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  • Allow Free Market to Inform Proper Level of Ethanol Use

    Domestically produced corn based ethanol has enjoyed preferential federal treatment for years including a $0.51 per gallon tax credit and tariffs that discourage potentially cheaper sugar cane-based ethanol from Brazil. Federal government government support for ethanol has only increased in recent years with the first ever renewable fuel mandate for gasoline in 2005 and the significant raise of the mandate in 2007. Few in Washington predicted the costs of this government interference in the energy market, but now they are beginning to be widely accepted. Heritage scholars Ben Lieberman and Nicolas Loris identify elements of the growing consensus including:

    • A recent Purdue University study found that the renewable fuel mandate has added about $130 per household to food costs.
    • World Bank President Robert Zoellick has acknowledged that “biofuels is no doubt a significant contributor” to high food costs, adding that “it is clearly the case that programs in Europe and the United States that have increased biofuel production have contributed to the added demand for food.”
    • A International Food Policy Research Institute study found that placing a moratorium on biofuels in 2008 would decrease corn prices by 20 percent and wheat prices 10 percent by 2009–2010.
    • Oxfam International argues that “large-scale growth in biofuels demand has pushed up food prices and so far there is little evidence that it is reducing overall carbon emissions.”

    Lieberman and Loris conclude:

    It should be noted that there is little to no downside risk in repealing the ethanol mandate, as well as the generous tax credits and protectionist tariffs that also tilt the playing field in favor of corn ethanol use. To the extent that there is a valid economic case for fuel ethanol, it will continue to be used even in the absence of government dictates and incentives.

    Posted in Energy [slideshow_deploy]

    One Response to Allow Free Market to Inform Proper Level of Ethanol Use

    1. Jonathan Hendersonvi says:

      We need to Develop Biomass ethanol not corn ethanol

      While we all have realized Corn ethanol has not lived up to its promise there has an increasing number of companies developing biomass ethanol. Unlike Corn or other sugar-based ethanol’s Biomass ethanol does not use up our food supply to produce fuel.

      As we have seen Ethanol from corn may not be economically viable but second generation Biomass Ethanol may do the trick. Look what happens when the government uses incentives to prod the free market into developing alternative fuel technology!

      Biomass is a renewable energy resource generally found in nature in the form of agriculture and forest residuals and energy crops, though it can also come from industrial and urban wastes. There is more than one billion tons of biomass that can be converted into fuel annually in the U.S. alone. Using the Coskata process, each of these tons can be converted into over 100 gallons of low-cost ethanol.


      That means we are looking at a potential 100 billion gallons of low-cost ethanol yearly. The United States currently uses 134 billion gallons of gasoline a year. If we converted to e85 instead we would need to produce 114 Billion gallons of biomass ethanol a year but only 20,160 Million gallons of gasoline a year to meet current consumption patterns.

      What has Coskata done to attract the interest of one of the world’s largest car companies and the backing of some of the biggest names in cleantech? The Warrenville, Ill.-based startup says it can produce commercial-scale ethanol for under $1 per gallon, made from either biomass (like energy crops switch grass), municipal solid waste or other recycled materials (like old tires – one reason GM is interested). At the pump the company claims its product could be anywhere from 50 cents to $1 per gallon cheaper than gasoline.


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