Once touted as a climate-friendly renewable alternative to foreign oil, corn-based liquid ethanol has been exposed as an environmental and economic mistake. Lured by federal subsidies, Midwestern farmers have devoted millions of acres to corn that might otherwise have been devoted to soil conservation or feed-grain production.
A dead zone fed by fertilizer runoff spreads at the mouth of the Mississippi. And production costs throughout the grain-dependent U.S. food industry rise.
At the end of 2011, the ethanol industry lost a $6 billion annual tax-credit subsidy. Last week, the U.S. Environmental Protection Agency delivered another policy defeat for ethanol — which is to say, a victory for common sense.
The EPA proposes a cut in the amount of ethanol the nation’s refiners must add to the fuel supply in 2014, from 18.15 billion gallons of ethanol called for in current law to a new target of 15 billion to 15.52 billion gallons. The downward revision is the first such reduction since Congress enacted the Renewable Fuel Standard (RFS) in 2007.
At that time, gasoline consumption was high and rising. It seemed reasonable to put the country on course to blend 36 billion gallons of ethanol into motor fuel by 2022, as the RFS statute did.
But changes in motorists’ habits and advances in fuel economy have made that objective unrealistic. Driving and motor-fuel use have plateaued.
Mixing more ethanol into a fixed or shrinking pool of fuel would bump up against the capacity of engines to burn it, as well as the capacity of the distribution network to pump it. Rather than hit this so-called blend wall, the EPA wisely decided to scale back the ethanol mandate.
Expect to hear from the ethanol lobby about how this is a victory for their rivals in the Big Oil and Big Grocery lobbies — which it is. The former has no interest in federal subsidy of a rival fuel; the latter would like less competition for access to grain. But that doesn’t mean their arguments are without merit.
The public benefits of ethanol subsidies do not offset the market distortions or outweigh the costs. The only flaw in the EPA’s announcement is that it doesn’t go far enough.
Partly, this is because the EPA only has authority to waive the legal mandate for a year. And partly, it’s because “biofuels are a key part of the Obama Administration’s … energy strategy,” EPA Administrator Gina McCarthy says.
What’s really needed is repeal of the ethanol mandate, which was enacted in a different time, on the basis of projections about energy markets that have not panned out. More-efficient fuel conservation measures, such as a gasoline tax increase, would let broad incentives, not politics, determine the best way to move vehicles while meeting energy security and environmental goals.
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