“It doesn’t make any sense” III

Ethanol subsidies, first introduced in 1978 and expanded by Congress many times since, is one of the most egregious examples of ill-conceived government policy one can find. These subsidies have inflated food prices, undercut the competitiveness of U.S. cattle, hog and poultry producers and induced land-use practices that boost greenhouse gas emissions. In addition, the resulting water- and fertilizer-intensive corn production has expanded aquatic “dead zones” in the Gulf of Mexico and Chesapeake Bay.

Beginning in 2012, Congress finally let the subsidies lapse, but corn farmers are still riding high on the hog and laughing all the way to the bank. It turns out that the Renewable Fuel Standard established under President George H. W. Bush mandated a guaranteed market for ethanol producers. Under the Energy Independence Act (EISA), sales of renewable fuels are mandated to increase from 9 billion gallons in 2008 to 36 billion in 2022. The act defines how much ethanol must be included in all the gasoline produced in the U.S. and it increases each year until 2022. Specifically, the EPA determines the amount of ethanol every major U.S. gasoline distributor must blend into its gasoline, and there are significant financial penalties if the quotas aren’t met.

The ethanol directive diverts massive quantities of corn from food to fuel production; the law requires that 37% of the 2011-12 corn crop be converted to ethanol and blended with gasoline. The result is higher than normal corn prices and handsome profits for corn farmers. Ethanol contains one-third less energy by volume than regular gasoline and, according to the American Automobile Association, the mpg-adjusted price of the ethanol blend is higher than regular, premium and diesel gasoline.

The rationale behind support for ethanol blended gasoline – besides obvious benefits to the politicians representing the corn belt – is that it releases less CO2 into the atmosphere and is, therefore, a greener alternative. But numerous studies refute this premise; when all factors are taken into consideration, it becomes clear that ethanol does not reduce greenhouse gas emissions. Often overlooked, for example, is the carbon released into the atmosphere when the soil is prepared for planting. Another factor that must be considered is that an acre of corn diverted to fuel production in the U.S. is likely to cause farmers in other parts of the world to clear an equivalent acre of forest to replace the food production lost from American farmers’ planting decisions. The Nature Conservancy did a comprehensive study on the amount of land that will be needed by 2030 for new biofuel development. Terming this measure “energy sprawl,” they wanted to see how expanded energy-related land use would adversely affect habitat and wildlife. They found that the biggest culprit, as shown on the accompanying chart, was biofuel production. Given all the negative consequences of expanding biofuel use, mandating the use of ethanol doesn’t make any sense. After all, if ethanol was such a great deal, there wouldn’t have to be a law to make people buy it.

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