The fundamental problem with the ethanol mandate

October 2, 2014

The Renewable Fuel Standard — America’s mandate to put ethanol in our gasoline supply — has caused unintended consequences across the economy, risking higher gas prices and plowing over natural conservation land. These consequences alone should be cause enough for Congress to revisit the ethanol mandate, but the fundamental problem with policy is simply a disconnect with economic basics.

As the chart above demonstrates, government-projected demand for government-mandated ethanol is far below the mandated levels, and will be for at least two decades.

Despite reality, Congress has yet to take significant action in reforming the mandate — talk about one hand not knowing what the other is doing. In fact, the Energy Information Administration (whose projections we used above) isn’t the only government entity to speak out against the policy:

  • The non-partisan Congressional Budget Office (CBO) released a report stating that enforcing the mandate could push gas prices up 9 percent — or 26 cents — per gallon in just three years.
  • The Environmental Protection Agency — responsible for implementing the nation’s ethanol policy — has provided evidence that shows ethanol produced 33 percent more emissions in 2012 than gasoline, and could increase GHG emissions by an additional 10 percent by 2017.
  • The Department of Energy has concluded that higher ethanol fuel blends like E85 (gasoline containing 85 percent ethanol by volume) lowers vehicle fuel mileage by 15 to 25 percent than when operating on E10. This means consumers are forced to return to the pump more frequently and at greater cost.
  • The National Academy of Sciences has demonstrated that high corn and soybean prices, prompted largely by the mandate, are driving one of the worst crop land conversion events in recent US history.
  • The Government Accountability Office is concerned that the largest increases in corn acres for ethanol production are projected to occur in the Northern Plains, which relies on irrigation and is already water-constrained. Parts of the region draw heavily from the Ogallala Aquifer, where water withdrawals for agriculture and other uses are already greater than the natural recharge rate from precipitation.

And while it’s true that the Environmental Protection Agency has the power to adjust the mandate every year, we’re 10 months into 2014 and still without a final ruling on this year’s mandate thanks to endless government red tape.

Tell Congress it’s time to take action on the Renewable Fuel Standard.