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  • Ethanol: A Corny Trade Policy

    Gas prices are on the rise again. The national average is now just under $4.00 a gallon, and it’s sure to rise as the summer driving season rolls near. The pesky detail not often mentioned is that our ethanol policy is a contributing factor toward these higher fuel prices.

    The United States is the world’s largest producer of ethanol, with Brazil a close second. However, Brazil’s sugar-based ethanol is cheaper, more efficient, and cleaner burning than our corn-based product. Yet special interests have managed a rather sweet deal for our domestic producers.

    In 2005, under the Energy Policy Act, Congress imposed the Renewable Fuel Standard, which mandated that 7.5 billion gallons of renewable fuel must be blended with the gasoline supply. If the original intent of this mandate, which has since been expanded, was to reduce fuel emissions, then we are hamstringing that effort—and unnecessarily harming U.S. consumers in the process.

    Since 1980, there has been a tariff—currently 54 cents per gallon—on imported ethanol. That means Congress’s attempt at going “green” has resulted in another instance of the government embezzling more green from our wallets. By imposing this tariff on cheaper foreign sources (mainly Brazil), Congress has artificially raised the price that we are all forced to pay and has steered the market away from a more efficient, cleaner source of fuel.

    While average Americans continue to feel the pain at the pump, the Obama Administration has remained remarkably silent on the issue. Fortunately, though, there may be hope on the horizon. Last week, a bipartisan group of Senators introduced the Ethanol Subsidy and Tariff Repeal Act.

    The bill would fully eliminate the import tariff on ethanol and repeal the Volumetric Ethanol Excise Tax Credit. This would grant U.S. blenders cheaper inputs, which in effect lowers productions costs and, subsequently, prices.

    Congress should move toward ending this outdated tariff and let the free market work.

    History, along with Heritage’s Index of Economic Freedom, shows that countries with stricter trade barriers and protectionist policies only hurt their economies in the end. It’s time we stopped hurting ours.

    Aaron Walling is currently a member of the Young Leaders Program at the Heritage Foundation. Click here for more information on interning at Heritage.

    Posted in Energy [slideshow_deploy]

    11 Responses to Ethanol: A Corny Trade Policy

    1. Keith, Hot Springs says:

      Not to mention this policy drives up the price of the corn we eat.

    2. Michael B says:

      Perhaps we should really let the free market work by eliminating ethanol mandates along with the subsidies and tariffs.

    3. Larry Coy. Mooresvil says:

      Government interference with the free market always means higher prices for consumer, i.e. taxpayers.

    4. Jeanne Stotler,Woodb says:

      I bought Ethanol for my car in the '80's, this was an Olds station wagon and Ethanol was cheaper at the pump than gas. I paid for the use, it gunked up the engine and the mileage degreased, after getting the engine flushed and running a cleaner I went back to gasoline and then the gov't. added it to the gas we use, raised the price of corn, we will pay for this when we need to replace cars more often. GM and others know of an engine that is economical and have had it for over 40 yrs. The Big auto builders and the Big oil companies are in bed together, they have an agreement to keep MPG at a certain level so Big oil can make their millions. The Gov't. is not going to tel you this as they need the big bucks from both to keep their Dem. butts in office. I go this information from a GM dealer in West Palm Beach Fla. in 1972.

    5. Tim AZ says:

      The green agenda has nothing to do with environmental concerns. It's camouflage being used by socialists to destroy capitalism under the guise of saving the environment. Always look for the red that hides beneath the stealthy green exterior. Lets drop the ethanol pose along with the radical goals and drill baby drill. Had enough yet?

    6. Greta Nelson says:

      Ethanol – at least corn-based – produces more SMOG than conventional gasoline. Add that to the list of reasons why it's a FAIL.

    7. Leon Lundquist, Dura says:

      The Ethanol Subsidies are actually the best way to insure Food Shortages. I go so far as to call it a Crime Against Humanity! We are paying ADM to burn food! It has been common knowledge for fifty years that Cannibus is the most effective way to grow our way out of the Oil Crunch! No. It isn't about getting Energy. It is about causing Starvation and unrest all over the globe, then taking advantage of it for Political Gain. If it were honest research we would have Marajuana Subsidies to get alternative fuels and not Corn Ethanol. Hemp grows in sandy soil, you would not have to make the false choice between burning Food or burning fossil fuels.

      Ethanol Subsidies are just another Kloward Piven scheme, to bring down the American Economy with our own money! It isn't just stupid. It is evil. Just you wait until the price of food is so high it effects our health. The sound nuitrition Americans have enjoyed is the greater reason for our better national health, not superior American Medicine. Good food is the real reason Americans have done so well. Expect our new Obamacare boondoggle to crash upon these rocks. Health Care Costs will skyrocket when our food supplies go South! Then, it will be the Farmer's fault and Obama and his Gang will Nationalize Farming! Just like Uncle Joe Stalin did!

    8. Larry Welch, Idaho says:

      All ethanol subsidies must stop! The stuff is murder on some engine designs, yields poor "gas" milage and as noted above is a net poluter compared to straight gas. Our nation cannot afford to continue subsidizing ethanol. It's a disgrace.

    9. Stirling, Pennsylvan says:

      A country that burns it's food supply for the sake of providing energy to people who will soon not be able to afford it lacks common sense. We are sitting on more natural gas reserves then Saudia Arabia has oil, and not to look at our own resourses, which are less expensive, lacks more comon sense. This is the "new deal" all over again: when the government paid farmers to kill livestock and burn crops to force prices higher to benefit the farmers pocketbooks.. When they say this is annother great depression I can say it is in more then one way. The policies being implemented are eriely similar…

    10. Timothy Schiel, FT. says:

      I don't believe either side of this argument has presented all of the facts. I live in an area with an abundance of corn growers and a new, state-of-the-art ethanol producing plant. What I hear on the local farm reports is:

      1) The corn used for ethanol doesn't even consume the (approx) 5% surplus in the corn crop. By producing ethanol, the price of corn is more stable.

      2) Most of the corn grown is used for feed for farm animals, not direct human consumtion. The waste product from the ethanol process is converted to feed these same animals.

      If anything, the use of ethanol should be a good argument for eliminating subsidies.

    11. Roger S., Mass. says:

      To paraphrase our "Head Obamaist", let's "be quite clear about this": The ONLY green in your life "our" Government ever was, is, or will be interested in is that stuff in your wallet it calls Federal Reserve Note. Soon it will start imprinting it, officially, with "Federal Fiat Note", because we're out of any and all "reserves". As Leon, above, pointed out: It's not just stupid to burn our food in our engines: It is EVIL!

      On a lighter note: The only place I want Ethanol, and where I don't much care if it's subsidized or taxed, or domestic or foreign, is in my Martinis — and lots of it! (Like 'em dry, real dry — stirred, not shaken!) When the solid food "goes South", that's what I'll do, sort of as a last salute: Sell my car and drink up the proceeds. "Better to go on a bender than bender going"! You may quote me!

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