demand for renewable fuels and how it would provide for the energy security and promote environmental quality. The law would require motor vehicle fuel to contain a minimum quantity of renewable fuel, and the study assumes the percentage by volume would start at 1.2 percent next year and increase to 4 percent by 2016. Using projections for highway energy use, that would increase the use of renewable fuel in the U.S. from current levels of 1.9 billion gallons to 8.8 billion gallons by 2016. The majority of renewable fuel would come from ethanol produced from grain, but biodiesel would account for 15 percent by 2016. There would also be additional ethanol from cellulose conversion as that technology is commercialized. “An increase in the demand for renewable fuels … would have significant positive implications for energy security, the agricultural sector, and the economy,” says the report. Imports account for 60 percent of crude oil demand in the U.S., and the government expects this dependence to reach 70 percent by 2016. More use of renewable fuels would displace the equivalent of 2.9 billion barrels during that time, by reducing the share of imports to 65 percent by 2016. “The implications for the U.S. trade deficit of a reduction in oil imports of this magnitude are substantial,” it says, and would improve the U.S. trade deficit by $63 billion over the next 15 years. An increase in renewable fuel demand would have “significant positive impacts” on commodity prices, farm income and government spending for agricultural support programs. Virtually all ethanol produced in the U.S. comes from grain, with corn the leading feedstock, while biodiesel is made mostly from soybean oil from crushed soybeans. The livestock and poultry sector will only be modestly affected by increased use of corn and soybeans for ethanol and biodiesel production, but taxpayers would benefit from the elimination of loan deficiency payments and lower government cash payments for crop subsidies, to direct payments of $7.8 billion. Increased demand for renewable fuels would not result in a significant rise in consumer food prices. The renewable fuels industry would invest $10 billion on structures, machinery and equipment, and additional investments in infrastructure would be made for pipelines, storage facilities and transportation infrastructure to handle the larger production of ethanol. “Farmers, consumers, and taxpayers will directly benefit from legislation that would increase the renewable content of motor vehicle fuel used in the United States,” concludes the report. “Farmers will benefit from the development and steady growth of a significant base of domestic demand for grains, oilseeds, and other crops that would result in higher prices and revenues from marketings.” Legislation to increase the content of renewable fuels would put an additional $6.6 billion of net cash income in the pockets of U.S. farmers annually over the next 15 years. Taxpayers would benefit because improved demand and prices for grains will reduce the amount of taxpayer dollars needed for direct government payments to farmers, it explains. Consumers would benefit as domestically produced renewable fuels displace imported crude oil, reducing dependence on imports from “an increasingly unstable region of the world.” Renewable fuels means that “every acre of land that produces biomass used to make a renewable fuel ethanol becomes an oil patch that never runs dry,” and the direct economic consequence would include a reduction in the trade deficit by $63.4 billion by 2016.
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