Everybody seems to hate them, but Congress just passed another round of ethanol subsidies last Friday as part of its elephantine $858-billion tax relief bill. The ethanol boondoggle has cost U.S. taxpayers over $21 billion since 2006 ($6 billion this year).
The subsidy funnels 45 cents in tax credits for every gallon of ethanol that’s blended with gasoline. And it sets a 54-cent per gallon tariff on imported ethanol to keep competition out, while you pay more at the pump. Brazil, which sensibly produces ethanol from sugarcane, not corn, is challenging the U.S. at the World Trade Organization.
Making ethanol from corn is the worst idea ever. With about 40 percent of corn production now devoted to ethanol, it’s no mystery why food prices are ballooning. Industry apologists, however, maintain the high cost of food is owing to speculators, greed and high oil prices. Mm-hmm.
At the same time it funds these subsidies, the government mandates a fuel mix to include 36 billion gallons of ethanol/biofuels (roughly one gallon in four sold) by 2022. So it’s a double whammy for the consumer and a two-handed gift to the ethanol producers.
The industry now wants to boost ethanol content from 10 to 15 percent (E15), causing a big pushback from the automakers. Their trade associations are suing the EPA, claiming violation of the Clean Air Act, plus harm to catalytic converters and engines in older cars.
Now we learn today that demand for gasoline in the U.S. is starting on a long-term decline, which can only accelerate.
By 2030, Americans will burn at least 20 percent less gasoline than today, experts say, even as millions of more cars clog the roads.
The country’s thirst for gasoline is shrinking as cars and trucks become more fuel efficient, the government mandates the use of more ethanol, and people drive less.
Well, isn’t that wonderful, and shouldn’t we applaud these government mandates?
Biofuels from cellulose may indeed be part of the answer, but there are many, many problems to solve before such an industry becomes viable and productive enough to be a factor. The subsidies haven’t worked, except to enrich Archer Daniels Midland and the campaign coffers of certain Iowa and South Dakota senators.
Should government be subsidizing the ethanol/biofuels industry another way?