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  • Congress Should Permanently Waive the Ethanol Mandate

    Last week, the Environmental Protection Agency (EPA) rejected a proposal from a number of governors and federal legislators to partially waive the Renewable Fuels Standard, which mandates the production of 36 billion gallons of ethanol by 2022.

    This year, the Energy Policy Act of 2005 requires refiners to blend nearly 13 billion gallons of corn-based ethanol into gasoline.

    With this past summer’s drought limiting corn supply and driving up prices, farmers and ranchers who feed corn to their livestock argue that the ethanol mandate is further distorting prices and pushing limited corn resources from food to fuel.

    Whether we use corn for food or fuel should be for the market to determine. Whether the impact of the mandate has large or small impacts on prices is irrelevant, because the mandate is simply bad policy. Congress should make up for the EPA’s refusal to waive the mandate by repealing the Renewable Fuels Standard.

    Originally championed as a way to reduce dependence on foreign oil and produce environmentally friendly fuels, the mandate has attracted a wide collection of opposition. Proponents of a free-market energy policy ask this simple question: If biofuels are competitive, why do they need a mandate that guarantees a share in the market?

    Given the fact that the transportation fuel business is a multi-trillion-dollar one worldwide, biofuels have all the incentive they need to compete. Environmentalist groups that once supported the use of ethanol are now arguing that once accounting for land use conversion, the use of fertilizers, insecticides, and pesticides, as well as the fossil fuels used for production and distribution, biofuel production has had unforeseen environmental consequences.

    World hunger organizations have been especially critical of the mandate, arguing that diverting food to fuel increases corn prices. Corn is a staple product for many developing countries and is feed for livestock, so price spikes can have dramatically rippling effects. Heritage senior research fellow David Kreutzer calculated:

    As is typical with commodity markets, small changes in supply or demand can lead to large changes in price. The loss of 10.8 percent of the world’s corn to ethanol production leads to a 68 percent (about two-thirds) increase in corn prices.

    However, these calculations do not measure the mandate’s impact on price. We do not know this impact because we do not know how much ethanol would be produced in the mandate’s absence. Nor have we calculated the impact of expanded corn production on reducing the acreage of other farm commodities and the subsequent price increases for those commodities.

    Congress should repeal the ethanol mandate and eliminate all subsidies for transportation fuels and technologies. This would continue to drive America’s energy policy in the right direction.

    Posted in Energy, Featured [slideshow_deploy]

    6 Responses to Congress Should Permanently Waive the Ethanol Mandate

    1. Mike, Wichita Falls says:

      Other green energy "saviors" such as windmills and solar panels have also upset the environmentalists due to their adverse effects on birds, turtles and other "endangered species".

      Nuclear, hydrocarbon, biofuels, windmills, solar panels, etc. must be given a thorough cost-benefit analysis before making any policy. Instead, policy is made to benefit a politically-favored, campaign-contributing interest group rather than the general welfare.

    2. Ric Paluch says:

      The House needs to cease the practice of Omnibus spending bills and make each department come up and laboriously explain in painful detail the need for each and every dime they are requesting. Then when the budget is complete send it to the House floor, vote on it, and send it to the Senate and wait for it to either pass or be sent to conference for negotiation. Then commence working on the next department and so on to the end. No continuing resolutions, stop gaps or beginning each budget with last year's budget as the floor for negotiations; start at zero and justify everything from scratch. Finally, schedule Defense first and EPA dead last with no monies to tide them over while they wait.

      • pete says:

        I agree with this thought. The continuing resolutions and crisis management of the budget has to end. I am good that it ends under Obamas watch as well. He can lead us in the goal to a balanced budget vs spending without consequence during his time in office.

    3. Lloyd Scallan says:

      What Congress should do and what they actually do is worlds apart. Do we not yet realize that most of all ethanol is made from corn? Besides fuel additives, corn is used in thousands of products used by Americans daily. The more corn used for fuel, the less corn available for other products, which drives up cost of almost everything else. More cost translates into less money in savings accounts, which means more government dependency on hand outs. Now, do you understand why Obama will never allow ethanol to end. God forbid Obama would allow more oil production to replace the 15% ethanol additives!

    4. Bobbie says:

      People have to rise above the corrupt and or density of the mind of those that think they have control…
      A brighter congress of integrity would have permanently waived the ethanol mandate 10 plus years ago. it's never too soon!!!

    5. Charlie Peters says:

      Can Mary Nichols and Governor Brown support a BP GMO fuel EPA ethanol waiver? Motorcycle, Classic car, Lawn tool engines, Boat, & the beef just might like a choice of fuel ethanol opinion, a waiver. Can Governor Brown use the 10th amendment to support California option.

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