Renewable Fuels Policy and Food Prices

“Thank you all for coming today to discuss our nation’s biofuels policy, and how that policy is affecting domestic and global food prices. The recent increase in commodity prices, with food and fuel prices at historic highs, highlights the importance of getting our policies right. I called today’s hearing in an effort to help us do just that: to make sure we are getting our biofuels policy right.

“Last month, I asked the Secretaries of Agriculture and Energy a series of questions about the impact of the Renewable Fuel Standard on domestic and international food and fuel prices. Those questions were intended to establish some of the facts on this issue, so that we could base today’s discussion on facts, rather than the agenda-driven calculations that we see more often than not.

“The answers that I have received from the Departments of Agriculture and Energy indicate that U.S. biofuels policy explains between 4 and 5 percent of the 45 percent global increase in food prices in the last year. At the same time, biofuels have increased the U.S. fuel supply and are reducing the prices that Americans pay at the gas pump by between 20 and 35 cents per gallon.

“As we continue on this path toward expanding our alternatives to gasoline and reducing its cost, we obviously need to find a way to eliminate any impact on the global food prices. The intent of the Renewable Fuel Standard that was enacted in December 2007 is to move beyond our current technologies, to technologies that have no implications for our food supply.

“I think the critics of our current biofuels policy do not question the validity of our end goal of a healthy second-generation biofuels industry, but rather question our path for arriving at that end goal. Our current path does require increased use of existing biofuels, including corn ethanol and soy-based biodiesel.

“I am concerned that altering that path now would not only be unfair to the industry that is responding to the government policies that have already been put in place, but also would have negative implications for second-generation fuels. It is a fact that many of the companies that are expected to be next-generation biofuel industry leaders, especially for cellulosic ethanol, are current industry leaders in corn ethanol production. To hurt those companies’ bottom lines now would endanger their investments in expanding their business to include next-generation production.

“I also suspect that investment in other kinds of next-generation technology would suffer, as investors would feel less confident of Congress’s commitment to its biofuels policies. I believe that many next-generation fuels hold great promise for further diversifying our fuel supply. As we diversify away from biofuel feedstocks that compete with our grain supply, we also diversify the geographic production areas beyond the current base in the Midwest.

“In my home state of New Mexico, which has no corn ethanol production, limited sorghum-ethanol production, and very small amounts of biodiesel production, is an example of how the geography of biofuels production can change. We are hopeful that we will be home to the country’s first biobutanol plant, which could be located near Portales, New Mexico, and could use sweet sorghum as a feedstock. We also understand that New Mexico is one of the most promising states in the U.S. for large-scale algae production, which we will hear more about in today’s hearing. We need the market certainty that comes with the existing renewable fuels mandate in order to realize the benefits of this next-generation industry.

“At the same time, I do think we need to be mindful of any unintended consequences of our biofuels policy. No one wants our biofuels policy to increase the prices that Americans are paying at the grocery store – although I think we can agree that this domestic price increase is to some degree offset by the savings we’re seeing at the fuel pump. But we must also ensure that our policies, including but not limited to our biofuels policies, are not negatively impacting the world’s poor, who are most vulnerable to food price increases. I take seriously the United Nations call for further study on the topic of biofuels, and look forward to constructive thoughts on how we can create a more sustainable global biofuels industry.

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