Ethanol: A Pathway to Reward Climate Smart Agriculture

ACE believes farmers should have the opportunity to monetize low-carbon practices by selling their corn to ethanol plants that have pathways into clean fuel markets at the state or federal level, creating maximum value and meaningful change.
By Brian Jennings | October 14, 2022

A few years ago, ACE began alerting our industry that it would be a matter of if, not when, Congress would enact legislation designed to address climate change and reduce greenhouse gas (GHG) emissions.

Knowing climate legislation could impose costs and regulatory burdens on ethanol producers and farmers, ACE also began strategically and proactively promoting corn ethanol as part of the climate solution. Whether working to improve and update lifecycle models such as GREET, which are used to determine the carbon intensity of fuels like ethanol, or highlighting how ethanol is the only low-carbon fuel able to achieve both net-zero and net-negative GHG emissions, ACE has methodically been laying the groundwork for ethanol producers and farmers to benefit from new clean fuel markets.

Our latest mission involves a phrase that is all the rage these days; “climate-smart agriculture,” which is just another way to describe farming practices that help sequester carbon in the soil or reduce GHG emissions. Examples include a farmer switching from conventional tillage to reduced tillage, adopting 4R nutrient management or planting cover crops.

No matter what they are called, farmers obviously incur a cost, and sometimes an initial yield hit, to make these changes in their operations, so they must be able to get a return on their investment in order to monetize the practices in a marketplace.

At the moment, farmers are getting inundated with offers from private companies that want to take credit for things like reduced tillage in voluntary carbon markets. The trouble is, the meager payments offered by these companies do not cover a farmer’s cost to adopt the practices, and they pale in comparison to what farmers could potentially earn through a clean fuel or low-carbon fuel market.

ACE believes farmers should have the opportunity to monetize climate-smart practices by selling their corn to an ethanol plant which has a pathway into a clean fuel market at the state or federal level, where carbon credits fetch significantly greater value than in voluntary programs, generating more than enough revenue to justify making changes to their farming practices.

California’s Low Carbon Fuel Standard represents the largest existing clean fuel market, but, California has not yet allowed carbon credits for ethanol based on climate-smart farming practices. We are determined to change that. ACE is currently engaging California market regulators, as well as those developing legislative proposals for new clean fuel markets in Midwest states such as Nebraska and Minnesota, to enable ethanol producers and farmers to generate carbon credits based on things like 4R nutrient management and reduced tillage.

In terms of value, we did an analysis to show what the maximum potential economic benefit would be for ACE member plants and the farmers supplying corn to them if the full suite of climate smart practices were monetized in a clean fuel market, and the number is just shy of $1 billion per year.
While we continue working to establish new clean fuel markets at the state and eventually the federal level, Congress and President Biden recently took historic action on climate change through the so-called Inflation Reduction Act. This legislation will provide half a billion dollars for E15 and E85 infrastructure, invest $18 billion to support climate-smart agriculture practices and help us measure and verify the GHG benefits of these practices, reward fuels like ethanol with a new clean fuel production tax credit based on carbon intensity as measured by the GREET model, establish a new sustainable aviation fuel tax credit based on carbon intensity and give a big boost to projects which capture and sequester carbon. This bill does not contain everything on our wish list, but it provides incredible incentives for farmers and ethanol producers looking to capitalize on carbon intensity.

Had ACE been standing on the sidelines these last few years, not engaging policymakers about how corn ethanol is part of the climate solution, others would have filled the void to position us as part of the climate problem. I am proud to work for members who chose to engage. We made the right decision. Our proactive approach is beginning to pay big dividends, to create new opportunities for farmers and ethanol producers.

Author: Brian Jennings
CEO
American Coalition for Ethanol
605.334.3381
[email protected]