Biofuels, carbon credits and Congress, oh my!

In China\'s interior as in many developing nations, the poorest are hit hardest by rising food prices.


When our bionic counterparts look back to the first half of 2008 from the safety and security of their sleek, iPod Nano-like future, they will likely recall a few events as pivotal to human history: the collapse of the housing bubble and the ensuing credit crisis; the historic but painfully long U.S. Democratic primary between Sens. Barack Obama and Hillary Clinton; and the soaring global prices of food and energy.

It is this last one—the cost of food and energy—that I want to examine more closely, for the end of cheap energy and food may do more to change the way we think, work and live than any of the others aforementioned. This isn’t to suggest that the housing crisis didn’t shatter many Americans’ dreams of owning a home or their retirement plans, or that the presidential primary process was unimporatant.

But the rising costs of food and energy supersede political parties and breeze over mountains, oceans and time zones to cross international borders. They are both democratic and global, and strike at the very fundamentals of our social organization and existence. And they could be here for a while.

Thus, our newfound interest in energy conservation and developing alternative sources of energy. Moving to renewables such as wind, hydroelectricity, solar, geothermal and biomass hold great promise for economic growth in the form of new industries and jobs, greater international political stability, combating climate change and creating a cleaner environment. But the policy decisions must be based on good science as well as viable business practices, and thus far, this hasn’t been the case.

I’m thinking specifically of the push for alternative energy in the form of corn ethanol and biodiesel, known together as biofuels. The U.S. has invested in corn ethanol for essentially the same reasons that it continued to invest in oil for all these years—because it was cheap, abundant and we already had the infrastructure for it. Most professors and alternative energy activists I’ve spoken with bristle at the suggestion that corn ethanol is inherently misguided because they never considered it a viable source of alternative energy to begin with—they always thought of it as a transitional technology until ethanol from cellulose and other plant or human waste could be developed.

But Congress obviously thought otherwise, and in December of 2007 mandated 15 billion gallons of corn ethanol be in use by 2022. Another 21 billion gallons would come from alternative sources of biomass, such as plant stalks or switchgrass.

This has contributed to the soaring price of food worldwide, and the U.N. has met in Italy this week to discuss the problem. Biofuels certainly are not the sole cause, but most people, even farmers and their lobbyists, will admit that they’re one of them. The price of energy in the form of fertilizer and transportation costs are another. Global growth in Asia, which has led to dietary changes favoring more meat and thus more grain to raise livestock, is yet another.

But the point is that if the U.S. production of biofuels is exacerbating soaring food prices, particularly in developing countries, there should be a moratorium on production until the question is resolved. People are starving not because there’s no food but because they can’t afford to buy the food that’s available. Congress may be doing the wrong thing for the right reasons, but that isn’t good enough.

And it’s not just because of what biofuels are doing to food prices, but what they may be doing to the environment as well. In Brazil, Indonesia and even here in the U.S., lands previously conserved or allowed to fallow are being cultivated to grow corn, soybeans and palm hearts to cash in on record high prices. Science magazine pointed out that when forests and swamps are burned to make room for these crops, vast stores of carbon are released into the air, wiping out any benefit of replacing petroleum fuels with ethanol or biodiesel.

Which brings us to carbon credits. One way to do protect forests and swamps from being burned to produce these biofuel cash crops, many think, is with a cap and trade system. The Senate this week is debating the Climate Security Act, also known as the Warner-Lieberman bill, that would create such a system in the U.S. Under a cap and trade system, the total amount of carbon a company can create is capped each year, and if that company wants to exceed its allotted amount then it must pay to do so. The money it pays can go to building windmills or hydroelectric plants, or it can to go conserving native forests like those in Brazil. The bill will almost certainly not become law—Bush has said he would veto the measure—but it sets the stage for the law under the next administration and raises good questions about how to create a law and administer it.

Michael Specter points out in this great New Yorker article on carbon trading that the only way to stop people from cutting down their forests is if their lands are more valuable preserved than cultivated.

“From both a political and an economic perspective, it would be easier and cheaper to reduce the rate of deforestation than to cut back significantly on air travel. It would also have a far greater impact on climate change and on social welfare in the developing world,” Specter writes.

I’ve heard alternative energy activists, journalists and policy wonks deridingly compare carbon credits to the indulgences the Catholic Church once sold to parishioners, implying that these credits will assuage our guilt without actually helping the environment. The metaphor is clever, if overused, but as Specter points out, it misses the point.

It doesn’t really matter if businesses are doing the “moral” thing in buying and selling the right to pollute—they will certainly be acting in their own self interest, which is what they have always done best. What matters is what effect this might have on the environment. Biofuels, as they are done now, hurt both the environment and the poor. Carbon credits, for all their shaky, derivative-based logic and specious standards, could help protect our carbon stores by incentivizing landowners to protect their property. We must be careful not to exclude an option simply because it doesn’t fit into our cultural concepts of what is fair or unfair.

It’s like I tell my pastor, “Hey–just because it’s immoral, buddy, don’t mean it’s wrong.”

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