Beware of exaggerated ‘benefits’ of carbon pipelines

  • Silvia Secchi is a professor in the Department of Geographic Sciences and Sustainability at the University of Iowa.

One of the companies proposing pipelines in Iowa to sequester CO2 from ethanol production commissioned a report from a private firm, Ernst & Young, that grossly overestimates the economic benefits of the pipelines.

This isn’t the first time pipeline benefits have been inflated – it’s actually happened multiple times, from the Keystone XL pipeline to the Dakota Access pipeline. A report by Dave Swenson, an economist at Iowa State University, makes this clear.

These studies are a rhetorical tool to convince policy makers and local communities of the benefits of pipelines, but they are not a very useful political tool because, as I will detail below, they misrepresent the benefits and ignore the costs, especially environmental. CO2-ethanol pipelines are different from pipelines like Keystone because they rely heavily on federal and California subsidies, so the public should have access to credible scientific information about whether there are more efficient ways to spend public money to reduce greenhouse gas emissions and the environmental costs of all alternatives must be carefully assessed.

Ernst & Young’s study follows the Dakota Access playbook in overestimating the economic impacts of pipelines, which are largely transient and limited to the construction period, and – even then – highly dependent on inputs and labor -work outside the state.

The actual economic benefits of the pipelines will be far less than those estimated by Ernst & Young because none of the pipes, valves, pumps, etc., are manufactured in the pipeline states. And the highly skilled welders who would be employed during construction would likely come from Louisiana, Oklahoma and other places where the pipeline industries are clustered, not the Midwest. Swenson, who recently retired from the state of Iowa and is an expert on such matters, confirmed that, for example, with the Dakota Access pipeline, only 16 Iowa-based welders were certified to work on the pipeline.

The transitory nature of employment benefits in particular is masked by the use of ‘worker-years’ over the lifetime of the project rather than assessing the employment effect each year. This approach would show the few long-term effects of the projects on employment in our region. Ernst & Young also overestimates the effects of the pipeline on the economy by using a national model instead of one that only considers the region of construction and operation, and using this model to estimate tax impacts. Using the national model inflates the indirect and induced effects of economic activity.

The pipelines will have minimal positive economic impacts once installed, but the risks and long-term effects on the land will be long lasting. The bottom line is that this commissioned study overstates the benefits and has nothing to contribute to the issue of costs: monetary costs of subsidies that would fall on Iowans as taxpayers, risks to human and animal health, and environmental costs to Earth.

Finally, consider the elephant in the room. The pipeline will provide justification to continue growing corn and using it for ethanol for a long time. The industry and the registry editorial board are well aware that the future for corn ethanol is not bright. Ethanol is a supplement to gasoline, not a substitute. Half of Iowa’s corn acres and a third of US corn acres (more than 30 million) are used to produce 15 billion gallons of ethanol, or about 10% of pre-COVID US consumption. 19. That’s why we have the E10 mandate in the Renewable Fuels Standard.

The United States has approximately 320 million acres of cultivated land overall. It’s pretty obvious that corn ethanol isn’t scalable as a gasoline substitute, so its fortunes are tied to that. We should be seriously discussing ways to diversify Iowa agriculture away from corn, not investing resources in technology that contributes to climate change and will not be economically competitive in the long term. It is unreasonable to even consider the use of public funds and eminent domain for such projects.

Silvia Secchi is a professor in the Department of Geographic Sciences and Sustainability and a senior fellow at the Public Policy Center at the University of Iowa.

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