US biofuel industry calls for rise in ethanol ceiling

The Obama administration is to face an early test of its commitment to the US biofuel industry, after a coalition of corn ethanol firms led by retired general and Democratic presidential candidate Wesley Clark last week called for an increase in the amount of ethanol blended with conventional fuels.

Speaking at a press conference on Friday, Clark, now chairman of pro-ethanol lobby group Growth Energy, said that the Environmental Protection Agency (EPA) should increase the current ceiling on the amount of ethanol that can be blended with regular fuel from 10 to 15 per cent.

He said that the change would create up to 125,000 jobs while providing a boost to the ailing corn ethanol sector which has been undermined by falling demand and plummeting corn prices that recently saw former industry darling VeraSun file for bankruptcy.

"It's an example of how a change in regulation can open up an industry to bring in private sector dollars," he said. "There is still a lot of money out there on the sidelines. They're looking to use their financial resources in an effective manner… It will be a stimulating pulse in the economy without the need for a stimulus bill."

The EPA is so far resisting the calls as it continues research into whether or not higher concentrations of ethanol causes damage to engines. There are concerns that the fuel delivers lower fuel efficiency than conventional gasoline and is also ill suited for use in small engines such as boat outboard motors.

However, Clark said that the change in the ceiling would not require firms to increase the ethanol concentration to 15 per cent, only allow them to do so where it is appropriate.

The industry also warned that without an increase in the cap on blended ethanol, it would struggle to meet biofuel targets passed by Congress requiring refineries to deliver 36bn gallons a year by 2022.

President Obama had said during the election campaign that he would support a huge increase in that target to 60bn gallons a year – now the industry is calling on him to deliver on that commitment.

Environmentalists, however, remain deeply divided about the benefits of biofuels in general and corn-based ethanol in particular. A series of studies have suggested many biofuels have failed to deliver expected greenhouse gas savings, while there is also evidence that increased demand for corn from the biofuels sector has driven up food prices in recent years.

However, Clark dismissed suggestions that ethanol had contributed to increased corn prices, arguing that many farmers were still operating at a loss. He also said that an increase in ethanol concentrations would help bolster demand for so-called next-generation ethanol made from grasses, which experts claim will deliver greater carbon savings.