Is ethanol the heart of gov.’s idea?

Gov. Arnold Schwarzenegger’s senior staff declared there “are no winners and losers” in California’s ambitious low-carbon fuel initiative unveiled in Sacramento on Tuesday. But some parts of the energy industry may have more to gain than others.

Former California secretary of state Bill Jones, co-founder and chairman of Fresno-based Pacific Ethanol Inc. and a contributor to Schwarzenegger’s reelection campaign, was a featured speaker, suggesting that ethanol has a major role in the governor’s vision for sharply reducing greenhouse gases by shifting to lower-carbon fuel. Not a single oil or gas company was represented onstage.

While some scientists and environmentalists applaud ethanol, others say that it is far from a sure bet in terms of reducing greenhouse gas emissions, and analysts said replacing petroleum with things like ethanol could actually raise prices for consumers at the fuel pump, especially in the short run.

“It definitely does raise a concern as to whether ethanol companies will be the primary beneficiaries,” said Bill Magavern, a senior policy advisor with Sierra Club California, of Jones’ center-stage appearance.

Magavern, who applauded the initiative in general, cautioned that most U.S. ethanol actually increases summertime smog because it evaporates more quickly than petroleum.

California Environmental Protection Agency Undersecretary Dan Scopek said the new “policy is not focused on ethanol. Our policy is focused on creating lower carbon, and there’s a variety of different fuels that may prevail as the winner. But this policy does not mandate any one in particular.”

As Jones said in an interview, however, “the only alternatives that are available, scalable and financeable today is renewable fuel, and the primary form is ethanol.”

A number of studies, including one just completed at UC Berkeley, raise questions about whether corn-based ethanol, the form now most widely used in the United States, actually reduces carbon, the largest greenhouse gas contributor believed to be causing global warming.

“I don’t think much of ethanol for energy or anything else,” said Tad W. Patzek, professor of geoengineering at UC Berkeley, who said that several studies that he has co-written, including one in the peer-reviewed Natural Resources Research Journal next month, found that the coal, petroleum and other fossil fuels used by tractors to grow corn, and the heating equipment used to distill it into fuel, zeroed out any benefits from burning ethanol rather than petroleum.

But others cited a study by different UC Berkeley researchers last January that concluded that if natural gas rather than coal was used to process ethanol, there was the potential for a 13% to 15% reduction in greenhouse gases over gasoline.

Switching to any form of alternative fuel, including ethanol, could prove costly to consumers, some analysts said.

Philip Verleger, an energy economist and consultant based in Aspen, Colo., called the proposal “innovative and exciting,” but added, “It will raise the cost of gasoline ... probably, at least for the next 10 to 15 years.”

He said it was unlikely that oil companies would be able to replace gasoline fast enough, and under the governor’s plan would need to purchase credits from companies moving more quickly to reduce carbon.

Ethanol is blended into more than 45% of the nation’s gas now, and supporters said every gas station in California could be retrofitted fairly quickly with ethanol-only pumps. Also, car makers have committed to producing millions of vehicles in coming years capable of using 85% ethanol fuel. Ford Motor Co. said the technology could add as little as $150 in costs per car.

Backers of the initiative said ethanol would be vastly improved in response to market forces unleashed by the governor’s initiative. They said that the end result would be lower prices at the pump and less reliance on foreign oil, and that ethanol is the quickest, surest way to go.

Sara Hessenflow Harper, a national security and climate policy analyst with Environmental Defense in Washington, D.C., sees great possibility in ethanol.

She said that newer forms of “cellostic” ethanol fuel are being developed from rice stock, cow manure, wood chips and other California agricultural products, and that they could make a big dent in carbon-based fuels.

She and others cite Brazil, where ethanol from sugarcane is widely used.

“Unfortunately, for too long, the environmental movement has looked at ethanol for all its negatives ... instead of looking at what it could be,” Harper said.

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