California remains top corn ethanol state

California uses more ethanol than any other state, with a 5.7 percent ethanol blend required in gasoline sold the state (about 1 billion gallons of ethanol), which is expanding this year to 10 percent. That means in 2010, California will be using nearly 2 billion gallons of corn-based ethanol.

And a decision by the California Air Resources Board (ARB) to adopt a low carbon fuel standard will not change that. What it could change at some point in the future, at least in theory, is the source of that ethanol.

Ethanol (and corn) groups are generally supportive of the idea of a low carbon fuel standard. They just do not agree with a component of ARB’s plan, that being that corn going to ethanol will result in land use changes elsewhere. (As in an acre of corn going to ethanol results in an acre of rain forest being plowed up elsewhere, releasing tons of carbon.)

Ethanol from the Midwest greatly reduces greenhouse gas emissions, and ARB acknowledged that. However, ARB's land use penalty pushes corn-based ethanol over “the limit”, or says that in the end it is no different than regular gasoline and won’t reduce carbon output of the final fuel.

Corn and ethanol groups also don’t agree with some components of the standard on items like distillers grains and future corn yields.

ARB has told its staff to form an expert panel on the land use issue, and ethanol groups are hoping to work with the panel to better the science and make their case.

Renewable Fuels Association president and CEO Bob Dinneen, for example, said RFA remains cautiously optimistic that its decision to form an expert work group will provide an opportunity to get the standard right.

ARB chairman Mary Nichols’, in a letter (.pdf) to Growth Energy, said the panel will consider agricultural yield improvements, co-product credits, land emission factors, food price elasticity and other relevant factors. The results of the panel and recommended changes to the rule are to be presented to ARB on or before December 2011.

That is encouraging, as was Nichols statement that corn-based ethanol will “will play a significant role well into the next decade.”

One of the problems is all the uncertainty that ARB’s now existing low carbon rules create.

Where should investors spend their money? What technologies, existing and in the works, will be able to meet California’s rules by 2020? (And what if a dozen states follow suit - roughly 30 percent of the country’s fuel market?) Will the corn ethanol industry qualify? Will farmers be able to demonstrate that their carbon output is lower than what ARB believes? Or that their ability to sequester carbon greater?

The U.S. Environmental Protection Agency is also considering rules along these lines. It will be interesting to see where EPA ends up when it comes to corn-based ethanol and land use. ARB has said it will consider EPA’s position on the matter to “harmonize data” where possible.

For more, check out this post on several U.S. Senators sending a letter to EPA on land use changes, and this post on how ARB’s land use ‘model’ is an unproven theory.