Renewable Fuel Standard is an unjustifiable giveaway

The current phase-in schedule (to 36 million barrels per year by 2022) for the Renewable Fuel Standard (ethanol mandate) program was established by a bipartisan energy bill (the Energy Independence and National Security Act) enacted in 2007. SAFE’s disapproval was duly reported in our then recently-launched blog. Fiscal visionaries at bay, 12/24/07.

Why should the government mandate the use of ever more ethanol? Producing ethanol from corn is ruinously inefficient, not to mention its adverse effects on food prices and the environment. It may eventually be possible to produce ethanol from switch grass and such, but the technology has yet to be developed on a commercial scale.

In 2011, a skeptical chemical engineer concluded that: “The only good reason for making corn into ethanol is for whiskey.” The chemistry of ethanol, David Henderson, econlib.org,
3/24/19.

Based on a number of sources, it appears that ethanol blending (a) raises fuel costs for the general public, (b) drives up food costs, (c) achieves no clear-cut environmental benefits, and (d) does not usefully extend the life of fossil fuel reserves. If so (see ensuing discussion), shouldn’t our political leaders come to their collective senses, acknowledge that the Renewable Fuels Standard was a mistake, and abolish it?

A. Background – A government policy of encouraging the blending of ethanol in gasoline can be traced back to 1978, when a 40¢ per gallon subsidy was enacted. This and other subsidies had the desired results, and they were supplemented in 2005 by enacting a Renewable Fuel Standard, which was then extended until 2022 with steadily growing volumes by the aforesaid 2007 energy bill. Should the US end the ethanol mandate? Robert Bryce, manhattaninstitute.org, 11/15/15.

Ethanol subsidies were subsequently allowed to expire, but the RFS mandate has sufficed to drive growing ethanol use. See this chart of ethanol blending from 2001 to date.

Screen Shot 2, 6:10:19

One obstacle to hitting the desired level of ethanol blending was the policy (under EPA administration) of limiting ethanol blending in gasoline to 10% (aka E10) on grounds that higher ethanol blends (e.g., E15) can be harmful for the engines of older vehicles, boats, motorcycles, gas mowers, etc., especially during summer months. E15’s not the problem. Special treatment for ethanol is, Nicolas Loris, heritage.org, 10/10/18.

This chart shows ethanol blending approaching the 10% ceiling by 2010, which has led the ethanol lobby to demand that the sale of E15 be permitted on a year-around basis.

Screen Shot 1, 6:10:19

B. Fuel costs – As ethanol reduces miles per gallon performance (due to its lesser energy content) and costs more per gallon than gasoline, it’s apparent that use of ethanol-blended gas will increase fuel costs. Here’s one estimate of the extra cost involved for an “average driver.” Time for action on flawed ethanol mandate, Charles Hughes, economics21.org, 10/31/17.

In a 2015 report [click link to access report] from the Manhattan Institute, Robert Bryce found that the RFS program imposed $10 billion each year in additional fuel costs for motorists, equivalent to $47 a year per driver. The reason for the higher cost is straightforward, as from 1982 to 2014, “ethanol was 2.4 times more expensive than an energy equivalent amount of gasoline.”

Note that (1) the $10 billion per year average excess cost for ethanol-blend gas is for the period 2007-2014, and (2) ethanol was 1.4 (vs. 2.4) times more expensive than gasoline during this period. Relevant portion of the data table is shown below.

Screen Shot 3, 6:10:19

C. Food costs – In 2000, over 90% of the US corn crop was being used to feed people (directly and by feeding livestock) while less than 5% of said crop was used to produce ethanol burned as fuel. As a result of the Renewable Fuel Standard, the comparable percentages in 2013 were 60% food/ 40% fuel. It’s final – corn ethanol is of no use, James Conca, forbes.com, 4/20/14.

This doesn’t mean that the use of corn as food is necessarily being stinted, as US corn not only feeds a growing population in this country but also supplies some 70% of corn imports by other countries. Food shortages can develop due to miscalculation, however, as happened in 2007.
Ibid.

In 2007, the global price of corn doubled as a result of an explosion in ethanol production in the U.S. Because corn is the most common animal feed and has many other uses in the food industry, the price of milk, cheese, eggs, meat, corn-based sweeteners and cereals increased as well. World grain reserves dwindled to less than two months, the lowest level in over 30 years.

To avert ethanol-related food shortages, additional acreage must be planted for corn; this has contributed importantly to the disappearance of grassland areas in the nation’s interior. How the ethanol mandate is killing the American prairie, William Shugart, heartland.org,
4/20/17.

According to a report by the Organic Consumers Association, 95% of the 240 million acres of prairie land that once blanketed the middle of our country, from Texas to North Dakota, already is gone. Only isolated pockets of prairie tall grass, some 35 million acres set aside for soil and wildlife conservation, remain. And that — largely in the Great Plains — is at risk of being destroyed.

With more acreage being planted in corn (presumably less suitable than areas previously used for this purpose), the margin of safety against subpar crop years (like 2019 is shaping up to be) may well be reduced. Millions of acres of US farmland will not be planted with crops this year due to cataclysmic flooding, Michael Snyder, freedomoutpost.com,
6/5/19.

The food that we are eating right now is from past production. The crops that are being grown now represent food that we will be eating in the future, and right now it looks like a whole lot less food will be produced than we expected. That means that food prices will start going up, and they will probably keep going up for the foreseeable future.

Given this outlook, what possible sense does it make for the government to continue mandating that a substantial part of the corn crop be burned for fuel?

D. Environmental effects – It’s been claimed that the Renewable Fuel Standard results in a net reduction in carbon emissions, which are supposedly causing global warming, but there is reason to believe otherwise. While growing corn takes CO2 out of the atmosphere, the same goes for vegetation that would otherwise grow on the acreage being plowed under to grow corn for ethanol. And because ethanol reduces mileage, more gasoline is burned in total. Corn ethanol is now a climate-change scandal, Robert Bryce, manhattaninstitute.org, 9/8/16.

In 2010, the [Environmental Protection Agency] determined that using more ethanol-blended fuel will cause carbon-dioxide emissions to increase for at least a decade. It also found that ethanol-blended fuel will “lead to up to 245 cases of adult premature mortality.” 

•Last year, the Environmental Working Group [a non-profit] issued a report that found that the carbon intensity of corn ethanol is 20 percent higher than that of standard gasoline. In 2014, the group determined that corn ethanol consumption “resulted in 27 million tons more carbon emissions than if Americans had used straight gasoline in their vehicles.”

Other environmental implications of growing corn to produce ethanol are clearly negative. The threat to what’s left of the American prairie has already been mentioned, and here are some additional considerations. Sources omitted.

•Increased use of fertilizers, causing run-off pollution, and encouragement of destructive farming practices like edge tillage (plowing to the edge of fields rather than leaving a buffer area).

•Large volumes of water are required for ethanol production, which are being obtained by over-pumping aquifers like the Ogallala that serve many mid-western states.

•Long-distance transportation of ethanol-blended gas by pipeline isn’t feasible, so the ethanol must be separately transported by rail or trucks (with whatever pollution is caused) and blended near the point of sale.

E. Fossil fuel reserves – A key argument for the Renewable Fuel Standard was that oil is a depleting resource, which would grow increasingly costly as reserves were exhausted. The US was a major oil importer, including substantial oil purchases from nations that did not wish us well, and the apparent price penalty for ethanol-blended gasoline would soon flip into an economic benefit. Since 2007, however, the situation has trended in the opposite direction. Let’s get rid of the ethanol mandate, not reform it, Bernard Weinstein, heartland.org, 6/25/18.

We forget that the RFS was implemented during an era when we thought we were running out of oil and importing more than 60 percent of domestic consumption. Today, we’re exporting more than two million barrels per day while net imports have fallen to about 20 percent of consumption.

What happened? It’s called the fracking revolution, which despite continuing obstacles to drilling on public lands has vastly increased US oil and natural gas production and enabled this country to once again become the world’s leading producer. Although oil remains a depleting resource, no one is really worried about running out of it any time soon. The ethanol gravy train rolls on, Paul Driessen, heartland.org,
5/14/18.

F. Summing up
– For the reasons discussed, we’re convinced that the Renewable Fuel Standard should be abolished. But as President Ronald Reagan once observed, getting rid of mistaken (or outmoded) government programs is easier said than done.

No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!

Considering how ethanol mandates are viewed in Iowa, it would be a brave presidential candidate who advocated their abolition in 2020. Even the current president has been reluctant to back Big Oil over Big Ethanol on this issue. The compromise policy decision (which was recently adopted) – allow the EPA to authorize E15 sales all year, but continue granting waivers for small oil refiners that can’t economically comply with the ethanol blending requirement – will leave the basic issue unaddressed. Trump administration trying to please everyone on renewable fuel standard, Ben Lieberman, cei.org,
3/22/19.

No matter, SAFE will continue advocating RPS abolition because it’s the right thing to do.

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