New Paradigms Rising for Biofuels

August 14, 2012 |

By Douglas L. Faulkner, “The Cleantech Conservative”
Special to the Digest 

Voters are in an ugly mood. Many view overreaching regulations and fiscal failings of the federal government as big roadblocks to economic recovery and even threats to our way of life.

Meanwhile, the oil and gas industry is gaining political strength as its production (and fortunes) rise and conservatives win more elections.

Our diminishing reliance on foreign oil and the withering federal role in promoting green energy due to budget constraints will also correspondingly reduce the political clout of the bioenergy industry and undermine arguments for relying on Washington to “make” markets.

The latest “food versus fuel” imbroglio sparked by the current drought should fade in time, but political and other pressures against subsidies and preferential market treatment will only grow after the elections. Biofuel industry leaders should seize this fortuitous window of time while we wait for the newly-elected President to take office six months from now and open an unvarnished internal debate about what their industry really wants and needs from the federal government. The recently-formed Biofuels Producers Coordinating Council could be a useful forum.

These questions should be front-and-center:

Can government ever successfully predict a production goal that matches market demands years into the future?

Does the industry even need a federal mandate and for how much longer – – or are there other policy changes that might prove even more important in the critical years ahead?

What will be the impacts of surging oil and gas production, rising engine efficiencies and growing demand in the developing world on global fuels markets?

Can industry begin to build a true partnership with the oil and gas companies, as their attention shifts to more profitable fossil fuel extractions?

Why is the biochemical/products industry taking off – – and is there a lesson to be embraced in the fact there is little federal interference with that market?

The biofuel industry should more and more confidently look to the future, entertain policy changes and embrace market competition. We must turn the tables on our opponents, jiu-jitsu style. One place to start is sharing the facts about both the failings as well as the successes of the cumbersome , Rube Goldberg-esque Renewable Fuels Standard (RFS). Reforming the RFS will be critical for ensuring long-term policy stability. Alternatively, refusing to condone any discussion, let alone change, virtually guarantees policy instability and rising political tension.

We need to talk openly about new pathways to success that relies much less on the largesse and power of the federal government, and much more on private enterprise and on state capitals. And, we need to start now. To point: if Governor Romney wins the election, his clearly stated focus on retrenching the federal government’s role to basic science and emphasizing more market-driven policy will drive us in that direction. The biofuels industry, by beginning to work through our options in advance, will be in a better position to respond efficiently and effectively, and perhaps gain an advantage over our opponents.

We have learned several lessons in recent years:

• There remains a big need for fundamental, basic research in many areas for advancement of bioenergy – – a need that sits clearly in the sweet spot of the federal government.

• State and local governments know
far more about the circumstances and realities within their jurisdictions and can experiment with and tailor solutions for commercialization better than the federal government.

• While having to choose from a menu
with 50 dishes is more complicated than accepting one main course, such a menu offers much more variety and flexibility for the incredibly diverse marketplace emerging for biobased products, biofuels and bioheat/power in the U.S.

Granted, progress will be rocky and uneven as there are few states are large enough and with sufficient financial and natural resources, and infrastructure to go after the full range of bioenergy prospects, let alone the broader green energy arena. In fact, some of the biggest jurisdictions are flirting with bankruptcy.

But, there is a vacuum emerging for the states to step into as the federal government retreats. It won’t be easy, cheap or straightforward in state capitols. Some key ingredients for the successful rise of the states could include:

• Setting up entities drawing on a significant pool of private funds outside state appropriations and overseen by private individuals under legislated rules that can operate with flexibility and creativity to promote economic growth while minimizing taxpayer risk.

• Tapping into unique advantages
each state enjoys from its higher education system, from targeting workforce development to R&D partnerships with academia.

• Promoting interstate endeavors
in feedstocks and distribution networks.

• Encouraging and promoting experimentation
in the development of incentives and assistance with an equal focus on reducing red tape and bureaucratic delays. The elimination of those barriers can be just as useful to entrepreneurs in reducing costs of projects and starting up business faster as ready access to cash-on-the-barrelhead.

For their part, the private sector could even consider funding private R&D solicitations and could probably do it faster, more creatively and more efficiently than the national bureaucracy. The private sector should be willing to spend more time educating state bodies about trends in the marketplace and their changing needs.

At the same time, much deeper thought at the federal level should be given to the complex relationships between the global agriculture and energy sectors. The U.S. government is investing considerable resources in promoting food security in the developing world. These efforts will falter though unless access to energy markets for those farmers is increased, too. Exciting new approaches are emerging to promote both indigenous biofuels production and new farming practices in the developing world. The world will need to increase the productivity of each arable acre, provide sufficient demand for all that is harvested and promote increased trade.

Both Presidents Bush and Obama – – to their credits- – saw the power of a partnership with Brazil and of joint work in international forum, like the Global Bioenergy Partnership, to encourage sustainable bioenergy and economic growth in the developing world. Advocating for increases in food AND fuel in regions with distressed agricultural sectors would not require much in the way of taxpayer funding, but would benefit from more staff time and expertise as well as the power of the “bully pulpits” integrated from the State Department, the technical agencies, the White House and even, Congress.

The new concept emerging vis-à-vis the positive feedback between a vibrant agriculture sector and the growth in global bioenergy markets should be publicly trumpeted and embraced by aid money from non-governmental organizations. New bioenergy markets could help in feeding and clothing the billions of souls to be born in coming decades through adaptive policies that can efficiently respond to changing circumstances on the ground. Can you say “Food for Fuel”?

Now, more than ever, as big political and economic tectonic plates start to move, it’s time to challenge conventional wisdom and move from stagnant, out-of-date, partisan deadlocked thinking to new bipartisan paradigms reflecting the coming waves of changes in demography, health, markets and technologies.

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