Here in the United States, biofuels have developed a bad name. A 2007 law mandates the blending of annually increasing amounts of ethanol produced from biomass into our country’s gasoline, and at the time it was hailed as a way for the United States to shore up its energy security while “greening” our transportation sector. The Renewable Fuel Standard (RFS), as it’s called, was signed into law by President Bush, but it was President Obama who oversaw its rise.
Despite that bipartisan support, the policy is an unqualified disaster today. Because the vast majority of the mandated biofuels produced are distilled from corn, the RFS has raised global food prices, which hurts the world’s poorest. It’s led to an increase in monoculture in the Midwest, which scientists have correlated with a drop in wild honeybee populations. Studies have linked the RFS to a hike in gas prices, which no American driver will appreciate. The market for the credits refiners use to show compliance with the biofuel quotas has been the target of questionable Wall Street speculation. Perhaps worst of all, corn-based ethanol has been shown to have a negligible effect on reducing greenhouse gas emissions, and may even increase them.
Outside of the farmers growing this corn that is in federally-mandated high demand, you’ll be hard pressed to find a stakeholder content with this system. In light of all of that, it’s perhaps fortunate that there’s a limit to how much ethanol we can blend into gasoline—once gas contains more than 10 percent ethanol by volume, it runs the risk of damaging older engines. That blend wall, as it’s called, has put a limit on the rise of biofuel here in the United States, but there are other markets out there, and there’s none bigger than China’s. It’s important news, then, that Beijing announced this week its intent to blend ethanol into 10 percent of its gasoline three years from now.
This policy choice makes a lot more sense in China than it does in the United States. Though both Beijing and Washington are keenly aware of their dependence on foreign sources of energy, here in the United States we’re in the middle of a remarkable shale boom that has undercut the need for biofuels. China doesn’t have a bounty of tight oil (though it does have plenty of shale gas), so the energy security side of this decision makes more sense. But more importantly, China has corn—a lot of corn—lying around, and it’s actively looking for industrial uses for the 200 million ton stockpile it’s amassed.
The only thing left to do is to distill it, and if Beijing is serious about hitting the target it just set in three years, Reuters analysis suggests it will need to construct 36 ethanol plants to the tune of $5.5 billion. That’s a tall task, but it’s also the sort of project that China has a chance at pulling off. Just remember: this changes nothing about the disaster that is America’s biofuel boondoggle.