President Trump announced earlier this week that he intends to take actions to increase the mandate to add ethanol to fuels. Currently, refineries producing transportation fuel must demonstrate each year that they have blended certain volumes of renewable fuel into gasoline or diesel, or else acquire expensive credits from others who do so.
The Trump administration's action, which would require formal rulemaking, would direct the EPA to allow gasoline with 15 percent ethanol to be distributed year-round, reversing the current ban during summer months.
That action might be politically savvy, to make good on a campaign promise and to ease the impact of foreign tariffs on U.S. corn farmers by artificially raising demand for corn. (In this country, ethanol is obtained largely by fermenting corn.)
But it has little else to recommend it.
Politics aside, any defense of U.S. ethanol policy must embrace a series of fallacies which include: 1.) ethanol produced from corn makes the U.S. less dependent on fossil fuels, 2.) ethanol lowers the price of gasoline, 3.) an increase in the percentage of ethanol blended into gasoline boosts the overall supply of gasoline, and 4.) ethanol is environmentally-friendly and lowers global carbon dioxide emissions.
Not one of these claims is true. Yet, the ethanol lobby continues to promote them, and many politicians and lobby groups seem intoxicated by them.
Politicians like to say that ethanol is environmentally-friendly, but these claims must be put into perspective. Although corn is a renewable resource, it has a far lower yield relative to the energy used to produce it than does ethanol from sugar cane. Moreover, ethanol yields about 33 percent less energy per gallon than gasoline, so mileage drops off significantly when it is added. Motorists, who buy fuel in order to travel distances, are thus over-charged for every gallon of blended fuel. Fuel costs for Americans are artificially inflated due to the lower energy content of ethanol and the high costs faced by fuel companies trying to comply with ill-conceived fuel regulations.
The truth is that the federal Renewable Fuel Standard, which mandates ethanol blends in the first place, has failed miserably in achieving any of its stated goals.
Lower-cost biomass ethanol — for example, from rice straw (a byproduct of harvesting rice) or switchgrass — would make far more environmental sense, but large volumes of ethanol from biomass will not be commercially viable for many years. Moreover, production will be delayed by government policies that specifically encourage corn-based ethanol by employing subsidies.
American legislators and policymakers seem oblivious to the scientific and economic realities of corn ethanol production. Brazil and other major sugar cane-producing nations enjoy significant advantages over the U.S. in producing ethanol, including ample agricultural land, warm climates amenable to vast plantations, and on-site distilleries that can process cane immediately after harvest.
Thus, in the absence of cost-effective, domestically-available sources for producing ethanol, rather than using corn, it would make far more sense to import ethanol from Brazil and other countries that can produce it efficiently.
But, of course, this would defeat the purpose of the policy, which is actually meant to be a sop to Midwestern farmers.
The Renewable Fuels Association, a trade group, applauds the administration's proposed action, because it creates increased demand for its flagship product. Several years ago, the organization opposed the EPA's proposed lowering of the Renewable Fuel Standard when severe drought boosted corn prices. A spokesman made this particularly ironic comment: "Ultimately, the market will sort out any imbalances in supply and demand." But the association had evinced little confidence in the forces of supply and demand when they convinced Congress to mandate the diversion of 38 percent of the corn supply to ethanol production.
This intense lobbying reminds us of this observation by 18th-century philosopher and economist Adam Smith: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Politicians may be drunk with the prospect of corn-derived ethanol, but it is consumers who will ultimately suffer the hangover.
Colin A. Carter is a professor of agricultural and resource economics at University of California, Davis. Henry I. Miller, a physician and molecular biologist, is a senior fellow at the Pacific Research Institute. He was the founding director of the FDA's Office of Biotechnology.