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January 24, 2007

Bush’s State of the Union Energy Plan Gets Mixed Reaction

President Bush set a goal of reducing U.S. gasoline consumption by 20 percent in the next 10 years during last night’s State of the Union speech. The White House dubbed the program Twenty in Ten. According to Bush, that will cut total U.S. oil imports from the Middle East by 75 percent.  The President also proposed doubling the Strategic Petroleum Reserve to 1.5 billion barrels by 2027.

The President’s energy proposal would increase the scope of the current Renewable Fuel Standard, expanding it to an Alternative Fuel Standard. Bush wants Congress to set a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels – from fuels like corn ethanol, cellulosic ethanol, biodiesel, methanol, butanol, and hydrogen – by 2017. That’s nearly five times the current target.

He also called for reforming fuel economy standards for cars which could save 8.5 billion gallons of gasoline in 2017, according to The White House.

Under current law, fuel blenders must use 7.5 billion gallons of renewable fuels in 2012.

Reducing projected consumption by up to 8.5 billion gallons in 2017 means a five percent reduction in projected gasoline consumption in that year. These amounts are based on an assumption that on average, fuel efficiency standards for both light trucks and passenger cars are increased four percent per year, beginning in model year 2010 for cars and model year 2012 for light trucks. Given the changing nature of the marketplace for both cars and light trucks, the Secretary of Transportation will determine the actual standard and fuel savings in a flexible rulemaking process.

This means automakers could see pressure to dramatically increase production of vehicles that can run on ethanol, Forbes writes. Converting a gasoline engine to an ethanol-ready one costs about $100 per vehicle.

The speech proved that rumors Bush would agree to mandatory caps on emissions in an effort to combat global warming, were unfounded. The President steered clear of the recent pressure by the United States Climate Action Partnership, which is calling for a firm nationwide limit on carbon dioxide emissions that would lead to reductions of 10 to 30 percent over the next 15 years.

“Across the United States, scientists, CEOs, environment groups, state governments, and members of Congress, are seeking a comprehensive approach to global climate change and what the President is proposing is really only a very small step in that direction; his plan only affects the transportation sector, which accounts for roughly one-third of US greenhouse gas emissions; and it is unclear how real this commitment is,” said Eileen Claussen, president of the Pew Center on Global Climate Change and a member of the United States Climate Action Partnership.

Overall, Bush’s plan is getting mixed reviews:

“It’s a big change that the president has endorsed these new fuel-efficiency standards,” Fred Smith, the chief executive of the FedEx Corporation and a co-chairman of the Energy Security Leadership Council, a group of executive and retired military officers, told The New York Times. These standards, he said, match their recommendations, “which are achievable.”

 ”According to UCS research, if this fuel economy goal is required by law, it would save 550,000 barrels of oil per day in 2017, more than we currently import from Iraq,” David Friedman, the research director of the Union of Concerned
Scientists, said in a statement. “The increase would also cut global warming pollution by 95 million metric tons of carbon dioxide in that same year. This is equivalent to taking 14 million of today’s cars and trucks off the road.”

“The President’s goal of a five-fold increase in the RFS to 35-billion gallons by 2017 is feasible from a technology standpoint if cellulosic sources are included in the mix,” said Ceres chief executive officer Richard Hamilton. He noted that private industry has already made significant improvements to energy crops and increasing the RFS will encourage greater investments in biofuels. “I’m confident that we will find ways to scale-up production of biofuels and make them competitive with gasoline,”

But skeptics point out that Bush’s goal for ethanol would require big advances in “cellulosic ethanol,” which has yet to be produced at anything close to competitive prices, and massive changes to U.S. farmland.

“Producing 35 billion gallons of ethanol a year would require putting an additional 129,000 square miles of farmland – an area the size of Kansas and Iowa – into corn production, which is not very likely,” said Philip Clapp, president, National Environmental Trust. “The President’s proposals will contribute almost nothing to stopping global warming. They will allow our carbon emissions to grow by 14 percent over the next 10 years. He has proposed a paltry one-and-a-half percent cut
in the galloping growth of our emissions by 2017.”

The market had expected Bush’s energy proposals and ethanol stocks rallied Tuesday in anticipation of the speech, according to MarketWatch. Early Wednesday, performance in the sector was mixed, as traders locked in some of their prior-session gains.

During the speech, Bush said that “technologies will help us be better stewards of the environment and they will help us to confront the serious challenge of global climate change.”

California’s Gov. Arnold Schwarzenegger said he “appreciated” the president’s acknowledgment of climate change, adding that his advisers were still evaluating details of the proposal, according to the Contra Costa Times. “Acknowledging climate change is not enough. We must take steps to tackle it,” Schwarzenegger said.

Bush took his message on the road today and gave the nod to DuPont by holding his first post State of the Union speech at Hotel DuPont in Wilmington, Delaware, Delaware Online reports. The President was flanked by about 50 DuPont scientists and researchers and spoke to more than 1,200 DuPont employees and other guests. “At this company you’ve got 2,500 scientists, some of the smartest people in the country working here, all trying to develop new technology to help us solve this problem,” Bush said.

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