Is Independence Down South Good for the US?

How Brazil’s milestone can reinvigorate America’s quest for energy freedom
By Michael McAdams | June 20, 2011

Every two years leaders from around the world in academia, governments, nonprofits, science, agriculture and industry gather in Sao Paulo, Brazil, for an engaging summit focused on every facet of the biofuels world, debating and discussing the value and significance to our collective futures. It is a truly global event that I am particularly proud to play a small part in as a representative of our domestic biofuels industry.

The significance of each event has grown each year it is held and this year’s summit is more important, with more attention, than any others before it. We know the U.S. isn’t alone in its endeavor to invest, develop and deploy renewable energy alternatives, but a quick glance at the stakeholders here in Brazil demonstrates that any hesitation by our elected leaders in Washington could very well jeopardize the leadership position we’ve worked hard to stake out.

In fact, Brazil is no rookie to this and continues to court world leaders and make headlines as it announced in May it no longer needs to import gasoline, essentially declaring its energy independence as it created the right balance between their hydrocarbon and renewable fuels.

As I write this from Sao Paulo in early June, however, drivers across the U.S. are pulling up to $4-plus prices at the pump, and as we head toward celebrating our own independence as Americans, I have to wonder whether the U.S. must reach a milestone similar to the Brazilians’ to retain our leadership in deploying advanced biofuels and in the greater renewable energy space.

Energy policy in the U.S. has to start with the realization that we work within a global framework. Our nation now finds itself at a point that we can, and must, leverage our diversity in supply within our shores, across all renewable platforms, not just biofuels, but solar, wind, and geothermal and others so that we have a portfolio approach to energy, an approach which will position the U.S. economically relative to the rest of the world. We can’t escape the fact that we will always be an integral part of a global market place.

Don’t get me wrong, I am not suggesting our industry take a back seat, because from my vantage point, the core of this diverse energy portfolio must be a robust, thriving advanced biofuels market. Over this past year I’ve shared, in bits and pieces, how we can get to that point and I thought as we have independence on our mind this month, what better time to put it all together.

Below are some guiding principles for consistent public policies to foster growth of the domestic biofuels industry in America.

Technology Neutrality: Don’t pick a winner! The government’s track record of picking winning technologies does not compare with the free market. Instead, government should support objectives that allow companies to compete unfettered by regulatory or tax preferences.

Subsidy Parity: Whatever role government chooses to take to support the development of biofuels, the terms of engagement should be at parity. Giving one fuel $1 and another 50 cents is not a successful strategy if the goal is to back out foreign oil with as many gallons as possible.

Feedstock Neutrality: Like it or not, we have already dedicated a significant number of available farm acreage to certain crops. Any serious effort to replace foreign oil must recognize that all feedstocks have to be part of the equation moving forward.

Those principles could help guide the following legislative maneuvers to ensure the all-important consistency and smarter investments of taxpayer’s dollars.

The Renewable Fuel Standard 2 (RFS2) is currently being implemented and is successfully driving commercial investment in advanced fuels. We must maintain the integrity of the RFS2 in the near term. Because it guarantees a market, the RFS2 is the single most important market driver in the advanced biofuels space. Congress should allow the capital markets more time to sort out the best technologies.

Tax Policy Certainty is critical to creating jobs and domestic infrastructure. The federal government should extend the length of biofuels tax credits. By providing long-term support such as a five-year time frame, the federal government would provide a stable platform, creating certainty for the investment community. This would play a significant role in enabling investors to build the next round of commercial advanced biofuels facilities.

Equal Participation in renewable energy tax credits and incentives is needed. Programs such as the renewable energy Investment Tax Credit have been instrumental in catalyzing more than $7 billion in development in the wind and solar industries. Expanding eligibility to include advanced and cellulosic biofuels producers would have a similar positive effect of spurring commercialization to accelerate the growth of new production capacity. We should give all renewables an equal opportunity to participate under the law.

Long-term Contracting Authority allows the federal government to directly purchase fuels over a long period of time, helping to provide the necessary revenue flow to commercially build advanced biofuels plants. Congress should extend the length of purchasing time for up to 15 years for advanced biofuels.

Author: Michael McAdams
President, Advanced Biofuels Association
(202) 469-5140