Higher Ethanol Mandates Are a Lose-Lose for Americans

COMMENTARY Environment

Higher Ethanol Mandates Are a Lose-Lose for Americans

Dec 6, 2022 5 min read
COMMENTARY BY
Diana Furchtgott-Roth

Director, Center for Energy, Climate, and Environment

Diana is director of the Center for Energy, Climate and Environment and the Herbert and Joyce Morgan Fellow.
Of 90 million acres of corn in America, about 45 percent is dedicated to ethanol, shrinking supplies that go into food. Ben Hasty/MediaNews Group/Reading Eagle/Getty Images

Key Takeaways

This week the EPA proposed higher mandated volumes and percentage shares for the amounts of ethanol and biodiesel used in America’s fuel supply.

With the United States changing from a net importer to a net exporter of oil, and with more fuel-efficient cars, the case for ethanol is weak.

Ethanol production is contributing to increases in the price of food, both in the United States and abroad.

This week the Environmental Protection Agency proposed higher mandated volumes and percentage shares for the amounts of ethanol and biodiesel used in America’s fuel supply, with public comments due by Feb. 10.

At a time when President Biden is pushing the nation towards electric vehicles, and when he seeks lower gasoline prices for drivers, it makes no sense to increase the amount of ethanol required to be used.

Ethanol reduces gas mileage for drivers and raises the price per gallon, because refiners are required to purchase renewable fuel standard (RFS) compliance credits, called renewable identification numbers (RINs), which add to the price of gasoline.

Philadelphia Building and Construction Trades Council Business Manager Ryan Boyer, in a letter to President Biden, stated, “RIN prices have become so expensive that independent refiners in my region have reported paying more in annual RFS compliance costs than their combined costs of payroll, benefits, utilities, and maintenance expenses.”

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Sean McGarvey, president of North America’s Building Trades Unions, estimated in a letter to President Biden that “RINs have added 20 to 30 cents per gallon to consumer fuel costs over the past two years…..and have directly contributed to refinery closures which are responsible for thousands of jobs.”

That’s why requiring more ethanol is a lose-lose for America’s drivers, especially since gasoline prices have risen more than 17 percent over the past year.

The EPA announcement is a big win for corn producers. The required volumes are 20.82 billion gallons for 2023, 21.87 billion gallons for 2024, and 22.68 billion gallons for 2025. This is a steady increase over the requirement of 20.63 billion gallons for 2022.

In the mid-2000s, when Congress imposed renewable fuel mandates to make America independent from the Organization of Petroleum Exporting Countries (OPEC), adding ethanol to gasoline was seen as a way to reduce gasoline consumption, reduce oil imports and even curtail tailpipe emissions.

In 2012, the subsidy of 45 cents a gallon expired, along with the 54-cent tariff for imported ethanol. What keeps the ethanol industry afloat in 2022 is the mandate for the American economy to consume ethanol.

Now, with the United States changing from a net importer to a net exporter of oil, and with more fuel-efficient cars, the case for ethanol is weak.

But the ethanol lobby is strong. It includes corn farmers, whose price per bushel has risen from under $4.00 in 2010 to $6.50 today, and investors who placed capital into ethanol-producing plants.

Of 90 million acres of corn in America, about 45 percent is dedicated to ethanol, shrinking supplies that go into food.

In sum, EPA’s efforts to raise the fraction of ethanol in a gallon of gasoline above 10 percent of pumped gasoline has raised prices for American consumers.

Most cars made after 2012 can use gasoline with 15 percent of ethanol, but many drivers prefer a 10 percent blend, because they get better gas mileage. As cars become more fuel efficient, Americans are projected to use less fuel, rather than more.

To complicate matters, batteries are becoming the alternative fuel of choice for some drivers. Almost all auto manufacturers have invested in developing new electric vehicles, and most say they will only sell these vehicles from 2035 onwards. Whether American drivers will make the leap to electric vehicles remains to be seen, but their gas consumption is likely to decline as they buy more fuel-efficient vehicles, such as hybrids.

In September, the Department of Transportation and the Environmental Protection Agency issued new corporate average fuel economy standards, requiring fleets to have an average of 49 miles per gallon by 2024. Unless standards are revised, that means lower fuel use—and less ethanol use.

Ethanol is costly to ship, because it separates from gasoline in the presence of water. So, unlike gasoline, blends of ethanol and gasoline that motorists put in cars cannot be transported through pipelines. Instead, ethanol is shipped by rail, and mixed with gasoline near the point of distribution.

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EPA wants to force more ethanol consumption by allowing ethanol levels in gasoline to rise from 10 percent to 15 percent for cars from model years 2001 onward. Since higher ethanol blends are harmful to older car engines—some believe to newer engines also—gas stations would have to operate different pumps for the 10 percent and 15 percent blends. And if a customer put the 15 percent blend in his mower, boat, or other small engine, or older car by mistake—an accident likely to occur not infrequently—the engine could be damaged.

When Congress passed legislation mandating the use of oxygenated fuels, before America became a net oil exporter, using ethanol for energy was going to be win-win. The United States can grow so much corn, the argument went, that the country could divert some for gasoline and thus reduce tailpipe carbon emissions and become less dependent on foreign oil producers.

Alas, in the real world, unintended consequences arrive all too often.

Ethanol production is contributing to increases in the price of food, both in the United States and abroad. Not only is corn that was used for food made into ethanol, but other crops are being abandoned for corn. Corn prices are up 34 percent over the past year, and wheat prices are up by almost 16 percent.

Moreover, many scientists now believe that the production of ethanol causes more harmful emissions than it prevents. The more ethanol we produce, the more greenhouse gases are generated. Rising corn prices encourage farmers all over the world to transform their land from forests and fallow fields to corn, thereby losing the capture of airborne carbon dioxide performed by trees and shrubs.

EPA’s announcement shows that President Biden is loyal to his environmental base and to ethanol special-interest groups who voted for him, even though his ethanol goals clash with his desire for electric vehicles and lower gasoline prices.

This piece originally appeared in Forbes https://www.forbes.com/sites/dianafurchtgott-roth/2022/12/02/higher-ethanol-mandates-are-a-lose-lose-for-americans/?sh=3bf3fa445c8d