Point of View

A waiver that wouldn’t be wise

August 25, 2012 

Last week Gov. Beverly Perdue filed a waiver request for the Renewable Fuel Standard, one of the nation’s most successful energy policies and of critical importance to North Carolina’s economy, jobs and agriculture. Her rationale is that the ethanol industry is affecting corn prices for livestock producers during a year of extreme drought. While we understand this is a short-term decision, it has long-term effects for North Carolina and our nation.

The Renewable Fuel Standard was established in 2007 by a bipartisan Congress with a goal of reducing our dependence on foreign oil by introducing domestically produced biofuel into the U.S. marketplace in increasing amounts through 2022. Almost two-thirds of future Renewable Fuel Standard volumes are allocated for advanced biofuels like cellulosic ethanol made from agricultural waste, municipal solid waste and purpose-grown energy grasses.

North Carolina is playing a leading and powerful role in this industry. Franklinton is home to the North American headquarters of my company, Novozymes. We are the world-leading developer and manufacturer of enzymes for biofuels – including the newly announced Chemtex advanced biofuels plant in Sampson County, due to begin construction later this year.

North Carolina is also home to the N.C. Biofuels Center, the first of its kind in the nation working to develop a large-scale biofuels industry sector to reduce the state’s and country’s dependence on imported petroleum. Changes to the Renewable Fuel Standard put these jobs, private capital and the economic opportunity they create in jeopardy.

We are only three years into the administration of the Renewable Fuel Standards’ 15-year life cycle, and it is already working. North Carolina drivers and taxpayers have already experienced clear benefits:

Biofuels are now 10 percent of our nation’s fuel supply. They provide more fuel to the United States than we currently import from Saudi Arabia.

•  400,000 direct and indirect jobs, combined with the potential for 800,000 more with continued production of advanced biofuels in all 50 states.

•  Gross Domestic Product contribution of $40 billion. In 2011, ethanol contributed $42.4 billion to the GDP and added $29.9 billion to household income.

•  Consumer savings at the pump. The impact of 13.95 billion gallons of ethanol blending on gas prices in 2011 was an $0.84 – $1.09/gallon savings at the pump, according to a recent Iowa State University study.

Ethanol production has increased the amount of corn for all uses. The world gets more feed and more fuel because it has more corn. Over the past 20 years, the average corn yield has increased by 36 percent, from 109 bushels per acre in 1991 to an estimated 147 bushels per acre in 2011. This increase is due to advances in biotechnology, and in part, demand from the Renewable Fuel Standard.

Due to the high price of corn, our industry has already adjusted to the market and is using 14 percent less corn. Based on today’s U.S. Department of Agriculture estimates, the U.S. ethanol industry will use 2.9 percent of the world grain supply on a net basis for 2012/13, the lowest percentage since 2008/09.

Everyone agrees that the drought is one of the worst weather events to impact American farmers in decades. Let’s not use it as an excuse to create fear and mislead the public about American energy.

We understand poultry and meat producers are concerned. They are our customers, too. But ethanol is not the reason for the real issues at hand.

Waiving the Renewable Fuel Standard is a short-term solution that analysts and experts from Morgan Stanley and Purdue University agree might have little effect on corn prices. But this action would have serious long-term consequences for our state and nation in the way of lost jobs, lost revenues, poor air quality and associated health problems and continued energy dependence on foreign oil.

The federal government is helping livestock producers across America by opening federal lands for grazing and purchasing meat during this drought. Meanwhile, it’s critical we keep focus on the long-term benefits of biofuels to our state and our nation. Novozymes and its partners have invested $1 billion in bringing these technologies to market and creating associated jobs – and we are ready to invest $1 billion more, as long as policy remains consistent.

Adam Monroe is president of Novozymes North America.

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