When Markets Misbehave, Send the Marines! (World governments get a case of bioeconomy interventionitis)

The European Court of Justice has ruled that organisms altered via genome editing are GMOs and subject to GMO regulation in Europe, including warning labels for foods.  

And in the US, President Trump announced $12 billion in relief for farmers impacted by the Administration’s trade policies in a move that was sharply criticized by Republican farm-state lawmakers, and US conservatives. As Americans for Prosperity President Tim Phillips acidly observed, “The US is essentially borrowing from China to offset the costs of tariffs imposed by China. It doesn’t get more Washington than that.”

Meanwhile, Acting EPA Administration Andrew Wheeler announced an expanded set of approved pathways for sorghum as a biobased feedstock under the Renewable Fuel Standard. And isobutanol got a push from EPA, too.

In short, central governments are intervening with force in the bioeconomy again. Let’s look at the action on both sides of the Atlantic, and the reaction.

The European ruling on gene editing: Nature good, people bad

In a ruling, the European Court of Justice said it “takes the view, first of all, that organisms obtained by mutagenesis are GMOs within the meaning of the GMO Directive”. 

What  does “mutagenesis” cover?  ECJ Advocate General Michal Bobek found in January that “an organism obtained by mutagenesis can be a GMO if it fulfills the substantive criteria laid down in the GMO Directive. A Directive does not require the insertion of foreign DNA in an organism in order for the latter to be characterized as a GMO, but merely says that the genetic material has been altered in such a way that does not occur naturally.”

The court’s ruling upends an opinion released in January that “The Directive does not, however, apply to organisms obtained through certain techniques of genetic modification, such as mutagenesis. And that organisms obtained by mutagenesis are, in principle, exempted from the obligations in the Genetically Modified Organisms Directive.

The EU’s GMO Directive regulates the deliberate release into the environment of genetically modified organisms and their placing on the market within the EU. In particular, the organisms covered by that Directive must be authorized after an environmental risk assessment. They are also subject to traceability, labelling and monitoring obligations. 

EuropaBio’s Secretary General John Brennan highlighted industry’s concerns about the judgement. He warned that in the absence of improved legal clarity in this area, Europe could miss out on significant benefits of certain applications of genome editing.

“In addition to providing consumer and environmental benefits, such as enhanced nutrition, improved health or a more circular economy, innovations made possible by genome editing hold enormous promise to keep Europe at the forefront of socio-economic development, continuing to generate jobs and growth in the EU. Unfortunately, this court ruling, which is inconsistent with the Advocate General’s Opinion published in January, does not provide the necessary regulatory clarity needed by EU researchers, academics and innovators.”

The Farm Aid program, financed by bonds sold to China, to mitigate economic damage caused by…China

In Washington, the Trump Administration announced that the U.S. Department of Agriculture has crafted a short-term relief strategy to protect agricultural producers impacted by Trump Administration’s tariff policy. Specifically, USDA will authorize up to $12 billion in programs, which is in line with the estimated $11 billion impact of the unjustified retaliatory tariffs on U.S. agricultural goods. These programs will assist agricultural producers to meet the costs of disrupted markets.

The legion of critics said that the Administration should be working harder to open markets, rather than erecting barriers that led to trade partner retaliation against US agriculture.

“This is a short-term solution to allow President Trump time to work on long-term trade deals to benefit agriculture and the entire U.S. economy,” Secretary Perdue said.

USDA will use the following programs to assist farmers:

• The Market Facilitation Program, authorized under The Commodity Credit Corporation (CCC) Charter Act and administered by Farm Service Agency (FSA), will provide payments incrementally to producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. This support will help farmers manage disrupted markets, deal with surplus commodities, and expand and develop new markets at home and abroad.

• Additionally, USDA will use CCC Charter Act and other authorities to implement a Food Purchase and Distribution Program through the Agricultural Marketing Service to purchase unexpected surplus of affected commodities such as fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and other nutrition programs.

• Finally, the CCC will use its Charter Act authority for a Trade Promotion Program administered by the Foreign Agriculture Service (FAS) in conjunction with the private sector to assist in developing new export markets for our farm products.

Reaction from farm state Republican lawmakers was hostile.

Sen. Thom Tillis of North Carolina: “It can’t just be about agriculture”.

Senator Ben Sasse of Nebraska: “America’s farmers don’t want to be paid to lose — they want to win by feeding the world,” Sasse said in a statement. “This administration’s tariffs and bailouts aren’t going to make America great again — they’re just going to make it 1929 again.”

Sen. Ron Johnson of Wisconsin: “This is becoming more and more like a Soviet-type of economy here: Commissars deciding who’s going to be granted waivers, commissars in the administration figuring out how they’re going to sprinkle around benefits. I’m very exasperated. This is serious.”

Iowa Gov. Kim Reynolds: “The $12 billion in farm aid announced today will provide a short-term fix, but it’s not a long-term solution. Nobody wins in a trade war.”

Senator John Thune of South Dakota: ”It’s a Band-Aid. It’s a short-term solution and it doesn’t solve any of the problems agriculture has got right now. I appreciate the fact that they realize the farmers are being hurt by this, but this is not the right remedy.”

EPA says sorghum is OK for bioenergy

In Washington, the U.S. Environmental Protection Agency approved a variety of pathways for renewable fuel derived from sorghum, including biodiesel. EPA Acting Administrator Andrew Wheeler signed the final pathway alongside Sens. Jerry Moran and Deb Fisher, Rep. Roger Marshall, the National Sorghum Producers, and the American Farm Bureau Federation.

“Today’s approval sets the stage for more homegrown fuels under the Renewable Fuel Standard and adds diversity to our mix of biofuels in the U.S.,” said EPA Acting Administrator Andrew Wheeler. “This is a win for American sorghum farmers and biofuel producers alike.”

“USDA welcomes this decision by EPA that biofuel made from sorghum oil qualifies for advanced biofuel and biomass-based diesel designation under the RFS,” U.S. Secretary of Agriculture Sonny Perdue said. “This decision recognizes the environmental benefits of home-grown renewable energy and will create new markets for agricultural commodities.”

“Kansas farmers are hurting – low commodity prices and falling farm revenue have made it increasingly difficult for producers to make ends meet,” said Senator Jerry Moran (KS). “Approving the pathway is long past due, and I applaud Administrator Wheeler for acting quickly to finalize the pathway after assuming leadership of the agency. It is critical for EPA to recognize the challenges faced by farmers and ranchers and to make certain it pursues biofuel policies that will benefit rural America.”

“More and more farmers are growing sorghum in Nebraska, and it’s an important commodity in our state. EPA’s approval of a sorghum oil fuel pathway under the RFS is good news for Nebraska ag producers and rural America. I look forward to continuing to work with the administration to provide opportunities for Nebraska farmers,” said Senator Deb Fischer (NE).

Yes, 16% isobutanol fuel blends are not only OK, they’re officially OK

In June we reported that the Environmental Protection Agency announced the approval of isobutanol at a 16% blend level in gasoline for on-road use in automobiles.  Previous to this isobutanol had been approved for on-road use up to a 12.5% blend.

On the expansion of isobutanol blend levels, Sam Nejame wrote this for the Digest this week:

Last month, when EPA announced it had approved higher iso-butanol content in gasoline blends, you’d be forgiven for not paying much attention. But then GEVO’s stock popped 700% over a few spicy days.  That got traders and all those numbers guys chattering as if GEVO was the latest crypto-chit. 

I’m not going to recount all the physical and economic benefits butanol has over ethanol.  That’s a story too many times told elsewhere under brighter skies. But the truth is large scale production of butanol has the potential to disrupt many markets, some obvious others less so.  If implemented it could drastically increase corn production and spur construction of new plants along with the retrofitting of existing ethanol plants.  Refiners would be able to blend and retake margins (and RINs) long lost to fuel distributors/retailers.  In many parts of the country refiners could avoid expensive reformulated blendstock for oxygen blending and simultaneously utilize inexpensive heavier natural gas liquids from midstream suppliers. In the US, the largest blenders of butanol fuel oxygenate would likely include: Valero, ConocoPhillips, ExxonMobil, BP, Marathon Petroleum, Chevron and Sunoco.