Ethanol Strikes Back: Industry Groups Sue California Over Low-Carbon Fuel Rule

The ethanol industry -- specifically proponents of the corn-based fuel -- feel like they've been picked on long enough. So, now they're suing California, which earlier this year established new regulations that could keep corn-based ethanol out of the state entirely.

Growth Energy, a pro-ethanol group whose board of directors includes former Gen. Wesley Clark and POET CEO Jeff Broin, and the Renewable Fuels Association filed a lawsuit in federal court Thursday challenging the constitutionality of California's low-carbon fuel standard. The low-carbon fuel standard violates both the supremacy clause and commerce clause of the U.S. Constitution, according to a joint statement from the two industry groups.

The California Air Resource Board approved in April the nation's first low-carbon fuel standard, new rules that will require producers, refiners and importers of gasoline and diesel to reduce the carbon footprint of their fuel by 10 percent in the next decade. The regulation, which was created out of an executive order from Gov. Arnold Schwarzenegger in early 2007, is designed to increase the use of alternative fuels, replacing 20 percent of the fuel used by cars in the state by 2020. The regulation will go into effect in 2011.

As I wrote last spring, it's how that carbon footprint is measuredthat has caused corn-based ethanol producers to cring -- and now, it turns out, to sue. The low carbon fuel standard calculates the impact of fuels throughout their lifecycle and takes into account emissions generated from production, transportation and ultimately, its combustion.

Corn-based ethanol ends up receiving a worse emissions score than petroleum because of so-called indirect land use effects. The fuel source is penalized because of the indirect effect of growing corn for energy on land that would normally be used to grow crops for food. The regulation assumes that by growing corn in the Midwest to make ethanol, a farmer living on the other side of the world will burn grasslands and jungles to grow more food.

Under the indirect land use measurement, corn-based ethanol does not meet California's low carbon fuel standard, which means it would essentially be banned from use in the state. The ethanol industry has called the rule unfair and based on shoddy science.

The industry feels as if domestic ethanol has been singled out and the regulations will make it difficult to meet the federal Renewable Fuel Standard, which calls for 36 billion gallon of biofuels to be blended each year into the U.S. fuel supply in 2022. California's low-carbon fuel standard also will change how corn is farmed and how ethanol is produced all over the country, the two industry group argue in their statement.

Ethanol derived from sugarcane -- a major export from Brazil -- meets CARB's standards. In a pour-the-salt-on-the-wound move (at least in corn-based ethanol's eyes), California revised its ethanol blend requirements, which will push it from 6 percent to 10 percent ethanol by 2010.

In a world without commercially viable cellulosic ethanol and in a state that bans corn-based ethanol, guess who the big, fat winner is -- at least in the short term? Brazil and its sugarcane ethanol industry.