Do we need a pollution exporting policy?

It occurs to me that there is a missing piece to the talk about what a future with biofuels would look like. In particular, if carbon-based pollution has a significant social cost – and indeed we discuss a pricing for carbon in cap-and-trade policies – do we need to more clearly regulate this issue in the future?

Biofuels, when successful, might close the gap on overall CO2 emissions. But they still do emit CO2 (and other stuff) when combusted in our cars; it’s still a local pollutant in cities where it is consumed.

Today, ethanol is grown in Iowa and shipped to, say, Illinois for refining then sold in Minneapolis or Chicago. The CO2 was removed from the atmosphere in Iowa, but re-emitted as a pollutant in Minnesota (who suffers all of the local effects).

Does Iowa “owe” Minneapolis or Chicago something for exporting its CO2 as a pollutant? Did these cities assume this risk when they decided to sell Iowa-based ethanol? How would anyone know where the ethanol came from to collect on such a debt? Should Chicago or Minneapolis only allow ethanol that was made nearby?

This is a strange sort of thinking on my part. I don’t know the answer to it and, frankly, I would hate to see what type of policy these politicians would mutate from this. What this scenario illustrates is that there are still issues to be solved regarding how we balance our global environmental opportunities with our local environmental responsibilities. While we all want to be carbon neutral (or, given the name of this blog, carbon-free), there’s always more to consider than just the technological capability.

The Energy Bill Impact

It’s done. It’s signed. The 2007 Energy Bill (officially as HR 6 The Energy Independence and Security Act of 2007) has several far-reaching policies. I wanted to take a look at two important ones: the expanded renewable fuels standard (RFS) and the increased CAFE standard.

Expanded RFS
The Expanded RFS standard, if achieved, could go a long way to reducing our petroleum-based fuel demand. I ran a few numbers using the schedule included in the bill (and the Renewable Fuel Association website) to see what type of investment would be required to meet the volume capacity requirements. If we assume that capital costs for a corn ethanol facility are around $1.50/gallon of annual capacity and that advanced ethanol facility run around $2.50/gallon, we get the following investment amounts:

This is doable, from a magnitude standpoint. It would require a lot of renewed enthusiasm around the industry. It’s important to note, not surprisingly, are that corn ethanol has a limited future and that the future of the industry requires advancements in cellulosic ethanol…right now.