The market for ethanol is propped up by the Renewable Fuel Standard (RFS), a Soviet-style production quota. Conservatives should be appalled by this reversion to Stalin-era central planning. Should taxpayers have to subsidize ethanol too?
So let’s make a deal! I’ll give you a new source of fuel that has 1/3 the energy of your gasoline. In return for that, I’ll dramatically decrease the food supply. As a result of this screaming bargain, you’ll end up spending more cash on gasoline to make up for the lost power from this new fuel additive. And furthermore, once we’ve obliterated metric tons of food production, governments all over the Middle East will become destabilized and disrupt the original supply of fuel we were using before I offered you this bargain. If this sounds about as enticing as the offer Agent Smith made to Cypher Reagan, that only means you are intelligent and have been paying attention.
This pretty much describes the byzantine set of government mandates aimed at making us put corn juice in the gas tanks of our cars. As a result of this failed science experiment, botched on a national level, we now pay more for this alternative fuel and get worse gas mileage. On average, E85 vehicles cost $4.16 to drive the same distance you could typically drive with 1 gallon of regular unleaded for $3.77. The E85 is cheaper per gallon, but it lacks power, and you have to burn more to go the same distance you would with regular unleaded gasoline.
Ethanol is primarily protected from competition by the VEETC (Volumetric Ethanol Excise Tax Credit) which exempts ethanol fuel from $0.45 of taxation per gallon. Senators Tom Coburn and Benjamin Cardin have co-sponsored legislation to eliminate this giveaway. These gentlemen may have been inspired to eviscerate this travesty as a result of recent data from the CBO. Details follow below.
The costs to taxpayers of using a biofuel to reduce gasoline consumption by one gallon are $1.78 for ethanol made from corn and $3.00 for cellulosic ethanol. The cost of reducing an equivalent amount of diesel fuel (that is, a quantity having the same amount of energy as a gallon of gasoline) using biodiesel is $2.55, based on the tax policy in place through last year.
Similarly, the costs to taxpayers of reducing greenhouse gas emissions through the biofuel tax credits vary by fuel: about $750 per metric ton of CO2 (that is, per metric ton of greenhouse gases measured in terms of an equivalent amount of carbon dioxide) for ethanol, about $275 per metric ton of CO2 for cellulosic ethanol, and about $300 per metric ton of CO2 for biodiesel.
By comparison, the Waxman-Markey cap-and-trade bill estimated fair value offset prices between $25-$93 dollars depending upon emissions category. (Please see page xii in link). So, from anywhere from 3 to 25 times the recommended Waxman-Markey GHG offset prices for a metric ton of pollution, ethanol can bring cleaner air to a place near you!
According to Kenneth Gloser of The Heritage Foundation, US government policy is on track to make us consume 15Bn Gallons of ethanol by 2015 - against a predicted market demand of 9.8. Thus, by forcing the consumption of more ethanol, we get the BTU equivalent of 3.5Bn gallons of gasoline in exchange for 5.2Bn gallons of ethanol. After this 33% forcing of ethanol consumption, we will successfully replace 1.8% of the oil we import from abroad. The program was targeted to replace 25% of by 2025. I’m certain DOE’s Lean Six Sigma boys have a miracle in the works!(/sarc).
The effects of ethanol on US foreign policy have been deleterious in even the best case scenario. What happened in Egypt was not a best case scenario. Spengler of The East Asia Times describes how Eqypt was (and still is) vulnerable to any major policy that makes agricultural commodities cost more.
Egypt is the world's largest wheat importer, beholden to foreign providers for nearly half its total food consumption. Half of Egyptians live on less than $2 a day. Food comprises almost half the country's consumer price index, and much more than half of spending for the poorer half of the country.
This discombobulating impact can be said without loss of generality to Tunisia, Iran, Pakistan, and Syria. These particular governments are nothing to laud or aspire to; however, the alternatives seem primarily groups like Al-Qaeda, The Muslim Brotherhood or Hamas. Any US policy that strengthens the ability of these people to control territory and manpower enables them to plan more terrorism and thereby drive up the cost of a safe and secure America. Thus, the ethanol policy also raises the Bin Ladin Tax that has added to our economic hardships in the US.
Ethanol, like the awful characters in the Stephen King story Children of The Corn, is something that we absolutely don’t need to encourage. A market demand, of smaller dimension, exists for some of this fuel. Let the market meet this demand and back off the Kremlin Era central planning. Thus, when Senators Coburn, Webb, Feinstein and Cardin all four agree that ethanol should become decreasingly mandatory or protected, this is an example of Senatorial bipartisanship at its best. All four of these people are telling Washington DC to stop screwing this up. Call your senators and request their support of S. 520 and S. 530 today.