A Big Problem for Cap and Trade

Next year Congress seems likely to enact a "cap and trade" system to limit carbon dioxide emissions, to curb global warming. But Congress is considering a system that includes a provision called "offsets," which would create loopholes and opportunities for scamming on a grand scale. By Peter Montague of Rachel’s Democracy & Health News

Smokestacks"Cap and trade" is a plan to limit carbon dioxide emissions by selling (or giving) pollution permits (called "allowances") to big polluters. The total number of "allowances" is limited (the cap). If the polluters can reduce their emissions below their permitted amount, they can sell some of their "allowances" to other polluters (the trade) who can use them to continue polluting instead of reducing. The plan before Congress has one more wrinkle: instead of reducing pollution at home, polluters would be able to earn "credits" by investing in supposedly-less-polluting activities in China or Africa (or anywhere) and thus "earn" the "right" to continue polluting at home because their home emissions are being "offset" by the pollution- reduction projects somewhere else in the world.

Selling these "offsets" is already a big business -- for example, people who feel guilty about flying can buy "offsets" or "credits" to (supposedly) make their flight "carbon neutral." At least that is the theory and the business hype.

So what's wrong with this idea? Well, let's look at a fairly simple example: growing green plants to make ethanol (or other "biofuels" like "biodiesel") to power our transportation systems.

In the U.S., a scientific debate about biofuels has been raging for at least 5 years. In 2003, well-known agricultural researcher David Pimentel at Cornell published a paper showing that growing corn to make ethanol fuel requires more energy than it delivers in the ethanol. In other words, corn ethanol is an energy loser that will make global warming (and dependence on foreign oil) worse, not better, Pimentel concluded.

ethanolThe following year Tad Patzek, an engineer at the University of California at Berkeley, published a paper showing that growing ethanol from corn was even worse than Pimentel had said it was. Because there is so much petroleum hidden in crops (in the fertilizer, the pesticides, the energy to make and run the tractors, and so on), growing ethanol requires more fossil energy than it returns in the ethanol itself, Patzek found.

Critics said, "OK, maybe corn isn't the right crop for making ethanol but what about making ethanol from soybeans or sun flowers or from a fast-growing grass like switchgrass?"

In 2005 Patzek and Pimentel argued in a joint paper that growing plants for ethanol required more fossil-fuel energy than the resulting ethanol provided -- no matter whether the ethanol was made from corn or wood or soybeans or sunflowers or switchgrass. These five crops were all energy losers as sources of biofuels, Patzek and Pimental concluded.

With that, the critics of biofuels seemed to have won the debate.

Nevertheless, in his state of the union address in January 2006 President Bush hyped the advantages of ethanol from switchgrass. And in 2007 Congress -- based on advice from industry experts -- passed the Energy Independence and Security Act, requiring the U.S. to produce 36 billion gallons of renewable fuels annually starting no later than 2022, with 15 billion of that required to come from corn ethanol. (It turned out this was a boon worth billions of dollars to corn farmers and to big corn processors like Archer Daniels Midland, which has entered the ethanol business in a big way.)

Then in January 2008 U.S. Department of Agriculture researchers published a paper showing that switchgrass ethanol yields a tremendous energy benefit, compared to the fossil fuels fuels required to grow it. They said they differed with Patzek and Pimental on diesel fuel usage, fertilizer requirements, electricity rates and machinery costs, among other things.

Suddenly the biofuel advocates seemed to have the upper hand.

However, a month later two papers in Science magazine swung the debate the other way again: one paper showed that ethanol from switchgrass increases carbon emissions by 50% compared to gasoline; the other paper showed that clearing land to produce biofuels releases large quantities of carbon dioxide from the soil and that it takes decades or centuries for the debt to be repaid by burning ethanol instead of gasoline. In other words, in the short term -- precisely the time when we need to be reducing carbon dioxide emissions -- growing biofuels will increase carbon dioxide emissions. Advantage biofuel critics.

But wait -- not so fast!

In June and August of this year, two articles were published arguing that biofuels made from algae can reduce carbon dioxide emissions by more than 90% compared to gasoline. Both articles say we could get roughly 5000 gallons (roughly 15 metric tonnes) of fuel per acre per year by growing specially-selected algae in a carbon-dioxide- rich atmosphere in closed containers (closed to keep out wild, unproductive strains of algae and to maintain high levels of CO2). Five thousand gallons per acre is roughly 10 times the yield of corn ethanol and 100 times the yield of soybean ethanol. Advantage biofuel enthusiasts.

But could this make a dent in U.S. petroleum use? The U.S. uses roughly 4 billion (4E9) tonnes of petroleum each year. If we could grow algae to produce 15 tonnes of fuel per acre we would need 4E9/15 = 250 million acres of land, which is more than half the 450 million acres of cropland in the U.S. This is a ballpark calculation with every number rounded. But by any measure, it's a tremendous amount of land. And it is land that must be dedicated to biofuels, unlike wind turbine or even solar panels on tall stilts, which could allow other land uses like crops or grazing beneath them.

So what is the carbon impact of biofuels? As a writer in Environmental Health Perspectives concluded in June, "The answer depends on a slew of unknowns."

What can we learn from this?

Calculating the energetics of growing a crop to make fuel seems simple enough -- until you get into the details. It turns out the results are dependent upon dozens or hundreds of variables, many of them specific to a particular place -- soil type, soil carbon content, soil moisture, rainfall (including rainfall intensity, not just total rainfall), local pest populations, the particular cultivar, till or no-till... and on and on.

Will consultants in Kenya or Brazil (or on Wall Street) be able measure the actual carbon emission "savings" from a project that is planting, say, genetically-engineered Eucalyptus trees on depleted soil in Brazil so that a coal-fired power plant in Ohio can purchase an "offset" and take credit for reducing global emissions overall? If the best-known agricultural scientists in U.S. universites, funded by the U.S. Department of Agriculture, cannot reproduce each other's results -- how will "carbon offset consultants" be able to do it? After all, consultants on both sides of the bargain have an incentive to overestimate the carbon savings gained through each "offset." Both the buyer and the seller gain if someone fudges the numbers toward the high side and claims a carbon reduction where none exists.

Ordinarily, open scientific debate can resolve issues such as these. But with tens or hundreds of billions of dollars at stake -- at a time when the Wall Street banks have lost more than a trillion dollars on bad loans and are desperate to recoup their losses -- it is difficult to remain optimistic that mere facts will carry the day. No matter what the facts may be, some consulting scientist can always be found to put his or her name on a "research" paper ghost-written by an investment bank, a chemical company, or an oil giant, the purpose being to keep doubt and confusion alive. It has happened before. Indeed, in the field of global warming science, this is widely known to be business as usual.

In sum, cap and trade with offsets has the potential to become one of the largest business scams ever conceived. Wall Street banks are expecting this to be a new source of enormous profits regardless of whether it alleviates global warming. The enormous profits may indeed materialize. But in the process the "offsets" gimmick could very well (a) cause the entire cap and trade system to lose public confidence and thus fail; (b) increase rather than decrease global warming; and (c) cost us a crucial decade or more while the consultants confuse us into thinking things are going well when, in fact, the planet is being roasted alive.

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  • Posted on Sept. 14, 2008. Listed in:

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