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Press Release

Corn Ethanol Mandates Don't Make Sense

06/27/2007

No better example of nonsensical energy policy is the federal indulgence with corn ethanol fuel, a heavily subsidized product that is a net loser for the economy, the environment, and for our energy security.

In 2005, in the name of “energy independence,” Congress and President Bush mandated a doubling of the national use of ethanol as an additive in gasoline, specifically requiring the consumption of 8 billion gallons of ethanol in the U.S. by 2012. Ethanol production also receives a federal tax credit of 51 cents per gallon, which will expand with the new mandate, costing U.S. taxpayers over $4 billion a year by 2012. Several Midwestern states offer similar state subsidies for ethanol production.

Thanks to protectionist barriers and other restrictions, the U.S. will meet the expanded mandate through the inefficient milling of domestic corn into ethanol. The result is a massive new subsidy for corn growers—who already receive generous cash subsidies and other benefits from the traditional USDA corn commodity program, which paid corn growers $51.3 billion in the period from 1995-2005.

Yet, in spite of this extraordinary federal support, the planting, harvesting, milling, refining, and transporting of corn-based ethanol consumes more energy inputs than the final energy value of a gallon of ethanol. Cornell professor David Pimentel and his colleagues found that converting corn to ethanol consumes 29 percent more fossil energy than is produced. Put another way, because corn ethanol is a net energy loser, America is probably using more traditional fossil fuels because of the ethanol mandate than we would without any mandate at all.

Further, corn agriculture has a negative impact on the environment, including bringing new farmland under till and heavy pesticide use. Purdue University estimates that the new mandate will bring 10 million new acres of land under corn production in 2007, for a total of 88 or 89 million acres. That is the most corn under acreage in America since 1946, when the U.S. was feeding war-devastated Europe. About 25 or 30 percent of the nation’s corn acreage in 2007 will be dedicated to producing for the ethanol mandate. Finally, since ethanol has a somewhat lower energy content than traditional gasoline, more fuel is now required to travel the same distance—the ethanol mandate effectively reduces the Miles Per Gallon for all of America’s drivers.

Largely lost in the push for corn ethanol is the fact that ethanol derived from sources other than corn, such sugarcane and possibly switchgrass, is far cheaper to grow and refine (or to buy from other nations). These sources of non-corn ethanol are several times more efficient than corn ethanol, and do hold promise in helping to meet the nation’s energy independence and alternative energy policy goals. Yet, to protect corn growers, federal policy largely prohibits the utilization of these alternative sources of ethanol.

The U.S. government enforces a 54 cent per gallon tariff on imported ethanol, pricing competing alternative sources of ethanol out of the market. Entrepreneurs interested in refining efficient cane-sugar into ethanol in the United States are similarly prevented from doing so by the federal sugar program’s import quotas, which strictly limit incoming sugar supplies. At a minimum, in order to meet the ethanol mandate, the United States should allow motorists and entrepreneurs the right to buy Brazilian ethanol, which is made from cane sugar, or to refine cane sugar into ethanol here in the America.

In sum, corn ethanol is a sorry example of the way that powerful special interests have twisted the public’s concerns about energy security and renewable energy into a massive corporate welfare scheme that leaves America worse off in terms of fairness, competition, energy security, and the environment.