Flawed carbon accounting schemes at both the federal and state level are creating a dynamic where the U.S. is importing ethanol from Brazil while simultaneously exporting greater volumes back to Brazil. This “ethanol shuffle” is occurring exclusively as the result of state and Federal fuel regulations that “treat Brazilian sugarcane ethanol as if it were the Holy Grail of biofuels,” according to Geoff Cooper, the Renewable Fuels Association’s vice president of research and analysis.

In his recent blog post, “The Ethanol Shuffle,” Cooper explores this convoluted trade relationship and how U.S. policy is turning world ethanol markets upside down.

The heart of the issue is how both the EPA and the California Air Resources Board (CARB) are calculating carbon emissions for corn-based ethanol and Brazilian sugar ethanol.  Under both the federal Renewable Fuel Standard (RFS) and the California Low Carbon Fuels Standard (LCFS), the carbon footprint of Brazilian based sugar ethanol is deemed far superior to corn-based ethanol.  This results in a growing incentive for imports of ethanol from Brazil to meet increasingly aggressive carbon standards.  At the same time, a struggling Brazilian ethanol industry cannot meet its own domestic demand.  As such, Brazilian ethanol producers are finding it more valuable to export their product to America (and the carbon emissions that go with ocean transport) and import growing volumes of U.S. ethanol (and the same carbon emissions).

As Cooper writes in his blog, “So, that’s how the “Ethanol Shuffle” works. California imports sugarcane ethanol from Brazil rather than corn ethanol from Nebraska or Kansas; and in turn, corn ethanol from the Midwest travels to Houston or Galveston via rail, then is shipped to Brazil via tanker to “backfill” the volumes they sent to the U.S. Picture the irony of a tanker full of U.S. corn ethanol bound for Brazil passing a tanker full of cane ethanol bound for Los Angeles or Miami along a Caribbean shipping route. Remember, this is all being done in the name of reducing GHG emissions.”

Cooper explores just how environmentally destructive this practice can be. He found that transportation-related GHG emissions more than double in the scenario where California imports Brazilian cane ethanol and Brazil “backfills” those volumes with U.S. corn ethanol imports. And the miles traveled in this scenario are more than eight times the miles traveled in a scenario where California ethanol demand is met with corn ethanol from the Midwest.

There are economic ramifications to the shuffle effect as well. In concept, California gasoline blended with imported Brazilian ethanol has been 16¢/gal. more expensive than gasoline blended with U.S. ethanol.

All of this is compounded by trade distorting practices that the Brazilians discretely engage in to disadvantage U.S. ethanol.  The RFA recently raised this point in a letter to the U.S./Brazil Council.

Read Cooper’s entire post, complete with detailed descriptions of the flawed science promoting this kind of trade.