Will Government Mandated Corn Ethanol Consumption Ever End?
This spring, the EPA will likely reduce the amount of corn ethanol that must be blended into our fuel supply by about 1.3 billion gallons (for a total of about 13 billion gallons) simply because our transportation system can’t absorb any more of it without exceeding a 10% blend, risking damage to cars. This is called the “10% blend wall.” Unlike beef, or chicken, gasoline, or smart phones, ethanol consumption isn’t consumer driven. In general, because consumers could care less about corn ethanol, fuel blenders also could care less about it except as an economically viable anti-knock additive in more modest quantities. They have to be forced to blend more of it by the government. Unless or until some unforeseen consumer demand arises, mandated blending will be necessary to keep the corn ethanol industry solvent.
And just as importantly, where is future growth going to come from? We can’t use all of our corn crop. This isn’t new technology. We’ve been making moonshine by distilling ethanol from fermented seeds and fruit for thousands of years.
Last year, a bipartisan group introduced legislation to end the mandated consumption of corn ethanol. The odds of it ever getting to Obama’s desk let along getting this consummate Midwest politician to actually sign it, are very close to zero. There is reality, and there is political reality:
On the other hand, the corn ethanol lobby isn’t all powerful. They lost the blending subsidy given to oil companies as an incentive to blend more ethanol than required by law. They also lost the tariff that protected them from imported ethanol.
A few years ago, in an attempt to dodge the 10% limit on the amount of ethanol that can be blended, corn ethanol proponents successfully convinced the EPA to allow a 15% blend of ethanol to be sold. This moved very little ethanol because few people are willing to risk being sued because they sold fuel that damaged someone’s car engine.
The use of flex fuel cars capable of burning a mixture containing 85% ethanol has also failed to sufficiently expand the amount of corn ethanol sold because consumers won’t go out of their way to by enough E85 to make a meaningful difference.
So, the ethanol industry is turning to ethanol exports. But should we allow this? Roughly 44 percent of our corn already passes through ethanol refineries. In their rush to capitalize on this government created cash cow, corn farmers have plowed under wetlands and prairies to the tune of five million acres, which, according to this article, is “more than the Yellowstone, Everglades and Yosemite National Parks combined.” And that doesn’t include the Gulf of Mexico dead zone, which is bigger still.
Users of corn are currently paying roughly $53 billion per year more than was being paid on average for the 10 years prior to the Energy Policy Act of 2005 which increased the amount of ethanol that must be mixed with gasoline to 7.5 billion gallons by 2012 (the Energy Independence and Security Act of 2007 upped that amount to 36 billion gallons by 2022). You might argue that this is a small price to be paid for national security (energy independence). But considering that we are presently exporting roughly 4 times more refined and crude oil than corn ethanol produced, the “Energy Independence and Security” argument has become somewhat farcical when used to support corn ethanol. Why didn’t we simply mandate a 7% improvement in car fuel economy (ethanol provides only 70% of the mileage of gasoline)?
The answer to that question is fairly obvious, at least to me, and I’ve said this before. Government mandated corn ethanol is a shell game to subsidize farmers. Rather than tax fellow citizens and then write checks to farmers, citizens are forced to buy gasoline with ethanol blended into it. The blenders pay the ethanol refiners, who in turn pay the corn farmers. And I have to admit, this is one of the most politically slick moves to raid the public larder to buy votes that I’ve ever seen.
It may very well be a good idea to provide government assistance to the farm belt. I can’t speak to that. Wealth redistribution can actually be a good thing when done in a manner that maintains a large middle class. But I’d rather we just cut them a check than give them the incentive to plow up conservation reserve land, drive up the cost of food, and further degrade water quality. But maybe that isn’t as politically palatable as a shell game that keeps voters from realizing that they are writing those checks anyway.