Inter Religious Council Linn County World Religions

ETHICAL PERSPECTIVES ON THE NEWS IS PRODUCED BY THE INTER-RELIGIOUS COUNCIL OF LINN COUNTY, WHICH IS SOLELY RESPONSIBLE FOR ITS CONTENT. THE VIEWS AND OPINIONS EXPRESSED ON THIS PROGRAM DO NOT NECESSARILY REFLECT THOSE OF THE STAFF AND MANAGEMENT OF KCRG-TV9

GOOD MORNING AND WELCOME TO ETHICAL PERSPECTIVES ON THE NEWS. MY NAME IS CHARLOTTE FALLON. AT SOME DRIVES AROUND OUR STATE THIS SUMMER, YOU CAN'T HELP BUT NOTICE THE AMOUNT OF CORN THAT IS GROWING IN IOWA FIELDS. I KNOW THIS IS IOWA AND THAT IT'S HARDLY UNUSUAL. BUT IT SEEMS THAT THERE IS MORE THAN EVER THIS SUMMER.   CORN PRICES ARE GOOD AND MUCH OF THE PRICE OF CORN IS DUE TO THE INCREASED PRODUCTION OF CORN-BASED ETHANOL. SO ONE MIGHT THINK WHAT IS GOOD FOR FARMERS IS GOOD FOR IOWA. IS THIS ENTIRELY TRUE, HOWEVER? IS THIS ABUNDANCE OF CORN GOOD FOR US IN BOTH THE SHORT AND THE LONG TERM AS WE TRY TO WEAN OURSELVES FROM OUR DEPENDENCE ON FOREIGN OIL?    IS THIS ABUNDANCE OF CORN GOOD FOR US IN BOTHTHE SHORT AND THE LONG TERM AS WE TRY TO WEAN OURSELVES FROM OUR DEPENDENCE ON FOREIGN OIL.

WITH ME THIS MORNING TO DISCUSS THE ETHICAL DIMENSIONS OF CORN-BASED ETHANOL ARE DON CELL, PROFESSOR EMERITUS FROM CORNELL COLLEGE, DOUG KRESOWIK OF SIERRA CLUB, AND IN THE MIDDLE, MICHAEL OTT, THE EXECUTIVE DIRECTOR OF BIOWA. GOOD MORNING, AND WELCOME TO ALL OF YOU. I WILL BEGIN BY ASKING DON, ALTHOUGH ECONOMICS IS NOT THE ONLY ISSUE WITH REGARD TO CORN-BASED ETHANOL, BUT WHAT DO ENVIRONMENTAL ECONOMISTS SAY ABOUT CORN-BASED ETHANOL PRODUCTION?

CELL: WELL I THINK THE FIRST THING TO SAY CHARLOTTE IS MAYBE THE OBVIOUS POINT THAT THE ETHANOL ISSUE IS SOMEWHAT COMPLEX AND THAT DERIVES FROM THE FACT THAT THERE ARE DIFFERENT WAYS OF PRODUCING ETHANOL. IN IOWA AS YOU SUGGESTED, WE KIND OF EQUATE IT AUTOMATICALLY WITH CORN.   BRAZIL OF COURSE USES SUGAR CANE AND BRAZIL HAS GONE I THINK FARTHER THAN ANY OTHER COUNTRY TOWARDS ETHANOL AS A SUBSTITUTE FOR GASOLINE. AND THEN OF COURSE WE HAVE CELLULOSE ETHANOL, WHICH IS SORT OF A HOLY GRAIL, AND BECAUSE OF THE INEXPENSIVE BASE OF IT, THAT PROBABLY WILL BE COMING BUT REQUIRES SOME MORE TECHNOLOGY TO BRING THE COST DOWN. BUT I'D LIKE TO FOCUS IF I MIGHT ON ONE BASIC FACT THAT IS RATHER CRITICAL. AND THAT IS THAT ETHANOL POLICY IS REALLY THREE POLICIES ROLLED INTO ONE. WE HAVE THE FARM POLICY TO SUPPORT THE INCOME OF FARMERS. WE HAVE SECONDLY ENERGY POLICY, AND THE OBJECTIVE OF THAT SHOULD BE COST-EFFECTIVE PRODUCTION OF ENERGY.   AND WE HAVE THIRDLY ENVIRONMENTAL POLICY WHICH SHOULD BE SHOULD BE ENVIRONMENTAL PROTECTION. THE LATTER TWO HAVE TO BE LINKED BECAUSE THE PRODUCTION OF ENERGY NECESSARILY HAS A MAJOR ENVIRONMENTAL IMPACT. AND OF COURSE, WE'RE CONCERNED ABOUT THE FOSSIL FUELS AND THE EMISSIONS FROM THEM. AND WE'RE NOW CONCERNED ADDITIONALLY ABOUT CARBON OF COURSE AND GLOBAL WARMING WHICH COMES FROM THOSE FUELS. AND I WANT TO TOUCH JUST BRIEFLY IN A MOMENT ON A POLICY THE ECONOMISTS RECOMMEND CALLED CAP AND TRADE. BUT THOSE TWO HAVE TO BE LINKED.   I THINK HOWEVER THE PROBLEM IS THAT WE HAVE STIRRED FOREIGN POLICY INTO THAT MIX THROUGH THE SUBSIDIES TO CORN. AND I WANT TO EXPLAIN WHY I THINK THAT HAS BEEN PROBLEMATIC. ADDING FARM POLICY TO ETHANOL MEANS THAT POLITICALLY IS ALMOST CERTAIN TO BE DOMINATED BY THE FARM ASPECT, THE INCOME SUPPORT OF FARMERS. AND THAT MEANS THAT THE OTHER TWO POLICIES AND OBJECTIVES GET PUSHED AS SECONDARY OR TERTIARY ASIDE. THE ENERGY PRODUCTION EFFICIENTLY AND THE ENVIRONMENTAL ASPECT. I DON'T WANT TO SUGGEST THOUGH THAT WE SHOULD NOT HAVE A FARM POLICY OR THAT WE SHOULD NOT BE SUPPORTING THE INCOME OF FARMERS. I DON'T WISH TO BE BANISHED FROM IOWA BY MAKING THAT KIND OF ARGUMENT THIS MORNING. HOWEVER WE HAVE A SEPARATE FARM POLICY. IT'S NOW GOING THROUGH CONGRESS. AND WE CAN STRUCTURE THAT AS WE WISH. WE CAN HAVE ANY LEVEL OF SUPPORT, INCOME SUPPORT THROUGH THAT POLICY WHICH WE'VE HAD FOR MANY YEARS. ETHANOL DOES NOT HAVE TO BE A PART OF THAT POLICY. AND I GUESS I'D LIKE TO CONCLUDE THE OPENING REMARKS WITH A POLICY PRESCRIPTION. IT SEEMS TO BE THAT THE LOGIC OF THIS IS THAT WE OUGHT TO BE PHASING OUT THE SUBSIDIES TO ETHANOL AND WE OUGHT BE PHASING IN A CAP AND TRADE PROGRAM. A CAP AND TRADE PROGRAM IS CERTAINLY GOING TO COME.

FALLON: WE'LL TALK ABOUT THAT IN A BIT. WE'LL TALK ABOUT CAP AND TRADE IN A BIT. BUT MAYBE WE COULD HEAR FROM BIOWA ABOUT SOME OF THESE ISSUES. WHY SHOULD WE BE PROMOTING CORN-BASED ETHANOL?

OTT: I DON'T THINK YOU SHOULD JUST BE PROMOTING CORN-BASED ETHANOL. I THINK YOU SHOULD BE PROMOTING BIO-FUELS. SO THAT'S CORN-BASED ETHANOL, CELLULOSE-BASED ETHANOL, SOY-BASED BIO-DIESEL, BIO-DIESEL FROM ANIMAL FAT, BUTANOL FROM A WIDE RANGE OF SOURCES. WE'RE REALLY AT THE CUSP OF NEW TECHNOLOGIES WHICH ARE GOING TO MAKE FUELS AVAILABLE ON A VERY LARGE SCALE FROM RENEWABLE AGRICULTURAL RESOURCES. THIS IS THE TIME WHERE CORN-BASED ETHANOL HAS BEEN A VERY GOOD STEPPING STONE. NO ONE SAYS THAT CORN-BASED ETHANOL IS THE FINAL THING THAT WE'RE GOING TO MAKE. OR THAT WE CAN MAKE ENOUGH CORN-BASED ETHANOL TO COMPLETELY REPLACE GASOLINE. THAT'S YOU KNOW A NICE COMPONENT. RIGHT NOW WE'RE ABOUT 6 BILLION GALLONS OF CORN-BASED ETHANOL, WHICH IS VERY GOOD. UNFORTUNATELY, WE CONSUME ABOUT 142 BILLION GALLONS OF GASOLINE, SO THAT'S A VERY SMALL FRACTION OF OUR TOTAL CONSUMPTION. SO WHAT BIOWA IS DOING IN CONCERT WITH FARMERS, WITH INVESTORS, WITH RESEARCHERS, AND INDUSTRY IS DEVELOPING NEW WAYS TO MAKE BIOFUEL. SO WORKING AS YOU KNOW A CORN-BASED ETHANOL BACKBONE AND USING THAT INFRASTRUCTURE TO MOVE AHEAD. AND WE WORK WITH A LOT OF THE POLICY PEOPLE WHEN IT COMES TO YOU KNOW STATE AND FEDERAL POLICIES. FOR EXAMPLE WE'RE TALKING WITH SENATOR HARKIN'S GROUP ABOUT THE ENERGY TITLE IN THE FARM BILL WHICH TWENTY YEARS AGO, THAT WOULD HAVE SOUNDED ABSURD. THERE'S NO ENERGY IN THE FARM BILL. BUT NOW AS YOU LAID OUT EARLIER, ABSOLUTELY, IT'S A GREAT WAY TO DO IT. SO BIOWA WORKS WITH ALL THESE PRODUCERS TO GET THE MOST EFFICIENT USE OF NATURAL RESOURCES. DOING THINGS IN AN ENVIRONMENTALLY FRIENDLY AND A SUSTAINABLE FASHION. THAT'S EXTREMELY IMPORTANT TO US.

FALLON: OK. MR. SIERRA CLUB - IS THIS ENVIRONMENTALLY FRIENDLY?

KRESOWIK: SPEAKING FOR A MOMENT FROM THE CRITICISMS OF CORN-BASED ETHANOL, WHICH I THINK IS VERY IMPORTANT TO START OUT WITH, PARTICULARLY FROM THE PERSPECTIVE OF THE ECONOMICS. AS MIKE POINTED OUT, WE ARE ALREADY AT 6 BILLION GALLONS OF ETHANOL WHICH IS JUST A TINY FRACTION OF OUR OVERALL OIL CONSUMPTION. AND ALREADY WE'RE SEEING ENORMOUS INCREASES IN FOOD PRICES AROUND THE WORLD, WHICH IS A SERIOUS ETHICAL PROBLEM FOR MANY PEOPLE IN LOW INCOME SITUATIONS. WE'RE SEEING INCREASING PRESSURE ON CONSERVATION RESERVE PROGRAM LAND. WE'RE SEEING A VERY SMALL, MINIMAL REDUCTION IN GREENHOUSE GASES FROM ETHANOL WHEN COMPARED TO OIL. IT'S IN SOME CASES NEGLIGIBLE, DEPENDING ON HOW CORN-BASED ETHANOL IS PRODUCED.

FALLON: IS THIS BECASUE OF THE WAY WHEN IT'S PRODUCED THAT IT -

KERSOWIK: IT'S USING ENORMOUS AMOUNTS OF COAL AND NATURAL GAS INPUTS TO PRODUCE OIL. THAT PRODUCE ETHANOL - I'M SORRY. AND THERE IS PROMISE IN CELLULOSIC ETHANOL SHOULD WE BE ABLE TO MASTER THE TECHNOLOGICAL AND ECONOMIC AND DISTRIBUTIONAL CHALLENGES FACING CELLULOSIC ETHANOL.

FALLON: HOW DO YOU GET CELLULOSE?:

OTT: OK - YOU'VE GOT A CORN PLANT. WHAT'S INSIDE THE KERNELS, THE VAST MAJORITY OF IT, IS STARCH, WHICH IS SUGAR, WHAT YOU FEED TO A BUG, A LITTLE MICRO-ORGANISM, BUT IT MAKES ETHANOL. OR IT MAKES ANY OF DOZENS OF THINGS. THE CELLULOSE IS -

FALLON: CELLULOSE IS IN LOTS OF PLANTS.

OTT: IT'S IN ALL PLANTS. AND IT'S THE STALK OF THE CORN, IT'S IN THE SILK, IT'S IN THE LEAVES, IT'S IN TREES.

FALLON: SISTER ST. MATTHEW WHO TAUGHT ME BIOLOGY WOULD HAVE A STROKE -

OTT: NO, NO - IT'S A GOOD QUESTION. SO CELLULOSE IS THE BACKBONE OF ALL THESE PLANTS. SO YOU'VE GOT A TREE WHICH IS MOSTLY LIGNOUS CELLULOSE, THE WOOD PART, AND THEN THERE'S LEAVES ON IT.

FALLON: SO THIS CELLULOSE STUFF CAN COME FROM ANY KIND OF PLANT MATTER?

KERSOWIK: YES, AND ACTUALLY, THERE ARE PREFERENTIAL WAYS FROM AN ENVIRONMENTAL PERSPECTIVE FOR THE CELLULOSE BASE. FOR INSTANCE, CORN STOVER, THE STALK OF CORN AS MIKE WAS REFERRING TO IS ACTUALLY NOT A VERY GOOD CELLULOSE BECAUSE IT STILL CONTRIBUTES TO A LOT OF OTHER ENVIRONMENTAL, PARTICULARLY SOIL DIGRESSION, WE CANNOT CALL ETHANOL RENEWABLE ENERGY. PARTICULARLY CORN-BASED ETHANOL RENEWABLE ENERGY. AS ELWIN TAYLOR , AN IOWA STATE CLIMATOLOGIST, PUT IT, OUR SOIL ITSELF IS NOT RENEWABLE. IT'S THE MOST VALUABLE THING WE HAVE. AND CORN PRODUCTION IS USING UP THAT SOIL, AND IN SOME CASES DUE TO EROSION, SHIFTING IT DOWNSTREAM. BUT I THINK THE CHALLENGE IS WE'RE MOVING TOWARD A PRAIRIE-BASED CELLULOSIC SYSTEM. AGAIN, THE PROBLEM IS CORN-BASED ETHANOL IS NOT -

FALLON: WAS WHAT IOWA USED TO BE - PRAIRIE GRASS?

KERSOWIK: ABSOLUTELY. AND USING THAT AS A PRODUCT PERENNIAL. THE PROBLEM IS THAT CORN-BASED ETHANOL IS NOT A TRANSITION TO CELLULOSIC ETHANOL. WHEN YOU LOOK AT THE PLANTS THAT WE'RE SINKING MILLIONS AND BILLIONS OF DOLLARS OF CAPITAL AND PUBLIC AND PRIVATE MONEY INTO, THOSE PLANTS CANNOT BE RETRO-FIT TO PRODUCE CELLULOSIC ETHANOL.

OTT: MARK, I'VE GOT TO CORRECT YOU THERE. ON NUMBER OF ISSUES. MOST RECENTLY WHAT YOU SAID, YES THOSE PLANTS ABSOLUTELY CAN BE RETRO-FITTED AND WE'RE WORKING WITH THE LEADING ENGINEERING FIRMS THAT HAVE DESIGNED THESE PLANTS FOR THE LAST THREE YEARS TO ALLOW FOR CELLULOSIC ADD-ONS. I CAN GUARANTEE YOU
THAT WORKING WITH THE HEAD ENGINEERS OF THE BIGGEST COMPANIES OUT THERE, THEY'RE DEFINITELY, DEFINITELY ABLE TO BE BE RETRO-FITTED. I ALSO ARGUE WITH THE FACT THAT CORN IS NOT A TRANSITIONAL PRODUCT. I THINK YOU'RE RIGHT ABOUT THAT. YOU'RE NOT GOING TO SEE FARMERS GOING FROM THE CORN AND SOYBEAN ROTATION TO A SWITCH GRASS ROTATION UNTIL THERE'S A REASON TO DO SO. AND RIGHT NOW, THERE'S NO ECONOMIC REASON. IF WE'RE TALKING ABOUT THE ECONOMIC BENEFITS OF FARMING, CORN AND SOYBEAN MAKE THE MOST MONEY. THAT'S WHY PEOPLE PLANT THEM. IF SWITCH GRASS MAKES THE MOST MONEY, PEOPLE WILL START TO PLANT IT. SO FIGURING OUT HOW TO ENCOURAGE THAT, THAT'S GREAT. WE CERTAINLY ARE WORKING WITH COMPANIES THAT ARE TRYING TO CONVERT SWITCH GRASS TO ETHANOL. BUT THAT'S A LITTLE BIT IN THE FUTURE. SO IMMEDIATELY BAD-MOUTHING IT IS KIND OF TOUGH TO DO. AND FINALLY, I WANT TO HIT BACK ON THE FOOD VERSUS FUEL THING THAT YOU BROUGHT UP. ECONOMISTS AT LACG DID A REPORT SAYING THAT -

FALLON: COULD YOU TELL US WHAT THOSE INITIALS STAND FOR?

OTT: AH - NO I CAN'T - I WOULD IF I COULD - WELL THE LAST INITIALS STAND FOR CONSULTING GROUP. AND THEY LOOKED AT WHY ARE FOOD PRICES GOING UP. AND IT WAS PROVEN BY THEIR INDEPENDENT NUMBERS THAT IT WAS FUEL PRICES THAT ARE THE REASONS FOR FOOD PRICES GOING UP, NOT INCREASED PRICES OF CORN.

FALLON: WELL, MAYBE WE CAN ASK OUR ECONOMIST ABOUT THIS, BECAUSE WE KNOW THAT IN IOWA - AGAIN, AND THIS IS JUST ANECDOTAL, DRIVING AROUND THE COUNTRYSIDE, THERE ARE FEWER ANIMALS BECAUSE PEOPLE ARE RAISING CORN. SO, WHAT DO YOU SEE AS THE CONNECTION BETWEEN -

CELL: CHARLOTTE, I THINK I'M ON A DIFFERENT LEVEL. I MEAN THE QUESTION WE'RE ARGUING I GUESS - WHAT IS THE MOST EFFICIENT FUEL THAT WE CAN DEVELOP - AS AN ALTERNATIVE TO GASOLINE - WITH ENVIRONMENTAL PROTECTION ADDED TO THE MIX, RIGHT? THOSE ARE THE TESTS.

FALLON: WELL NOT EVEN THE MOST EFFICIENT. I THINK AS THE NAME OF THE PROGRAM - I THINK THERE IS ALSO AN ETHICAL ELEMENT HERE. THE MOST EFFICIENT IS NOT ALWAYS THE MOST ETHICAL.

CELL: NOT ALWAYS, CHARLOTTE. BUT EFFICIENCY CAN BE IMPORTANT FOR FAIRNESS. AND SO THE APPROACH THE ENVIRONMENTAL ECONOMIST TAKES, AND I THINK THERE WOULD BE UNANIMITY ON THIS, LET'S SET UP A POLICY STRUCTURE TO TEST OBJECTIVELY WHAT WILL BE THE MOST EFFICIENT AND WHAT WILL BE THE MOST EFFECTIVE WITH RESPECT TO ENVIRONMENTAL PROTECTION. AND THE ARGUMENT WE MAKE IS THAT THE WAY TO DO THAT IS THROUGH AN ENVIRONMENTAL PROGRAM THAT WOULD INCLUDE CAP AND TRADE, RIGHT? CAP AND TRADE IS COMING AS I BEGAN TO SAY. IT'S WORKING ITS WAY A BILL THROUGH CONGRESS RIGHT NOW AND BUSH IS GOING TO BE UNDER PRESSURE TO SIGN IT. BUT IF HE DOESN'T, THE NEXT PRESIDENT CERTAINLY IS; CALIFORNIA'S ADOPTING IT, NEW ENGLAND STATES, EUROPE, THE EUROPEAN UNION HAS IT - SO IT IS CERTAINLY COMING, AND IT'S VERY SIMPLE. IT SETS CAPS ON CARBON EMISSIONS AND THOSE CAPS HAVE TO BE BE REDUCED. ALL RIGHT? AND THEN IT PERMITS THE BUYING AND SELLING OF ALLOWANCES SO THAT THE EMITTERS OF CARBON THAT CAN DO IT MOST CHEAPLY WILL BE DOING IT. IF YOU HAVE THAT KIND OF PROGRAM IN EFFECT AND YOU COMBINE IT WITH THE RELATIVELY HIGH PRICE OF OIL, AND THEREFORE GASOLINE, YOU'RE GOING TO HAVE A POWERFUL INCENTIVE, RIGHT, TO DEVELOP ALTERNATIVE FUELS. AND SO LET'S SET THAT BASIC POLICY IN PLACE. AND THEN, LET'S HAVE COMPETITION, RIGHT, BETWEEN THE VARIOUS METHODS OF PRODUCING ETHANOL, THE OTHER BIO-FUELS, RIGHT ACROSS THE BOARD, TO SEE WHICH OF THOSE CAN BE MOST EFFECTIVE IN COST TERMS, BECAUSE THE COST OF ENERGY IMPACTS EVERBODY - THAT'S AN ETHICAL ASPECT.

OTT: YOU REALLY HAVE A GOOD POINT. I WANT TO HARKEN BACK TO WHAT MARK SAID EARLIER ABOUT THE CARBON THAT'S RELEASED WHEN YOU BURN ETHANOL. IT'S TRUE THAT THE CARBON DIOXIDE THAT'S RELEASED WHEN YOU BURN ETHANOL IS VERY SIMILAR TO GASOLINE. MAYBE SOME NEGLIGIBLE DECREASE. BUT YOU HAVE TO THINK ABOUT WHERE DID THAT CARBON COME FROM. WELL, IT WAS IN THE AIR. IT WAS ABSORBED BY A CORN PLANT WHICH GREW UP, WAS HARVESTED, PROCESSED INTO ETHANOL, BURNED IN YOUR CAR, AND THEN RELEASED IN THE AIR AGAIN. SO A TWO YEAR OR THREE YEAR TIMELINE IT GETS RECYCLED. SO THERE IS SOMETHING - YOU HAVE TO PUT A VALUE ON THAT.

KRESOWIK: THAT IS NOT TRUE. WHEN YOU LOOK AT THE LIFE CYCLE EMISSIONS OF PRODUCING ETHANOL VERSUS GASOLINE, THERE IS NEGLIGIBLE DIFFERENCE BETWEEN ETHANOL AND GASOLINE GIVEN THE WAY CORN-ETHANOL CAN BE PRODUCED.

OTT: OK. THINK WE'RE GOING TO HAVE TO AGREE TO DISAGREE ON THIS.

KEROWIK: THE NATIONAL RENEWABLE ENERGY LABS, BERKELEY LABS, DAN -

OTT: OK. I KNEW IT WAS GOING TO BE COMING FROM BERKELEY.

KRESOWIK: IT'S COMING FROM FEDERAL RESEARCHERS.

OTT: YEAH. THERE ARE PEOPLE THAT HAVE AN AGENDA THAT SAYS THAT THEY WANT EVERYONE TO REDUCE THEIR ENERGY COMSUMPTION BY 75% AND ARE THEREFORE BAD-MOUTHING -

KRESOWIK: IT'S COMING FROM THE FEDERAL GOVERNMENT, WHICH I DO NOT THINK HAS THAT AGENDA. I WANT TO TOUCH BACK ON SOMETHING THAT DON SAID BECAUSE I THINK IT IS VERY IMPORTANT. WE LOOK AT WHAT IS THE BEST WAY TO MEET OUR TRANSPORTATION PROBLEMS, TO DISPLACE OIL, DISPLACE FOREIGN OIL IN THE MOST EFFICIENT AND ENVIRONMENTALLY RESPONSIBLE WAY. I THINK THAT IS A VERY IMPORTANT POINT. THAT HAS THE ETHICAL COMPONENT OF PROTECTING THOSEBOTH OF LOW INCOME, I THINK BEING A VITAL ETHICAL PERSPECTIVE TO TAKE. I THINK THE WAY TO DO THAT AND THE WAY WE'RE SOON TO DO IT IS ACTUALLY THROUGH ELECTRICITY. IT IS NOT A FUEL. IT IS ELECTRICITY. AND PLUG-IN HYBRID ELECTRIC VEHICLES AND ELECTRIC VEHICLES ARE GOING TO WIN OUT.

FALLON: BUT HOW DO WE GET THE ELECTRICITY?

KRESOWIK: THAT IS THE FUNDAMENTAL QUESTION THAT WE NEED TO BE ASKING. HOW DO WE PRODUCE THE ELECTRICITY TO TRANSITION OUR ENTIRE TRANSPORTATION SECTOR AWAY FROM THE FUEL BASE. AND THAT NEEDS TO BE THROUGH WIND, SOLAR AND INCREASED, AGGRESSIVE ENERGY EFFICIENCY PROGRAMS. AND ALL OF THEM. SO REALLY DEVELOPING OUR WIND AND SOLAR RESOURCES, WHICH FOR FARMERS, WHEN YOU PUT UP A WIND TURBINE ON YOUR FARM,AND YOU'RE GOING TO BE MAKING FAR MORE MONEY THAN YOU EVER WILL FROM WHAT YOU PRODUCE ON AN EQUIVALENT ACREAGE. A SINGLE WINTER AT A QUARTER OF AN ACRE IS PAYING THE AVERAGE FARMER RENT OF TWO TO FIVE THOUSAND DOLLARS PER YEAR. NOW -

(OVERTALK)

FALLON: NOW IS THIS BASED ON THE FARMERS IN THAT PART OF THE STATE? UP AROUND FOREST CITY AND SO FORTH?

OTT: SORRY? ABSOLUTELY. THAT'S WHAT THEY'RE MAKING ABSOLUTELY. THEY'RE MAKING UP TO $5000 PER WINTER IN RENT ON THEIR FARM EACH YEAR,

OTT: NOW MARK, THOSE NUMBERS ARE BASED ON A TREMENDOUS STATE SUBSIDY. IF YOU'VE BEEN UP TO THE TOP OF IOWA WIND FARM, THAT'S BEEN OPERATING FOR SEVERAL YEARS - EIGHT OR NINE TERMS UP THERE. WE VISITED, WE TOURED,AND WE TALKED TO THEM ABOUT WHAT'S THE SUSTAINABILITY OF THIS, YOU GOT A LOT OF MAINTENCE PEOPLE WORKING ON THE CREWS AND EVERYTHING.   AND THEY SAID THAT ONCE THE STATE SUBSIDY RUNS OUT IN NINE YEARS, THEY'RE SHUTTING IT DOWN.

KRESOWIK: THAT HAS NOTHING TO DO WITH YOU RENT FOR FARMERS, AND THEY WON'T SHUT DOWN, BECAUSE THEN YOU WILL HAVE A CAP AND TRADE EFFECT WHICH WILL MAKE WIND MUCH MORE COMPETETIVE AND COST EFFECTIVE. ALREADY WIND IS COST COMPETETIVE. AND WITH A CARBON DIOXIDE PROGRAM TO REDUCE OUR CARBON DIOXIDE EMISSIONS IN THIS COUNTRY, WHICH IS VITAL AND ABSOLUTELY NECESSARY, WIND WILL CONTINUE TO BE COST COMPETETIVE AND WILL CONTINUE TO BE INVESTED IN.

OTT: I THINK YOUR ASSUMPTIONS ON THE WIND RESOURCE ARE VASTLY OVERSTATED. I THINK WHAT YOU THINK THE VALUE OF A CARBON CREDIT - IT'S COMPLETELY UNDETERMINED. I MEAN WE'RE WORKING WITH THE LEADING PRODUCER OF CARBON CREDIT FROM BIO-FUELS, AND THEY REALIZE WHAT THEY DON'T KNOW. AND SO, PUTTING A VALUE ON THAT OF TWO TO FIVE THOUSAND DOLLARS AN ACRE, THAT HAS -

KRESOWIK: THAT'S THE RENT FOR A FARMER FOR A TURBINE, RIGHT? AND THAT'S NOT GOING TO CHANGE. AS LONG AS YOU HAVE A TURBINE ON THAT GROUND, THEY'RE GOING TO PAY TWO THOUSAND DOLLARS. WHOEVER PUT THAT TURBINE UP IN THE FIRST PLACE - THOSE ARE THE AGREEMENTS THEY HAVE IN PLACE. THOSE ARE THE AGREEMENTS THEY HAVE IN PLACE.

OTT: BUT WHO'S GOING TO PAY THEM?

CELL: GENTLEMEN, I'M COMING BACK TO THE POINT. IF YOU HAVE A CAP AND TRADE PROGRAM IN PLACE THAT REQUIRES REDUCTION OF CARBON EMISSIONS, YOU DON'T HAVE TO HAVE THIS ARGUMENT. BECAUSE IT WILL BE DETERMINED BY WHATEVER THE POTENTIAL IS FOR REDUCING CARBON. THOSE WHO CAN REDUCE CARBON THE MOST CHEAPLY WILL BE UNDER PRESSURE TO REDUCE CARBON WILL DO IT. AND THEY WILL DO IT. SO YOU DON'T HAVE TO ARGUE THE NUMBERS IN TERMS OF WHICHIS THE MOST EFFICIENT WAY TO GET THERE, BECAUSE THE INCENTIVES WILL BE IN PLACE -

OTT: SURE. I'M JUST LOOKING AT THE NEAR TERM - IN THE NEAR TERM, I'D SAY A TEN TO FIFTEEN YEAR TIME SPAN - PROVIDING ADEQUATE FUEL FOR A LARGE NUMBER OF PEOPLE. AND BIO-FUELS IS GETTING THERE. AS I MENTIONED, YOU KNOW, DOING 6 BILLION GALLONS THIS YEAR, GETTING UP TO POTENTIALLY 35 BILLION GALLONS BY 2017 - THAT'S A SUBSTANTIAL CHUNK. IF YOU TALK ABOUT ELECTRICITY, I AGREE THE NUMBERS LOOK GOOD ON PAPER. BUT HOW DO YOU ACTUALLY IMPLEMENT THAT? I MEAN THAT'S EXTREMELY DIFFICULT TO DO.

KRESOWIK: IT'S ACTUALLY A LOT SIMPLER THAN INTEGRATING THE INFRASTRUCTURE NEEDED TO MASS PRODUCE ETHANOL EVEN LARGER THAN WE ARE CURRENTLY. YOU ALREADY HAVE THE ENTIRE ELECTRIC GRID SET UP. THE ONLY CHALLENGE IS GETTING THE PLUG-IN HYBRID ELECTRIC VEHICLES, WHICH ACCORDING TO GM AND TOYOTA, WILL BE ONLINE BY 2010. THE REASON - WHERE I DISAGREE WITH YOU HERE, DON - WHICH I LOATHE TO DO, BECAUSE I AGREE WITH YOU ON ALMOST EVERYTHING - IS THE PROBLEM, AND AS ANYBODY WHO HAS BEEN FOLLOWING WALL STREET FOR THE LAST FEW WEEKS IS KNOWING, WE'RE STARTING TO HIT SOME OF OUR LIMITS ON WHAT KIND OF CAPITAL AND WHAT KIND OF LOANS BANKS ARE WILLING TO MAKE. WE'RE STARTING TO INCREASE - WE'VE SPENT SO MUCH - AND THERE'S BEEN JUST SO MUCH MONEY FLOWING - WE'RE STARTING TO RUN UP ON SOME PLACES WHERE WE'RE SINKING A LOT OF CAPITAL, A LOT OF MONEY, IN PUBLIC AND PRIVATE, INTO WHAT I WOULD TERM AS NON-SOLUTIONS, THINGS THAT IN THE END AREN'T GOING TO BE COMPETETIVE IN A CARBON-CONSTRAINED ECONOMY. AND AS LONG AS WE DO THAT, WE'RE NOT GOING TO HAVE NECESSARILY THE CAPITAL AND THE RESOURCES -

CELL: I'M HAVING A HARD TIME TALKING EXACTLY TO WHAT YOU'RE SAYING IS THE PROBLEM -

KRESOWIK: WE'RE NOT NECESSARILY GOING TO HAVE THE CAPITAL AND THE RESOURCES TO INVEST IN THE REAL SOLUTIONS TO OUR ENERGY PROBLEMS, BECAUSE WE'RE STARTING TO APPROACH THAT POINT WHERE WE'VE SPENT SO MUCH PUBLIC AND PRIVATE MONEY THAT IT'S CREATING A PROBLEM FOR STATE BUDGETS, FOR LARGE PRIVATE CAPITAL LENDERS. BUT WE'RE NOT GOING TO HAVE THE RESOURCES IF WE DON'T ACT SOON AND QUIT SUBSIDIZING AND SPENDING SO MUCH MONEY ON NON-SOLUTIONS THAT WE'RE NOT GOING TO BE ABLE TO SOLVE -

OTT: I FUNDAMENTALLY DISAGREE WITH THAT, BECAUSE I MEAN THAT'S THE BASIS OF TECHNOLOGY AND CAPITALISM WHICH CAN SOLVE NEARLY ANY PROBLEM. AND WE THINK ABOUT THE INTERNET WHEN IT WAS INVENTED. THE PROBLEM WAS THERE WEREN'T ENOUGH RESOURCES IN THE WORLD TO DEPLOY THE INTERNET, TO DEPLOY ALL THE CABLE AND EVERYTHING IT NEEDED TO DO TO CONNECT EVERYONE. SO, THE INTERNET WAS DEAD. WELL THEY FIGURED OUT WAIT A MINUTE, THERE'S ALREADY SOMETHING THAT TRANSPORTS DATA ALL ACROSS THE WORLD. WE CAN RUN THEM THROUGH THE PHONE LINES. AND THEN THAT GETS SOLVED. SO ALL THOSE INFRASTRUCTURE ISSUES ALWAYS GET SOLVED.

CELL: INTERESTING. IN A WAY, WE HAVE THREE DIFFERENT POINTS ON THE CONTINUUM HERE. BECAUSE, I MEAN I AGREE WITH WHAT YOU JUST SAID, MIKE. YOU'LL HAVE THE INCENTIVE. THERE'LL BE A SIGNIFICANT COST DIFFERENCE BETWEEN THE SOURCES THAT EMIT THE MOST CARBONS AND THOSE THAT EMIT LESS. THAT'S GOING TO CREATE, IN ADDITION TO THE PRICE OF OIL, THAT'S GOING TO CREATE TREMENDOUS INCENTIVES TO INVEST IN THE MOST EFFICIENT METHODS OF REDUCING CARBON. BUT MY QUESTION TO YOU IS, AND IF YOU AGREE WITH THAT, WHY WOULD YOU NOT BE WILLING TO ACCEPT THE PHASING OUT OF THE SUBSIDIES. BECAUSE HERE YOU HAVE GOVERNMENT ATTEMPTING, RIGHT, TO PICK THE WINNERS BEFORE THE FACT, INFLUENCED BY THE POLITICS, AS I SAID EARLIER, OF THE FARM POLICY, BLESS THEIR HEARTS. BUT WHY NOT PUT IT ON A LEVEL PLAYING FIELD BY BUILDING IN THE INCENTIVES, AND THEN, YOU HAVE CONFIDENCE, RIGHT, THAT THE MARKET WILL WORK.

OTT: WELL, IF THERE WERE NO SUBSIDUES FOR ANY ENERGY FORM - ABSOOUTELY - WE'D LOVE TO COMPETE HEAD TO HEAD. BUT THAT'S NOT FAIR.

CELL: WHY ISN'T IT FAIR?

OTT: WELL BECAUSE NUCLEAR TECHNOLOGY WAS DEVELOPED BY THE GOVERNMENT, BECAUSE THE GOVERNMENT SPENDS FIVE HUNDRED ILLION DOLLARS A YEAR ON MILITSARY SPENDING SO WE COULD HAVE ACCESS TO OIL AND SHIPPING LANES, BECAUSE THE GOVERNMENT HAS SUBSIDIZED COAL HEAVILY, ALL ENERGY FORMS ARE SUBSIDIZED. AND TO TAKE SUBSIDY AWAY FROM ONE IS GOING TO KILL IT. SO IF YOU TAKE AWAY ALL SUBSIDIES FROM EVERYONE, YOU BET BIO-FUEL IS COMPETETIVE - THEY'RE TREMENDOUSLY COMPETETIVE.

CELL: THE SUBSIDIES ON THE FOSSIL FUELS WERE FAIRLY SIGNIFICANT IN THE PAST, BUT THEY'RE BEING PHASED OUT.

(OVERTALK)

FALLON: MARK HAS AN IMPORTANT POINT.

KRESOWIK: WE'RE RUNNING UP ON TIME. BUT THERE'S ONE ASSUMPTION YOU'RE BOTH MAKING, AND THIS BEING ETHICAL PERSPECTIVES ON THE NEWS AND BEING THE INTERIM CO-ORDINATOR FOR IOWA INTERFAITH POWER AND LIGHT, I THINK IT'S VITAL TO SAY - WHICH IS THAT THE FREE MARKET IS NOT AN ETHICAL INSTRUMENT.

CELL: THIS IS NOT THE FREE MARKET.

KRESOWIK: RIGHT. BUT WHAT YOU BOTH SAID IS THE PROBLEM, THERE'S A DISADVANTAGE, THERE'S A DISINCENTIVE. THE MOST EFFICIENT WAY TO REDUCE CARBON DIOXIDE IN THIS COUNTRY IS THROUGH ENERGY EFFICIENCY, BOTH FUEL ECONOMY STANDARDS ON OUR VEHICLES, THROUGH EFFICIENCY IN OUR ELECTRICAL SECTOR. BUT BOTH OF THOSE ARE CURRENTLY DISADVANTAGED IN OUR CURRENT FREE MARKET SYSTEM, IN THAT A UTILITY, FOR INSTANCE, THAT PROVIDES EFFICIENCY, HAS A DISINCENTIVE TO INVEST IN ENERGY EFFICIENCY. AN OIL COMPANY HAS A DISINCENTIVE TO INVEST IN ANY KIND OF EFFICIENCY, SO THAT WE NEED GOVERNMENT INTERVENTION, NOT JUST A CAP AND TRADE -

CELL: I'M NOT ADVOCATING THE FREE MARKET. A CAP AND TRADE PROGRAM IS NOT THE FREE MARKET.

KRESOWIK: BUT A CAP AND TRADE PROGRAM ALONE - IT DOESN'T SOLVE THE PROBLEM ETHICALLY, BECAUSE YOU HAVEN'T CHANGED THE DISINCENTIVE THAT ENERGY COMPANIES HAVE TO CONTINUE PRODUCING MORE ENERGY.

CELL: BUT THAT'S HOW YOU DO THAT.

KRESOWIK: UNTIL YOU DO THAT, YOU WILL GET THINGS LIKE FUELS AND CARBON CAPTURE AND NUCLEAR AS THE KINDS OF SOLUTIONS THAT INDUSTRY PROMULGATES AND, AND NOT EFFICIENCY, WHICH IS THE MOST ETHICAL, THE MOST EFFICIENT WAY TO REDUCE CARBON AND SOLVE BOTH OUR ENERGY AND OUR ENVIRONMENTL PROBLEMS, DEPENDENCE ON FOREIGN OIL. AND UNTIL WE SOLVE THAT PROBLEM, A CAP AND TRADE PROGRAM ALONE WILL NOT -

CELL: MARK, WE NEED TWO THINGS. WE NEED ENERGY . ENERGY IS VITAL TO A DEVELOPING ECONOMY. WE ALSO NEED TO REDUCE THE EMISSIONS - THE CARBON, RIGHT? SO WE NEED BOTH OF THOSE. YOU CAN'T TAKE ONE OR THE OTHER. BUT A CAP AND TRADE PROGRAM BUILDS IN POWERFUL INCENTIVES ALONG WITH THE PRICE OF OIL TO GET TO EXACTLY WHERE YOU WANT TO GO.

KRESOWIK: UNTIL WE'VE CAPTURED ALL COST-EFFECTIVE ENERGY EFFICIENCY MEASURES IN THIS COUNTRY, WE DON'T NEED TO PRODUCE MORE ENERGY BECAUSE WE HAVEN'T EVEN COME CLOSE -

(OVERTALK)

KRESOWIK: EXACTLY, BUT CAP AND TRADE ALONG ISN'T GOING TO PRODUCE THAT INCENTIVE.

OTT: WELL I THINK YOU NEED TO LOOK ALSO AT PRODUCING AS MUCH ENERGY LOCALLY AS YOU CAN. AND THAT'S WHERE THE STATE OF IOWA, PRODUCING TWICE AS MUCH ETHANOL AS ANY OTHER STATE, PRODUCING MORE BIO-DIESEL THAN ANY OTHER STATE - THERE'S TREMENDOUS ADVANTAGES TO THAT. AND THE JOB CREATION THAT WE HAVE, A GREAT STAT IN VENTURE CAPITAL INVESTING. THREE YEARS AGO, IOWA WAS 49TH IN VENTURE CAPITAL INVESTING. WITH ALL THESE PLANTS THAT HAVE SOME UP, WE'RE NOW EIGHTH. THAT'S TREMENEDOUS INVESTMENT IN LOCAL BUSINESSES, IN LOCAL JOBS. YOU'RE SEEING THE INCREASES IN LOCAL HARDWARE STORES, LOCAL GAS STATIONS. SO IF YOU CREATE THIS ENERGY LOCALLY, THERE'S TREMENDOUS SECONDARY AND TERTIARY BENEFITS THAT COME OUT OF IT. SO WE'RE EXPLORING THAT RIGHT NOW.

KRESOWIK: ON THE ELECTRICAL SIDE, THE EFFICIENCY - WIND ESPECIALLY, WIND TURBINE COMPONENT MANUFACTURE - WE'RE CREATING HUNDREDS IF NOT THOUSANDS OF NEW JOBS IN IOWA RIGHT NOW THROUGH WIND. AND ON THE ELECTRICAL SIDE, WE'RE CREATING FAR MORE JOBS. AND SO TRANSITIONING OUR TRANSPORTATION SECTOR TOWARDS THAT ELECTRICAL SIDE IS GOING TO CREATE MORE JOBS IN IOWA THAN GOING TO THE FUELS EVER WILL.

CELL: I AGREE WITH MARK ON THIS BECAUSE THERE'VE BEEN A NUMBER OF STUDIES THAT SHOW THAT THERE'S NO NET DECREASE IN JOBS WHEN YOU HAVE ENVIRONMENTAL PROTECTION. YOU'RE SIMPLY REALLOCATING JOBS FROM POLLUTION TO POLLUTION PROTECTION.

FALLON: BUT IT'S ALWAYS - AS A HISTORIAN, THOSE CHANGES ARE ALWAYS DIFFICULT BECAUSE PEOPLE SEE A REAL RISK, AND GETTING IOWA FARMERS NOT TO PLANT CORN - I THINK THAT IS GOING TO BE A TOUGH MOVE. BUT THE OTHER THING THAT I SHOULD JUST MENTION QUICKLY BECAUSE WE ARE RUNNING OUT OF TIME, IS THERE'S SOMETHING TO BE SAID FOR THE ARGUMENT THAT WITH THIS BIOFUELS THING IS THAT IT WILL DEVELOP NEW TECHNOLOGIES AND NEW EFFICIENCIES IN THE FUTURE. AND WE ARE RUNNING OUT OF TIME, SO YOU DON'T EVEN GET TO ANSWER THAT. BUT I WOULD LIKE TO THANK ALL THREE FOR A VERY INTERESTING DISCUSSION THIS MORNING. AND I'M SURE THIS DISCUSSION WILL GO ON. THANK YOU VERY MUCH FOR JOINING US THIS MORNING.