America's energy policy has been on an ethanol binge, and now
the hangover has begun. The federal renewable fuels mandate is an
unfolding failure, and more Members of Congress are taking notice.
If repeal of the mandate is not yet possible, Congress should at
least freeze ethanol use at current levels while the nation
reassesses its renewable fuels policy.
Mandates for renewable fuels, chiefly ethanol derived from corn,
have steamrolled through Washington as few other issues have in
recent years. The 2005 energy bill contained the first-ever
requirement that these fuels be mixed into the nation's gasoline
supply. Beginning in 2006, the mandate came on top of massive
subsidies and tax breaks already enjoyed by domestic ethanol
The mandate quickly proved to be a mistake-raising rather than
lowering fuel costs, sparking food price inflation, and invoking
environmentalist opposition during its first two years.
Nonetheless, a bill to increase the requirements nearly fivefold
passed Congress easily and was enthusiastically signed by the
President in December 2007. Thanks to this measure, America is now
committed to 9 billion gallons of renewable fuels in 2008 and 36
billion by 2022. For at least the next few years, almost all of
this mandate will be met by corn ethanol.
Notwithstanding Washington's strong support, ethanol's
real-world drawbacks are not going away. In fact, they are only
getting worse with the increased volumes.
As a general rule, it is hard to undo things in Washington,
especially when the beneficiary is the agricultural sector. Farm
programs from the New Deal era are still firmly in place despite
having long ago ceased to make any sense. Repeal of the renewable
fuels mandate, or even a relaxation of its targets and timetables,
should be considered a long shot.
However, the many problems with the policy have sparked broad
opposition, and Members of Congress are also having second
thoughts. The powerful ethanol lobby just might get a run for its
Higher Costs of Driving
The anger over high gasoline prices was the main impetus behind
the 2005 and 2007 energy bills and their successively higher
ethanol mandates. The public may have mistakenly assumed that
ethanol is cheaper than gasoline, but reality is beginning to hit
home. When everything is taken into account, including the lower
fuel economy from ethanol-blended fuel, the mandate is adding to
the cost of driving-which is precisely why ethanol had to be
mandated in the first place.
The AAA calculates that ethanol has recently cost 20 to 30 cents
per gallon more than regular gasoline. And that does not take into
account the heavy taxpayer subsidies, including a
51-cent-per-gallon tax credit, without which ethanol would be even
Proponents insist that economies of scale will kick in and make
ethanol more affordable as the mandated levels are ratcheted up,
but there is no sign of that actually happening. The opposite is
more likely. For example, ethanol costs more to transport than
gasoline, and the expanding mandates necessitate usage well outside
of its Midwestern home base.
ethanol is also more expensive to use in the summer: It
contributes to smog and in several markets can be used only with a
costlier base blend that compensates for this shortcoming; but this
blend must be used year-round. Over the longer term, the law
requires that corn alternatives like cellulosic ethanol be used as
well. Cellulosic ethanol-made from certain grasses, wood, or crop
waste-is currently far more expensive than even corn
It is only a matter of time before the public realizes that the
mandate is contributing to their pain at the pump. The media are
belatedly picking up on this point. Eventually, Members of
Congress-at least those outside of the 10 or so Midwestern states
where much of the corn and ethanol production is concentrated-will
realize that the mandate is a lousy deal for their constituents,
and they may want to do something about it.
Higher Costs of Food
Not surprisingly, diverting corn from food to fuel use has
raised food prices. At a little over $2 per bushel when the 2005
law was signed, the price of corn has surged above $5, primarily
because a quarter of the crop is now used to produce energy. A host
of corn-related foods, such as corn-fed meat and dairy, have seen
sharp price increases. Wheat and soybeans are also up, partly as a
result of fewer acres being planted in favor of corn. There's talk
of inflation rising to levels not seen in decades as renewable
mandates have conspired with other factors to drive up food
For corn farmers, the mandate has exceeded their wildest dreams,
but for consumers, it has been an expensive double-whammy-higher
costs to drive to the supermarket and higher prices once you're
there. A recent study from Purdue University puts the added food
cost from the renewable mandate at $15 billion in 2007-about $130
per household. And that was from ethanol usage at a
fraction of what will be required in the years ahead.
Globally, with nearly a billion people at risk for hunger and
malnutrition, the costs are far higher. Several anti-hunger
organizations have weighed in heavily against current policies. An
August 2007 United Nations report warns of "serious risks of
creating a battle between food and fuel that will leave the poor
and hungry in developing countries at the mercy of rapidly rising
prices for food, land, and water." There is evidence that this
may already be happening, including food-related rioting in Mexico,
Indonesia, Egypt, and the Philippines.
The food-versus-fuel critique of the renewable fuels mandate is
persuasive from a consumer and humanitarian perspective, but high
corn prices have done something that may prove even more powerful
politically: They have split the farm lobby. The poultry, hog,
beef, and dairy producers who buy corn as feed have felt the
pinch, and they are fighting back. For farm-state
legislators who are otherwise hesitant to take on the powerful corn
lobby, this increases their incentive to join their urban
colleagues in reconsidering the mandate.
ethanol was promoted in part for its environmental benefits:
lower pollution and reduced greenhouse gas emissions relative to
gasoline. That is why the growing chorus of environmentalist
criticism of the mandate is particularly noteworthy.
Many environmental organizations have raised concerns about the
increased inputs of energy, pesticides, and fertilizer to grow more
corn. The same is true for the stress on water
supplies, especially now that corn production is being expanded in
locales where rainfall is insufficient and irrigation is needed. Even
land that is now protected under federal conservation programs may
soon be cleared for corn. In addition, the facilities that turn corn
into ethanol create emissions issues of their own.
These and other impacts on the land, air, and water have already
raised serious concerns-and we are only one-quarter of the way
toward the eventual 36 billion gallon target.
Even worse is the turnabout on the major environmental issue of
the day: climate change. Proponents of ethanol claimed that it is
responsible for lower carbon dioxide and other greenhouse gas
emissions than the gasoline it displaces. But several studies have
challenged that assertion, including two recently published in the
same issue of Science. One finds that clearing lands
for energy crops creates a so-called carbon debt by "releasing 17
to 420 times more carbon dioxide than the annual greenhouse gas
(GHG) reductions that these biofuels would provide by displacing
fossil fuels," while the other estimates that "GHG
emissions from corn ethanol nearly double those from gasoline for
each km driven."
Not all environmental groups have abandoned ethanol, at least
not entirely. Several believe that cellulosic ethanol will one day
be environmentally superior to its corny cousin, but that is only
speculation. Assuming that it can be produced cost-effectively,
cellusic ethanol may also prove to be a green disappointment.
In any event, environmentally minded legislators who bought into
the benefits of corn ethanol now find themselves at odds with the
likes of the Nature Conservancy and the Sierra Club. This can only
help the anti-ethanol coalition.
Beyond the direct beneficiaries-corn growers and ethanol
producers like Archer Daniels Midland-the ethanol mandate retains
some supporters. For example, those who place a high value on the
national security benefits of producing domestic ethanol to
supplant oil imports have largely shrugged off the difficulties.
But for a growing number of people, including some who had
supported the mandate, the many problems, trade-offs, and
unintended consequences have proven too great to ignore. Even those
who see benefits have to ask themselves whether they are outweighed
by the costs.
Before the costs get any higher, it is time for Congress to
rethink its approach. If repeal of the mandate is not possible,
freezing ethanol use at current levels would at least help to
prevent additional harm while the nation reassesses its renewable
Ben Lieberman is
Senior Policy Analyst for Energy and Environment in the Thomas A.
Roe Institute for Economic Policy Studies at The Heritage
the AAA's "Daily Fuel Gauge Report" at www.fuelgaugereport.com
United Nations General Assembly, "Report of the Special Rapporteur
on the Right to Food," August 2007, p. 2.
Joseph Fargione et al., "Land Clearing and the Biofuel
Carbon Debt," Science, Vol. 319 (February 29, 2008), pp.
1235-1238; Timothy Searchinger et al., "Use of U.S.
Croplands for Biofuels Increases Greenhouse Gases Through Emissions
from Land-Use Change," Science, Vol. 319 (February 29,
2008), pp. 1238-1240.
Fargione et al., "Land Clearing and the Biofuel Carbon
Debt," p. 1235.
Searchinger et al., "Use of U.S. Croplands for Biofuels
Increases Greenhouse Gases Through Emissions from Land-Use Change,"