January 12, 2017 / 7:35 PM / 7 months ago

USDA analysis says ethanol's environmental benefits better than forecast

NEW YORK (Reuters) - The U.S. government on Thursday said that ethanol made from corn is better for the environment than previously expected in a report boosting the country's biggest biofuel a week ahead of a new administration that has some in the industry concerned.

The report, the first of its kind from the U.S. Department of Agriculture (USDA) to examine the actual impact of ethanol, said the biofuel reduces greenhouse gas (GHG) emissions by 43 percent relative to gasoline, significantly more than the 21 percent estimated by the Environmental Protection Agency in 2010.

That marks a potential blow to critics who have questioned whether ethanol, the foundation of the country's biofuels program, is better for the environment than petroleum-based fuels.

The analysis, prepared for USDA by Washington consultancy ICF International, comes just a week ahead of the inauguration of President-elect Donald Trump. (Ethanol analysis: bit.ly/2jIZuso)

Trump voiced support for ethanol on the campaign trail, especially in Iowa, but at least two of the major players in the incoming administration are critics of the country's biofuels program and environmental regulations.

The Renewable Fuel Standard (RFS) was signed into law by President George W. Bush in 2005 and sets annual requirements for used of biofuels including ethanol. It has become a battleground for entrenched oil and corn interests in Washington.

Uncertainty over the future of the program grew after Trump nominated Oklahoma Attorney General and regulation critic Scott Pruitt to head the Environmental Protection Agency, which oversees the RFS program. Trump has also appointed billionaire and RFS critic Carl Icahn as a special adviser.

Less land use was dedicated to ethanol production than expected and corn yields have risen, the analysis showed. The analysis compared the biofuel with 2005 gasoline, before regular blending of the fuel with ethanol. Now, most gasoline is blended with about 10 percent ethanol.

USDA Agriculture Secretary Tom Vilsack said in a statement that the "report provides evidence that corn ethanol can be a GHG-friendly alternative to fossil fuels, while boosting farm economies."

Ethanol advocates including the Renewable Fuels Association praised the report.

A spokeswoman for the American Petroleum Institute, which represents companies including Royal Dutch Shell Plc's and BP Plc's U.S. units, noted that use of natural gas in production of fuels has helped reduced carbon emissions from power generation.

The analysis forecasts the emissions reductions to rise to 50 percent by 2022 if trends in corn yields, fuel switching and efficiency continue.

Reporting by Chris Prentice; Editing by David Gregorio and Lisa Shumaker

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