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By Cole Gustafson, Published September 28 2009

New energy economics: Can scientists really estimate indirect land use?

FARGO - As mentioned in previous columns, public debate concerning biofuels now centers on global warming and indirect land use changes (LUC). Originally, the biofuel industry expanded based on additional farm income or rural economic development that potentially could be generated. Through time, the potential for renewable biofuels to provide energy independence and a sustainable supply were important policy themes. Now discussion focuses solely on biofuel's role in reducing greenhouse gas emissions.

LUC is a lightning rod for both advocates and protestors of biofuels. LUC is thought to occur in response to rising U.S. grain prices. As additional U.S. grains are used to produce biofuels, prices for those grains rise due to a limited supply. These price rises motivate foreigners to bring idle land into agricultural production. The most popular argument is that South American farmers are being encouraged to burn down rainforests and plant food crops.

At North Dakota State University's recent Northern Plains Biomass Economy: What Makes Sense? conference, Bruce Dale, distinguished professor of chemical engineering and former Department of Chemical Engineering chair at Michigan State University, debunked many of these arguments. In particular, he noted that existing LUC calculations do not use current data, are not consistent across different research studies, do not compare similar systems and fail to disclose key assumptions.

To illustrate his point, he asked why LUC is not applied to other public agricultural programs. For example, research on the Conservation Reserve Program (CRP) has shown clearly that taking existing food acreage out of production has raised grain prices. If the LUC holds, these rising prices have led to deforestation in the Amazon and the CRP should have a LUC penalty applied to the program.

Another striking blow is the lack of correlation between historical grain prices and deforestation in the Amazon. Dale plotted a chart of historical soybean prices versus deforestation and found the correlation to be less than 2 percent, which indicates that rising soybean prices have had negligible effects on LUC.

Dale proceeded to argue that the world has more than a billion acres of underutilized land that could be brought into production to reduce the deforestation of environmentally fragile lands. Moreover, improved crop genetics will lessen the need for additional land. He cited improved corn genetics that are expected to yield 300 bushels per acre by 2030. Combined, production of biofuels actually may alleviate a potential grain oversupply problem.

With respect to consistency, Dale noted LUC should be applied to all energy forms using similar methodology. In particular, oil sands emit far more carbon during processing than biofuel production.

While Dale makes some very compelling arguments, the Environmental Protection Agency and Department of Energy (DOE) will continue to implement the Energy Independence and Security Act that requires LUC biofuel determinations. The DOE has selected three scientific models to refine and improve biofuel LUC quality. I hope that Dale's concerns will be addressed.

Gustafson is a biofuels economist with the NDSU Extension Service.