North American Framework

The United States biofuels program is ranked highly (Demirbas and Balat, 2006). As noted already ethanol in the USA has been used as fuel since the 1800s and especially during World War I. According to Curtis (2010), the Office of Energy Efficiency and Renewable Energy’s (EERE) Biomass Program in the U.S. Department of Energy (DOE) is set up to help transform “renewable and abundant biomass resources into cost competitive high performance biofuels, bioproducts and biopower”. The Biomass Program supports the EERE’s four key priority areas as follows:

b) Promote the use of diverse, domestic and sustainable energy resources c) Reduce carbon emissions from energy production and consumption d) Establish a domestic bioindustry.

DOE (2014) says the United States energy endeavours will be mainly aimed at securing access to oil and reducing demand for energy while developing other sources. Other western nations will have a similar energy agenda given the security instability around oil producer nations (Pippard, 2010). Hoekman (2008), says the U.S. has enacted regulations and set goals to encourage increased usage of biofuels especially corn derived ethanol. The reasons given are energy security, diversity and sustainability as well as greenhouse mitigation. As Tiffany (2009, p.44) puts it “the primary goal of using this fuel is the reduction of emissions that contribute to ozone formation; an additional goal is the reduction of toxic emissions such as benzene”. The state of California is the leader in aggressively promoting biofuel use and has a goal of 20% increase of renewables of total road transport fuels by 2020 and by 30% by 2030.

On the national level the Energy Policy Act (2005) has many provisions including energy efficiency and conservation, modernization of energy infrastructure and promotion of both traditional and renewable alternatives. Koplow (2007) quoted by Tiffany (2009) lists a number of tax incentives emanating from EPA (2005) which targeted corn ethanol production as well as ethanol use such as volumetric excise tax credits, market price support, reductions in state motor fuel taxes, federal grants, demonstration projects, research and development grants, accelerated depreciation on assets and federal small producer tax credit among others. The U.S. Congress passed the Energy Independence and Security Act of 2007 (Hoekman, 2009). This act specifically incentivises biofuels from cellulosic material, that is second generation biofuels and raises the renewable fuel standard (RFS). Ethanol producers who use cellulosic raw materials get higher tax breaks compared to those still using corn. The aim is to use lass corn for fuel since corn is in the food chain via livestock feed. The incentives protect the farmers in general and particularly corn farmers who supply ethanol production plants. Ethanol producers are also incentivized through various tax breaks, soft loan guarantees. While consumers benefit from lower vehicle taxes if they use ethanol blends. The Farm Bill of 2008 has among its provisions direct payments to corn producers, sets prices for corn for four years to 2012, sets loan rates for

corn for marketing assistance, definition of advanced biofuels and stipulates the payment quantums to cellulosic fuel ethanol producers among others (Food Conservation and Energy Act, 2008). This bill among other things targets moving ethanol production away from corn feedstock to cellulose.

According to Detchon (2007), the American economy depends on transportation and transportation depends almost entirely on oil. This dependence has certain risks such as the need for military action to protect access to oil, a drain of resources from the economy in order to purchase oil and increased global warming. President George Bush (2006) articulated America’s dependence on oil and said, “Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world.” (Hoekman, 2009).

Tom Lasorda (Chrysler Group President and CEO press release, 2006) proposed a solution by stating that “Biofuels represent a huge opportunity to reduce fuel consumption and our dependence on foreign oil.” Bill Ford (Chairman of Ford, 2006) agrees and says that “If we want a game changer and a game changer in very short term and in big numbers, then ethanol is a very good play for this country.” Ethanol is seen as having the potential to reduce America's oil dependence. Ethanol in America is mainly produced from corn (Balat, 2008). Bill Ford’s (Chairman of Ford, 2006) comment suggests that the potential weaning of America from the exclusive use of fossil oil as a transport energy source by ethanol ought to be pursued to its logical conclusion. This research is about making ethanol a significant fuel in Malawi in order to reduce fossil oil dependency. The use of corn as a raw material for ethanol production in other parts of the world including Malawi is controversial because corn is a staple food (Heisey and Smale, 1995).

Corn ethanol production and use in the USA has been supported by government at federal and state level through legislation using various subsidies and grants and tax incentives to corn farmers, ethanol producers and ethanol blend users. Strong intervention by government is also noted as the USA moves from first generation ethanol production to second generation (cellulosic) ethanol

production. The Farm Bill 2014 repeals most of the support corn ethanol that was available through Farm Bill 2008 (Agricultural Act, 2014).

Lessons

The following is a summary of the literature review on American corn ethanol: a) The biofuels program is aimed at reducing oil dependence. American

transport depends almost entirely on oil and as observed by President George Bush events elsewhere threaten the security of oil supply.

b) Mitigation of harmful emissions (GHG). The laws enacted such as the EPA 2005 and the Farm Bill 2008 specifically target GHGs and offer incentives for lowering such emissions.

c) The Federal government enacts laws to protect corn farmers from market vagaries. Corn farmers get grants and payments to guarantee their incomes. Part of the rationale is that corn is livestock feedstock and therefore in the human food chain.

d) Individual states also have laws to encourage ethanol production. Notably California has ambitious targets to reduce vehicle emissions by promoting ethanol production and use.

e) These laws also fix the market price of many agricultural commodities among them corn. Corn prices are fixed by law so that farmers continue producing corn.

f) Ethanol producers have grants and tax credits to encourage production. Up to 2008 corn ethanol plants were eligible for a number of incentives. g) Blend mandates are still less than 10% due to cutting back of corn as a

feedstock for ethanol and the still growing cellulose ethanol production apart from the large American vehicle fleet most of which does not run on ethanol.

h) The Agriculture Act 2014 repeals most of the grants, payments and tax credits for corn ethanol in the Farm Bill 2008 in favour of ethanol produced from cellulose (second generation ethanol). An example of strong government control of biofuel policy and strategy.

The following Section 2.18.3 looks at the Asian scenario and has more insights on the food versus fuel debate.