Ethanol Mandates: The Single Most Misguided Agricultural Program in Modern American History


photo: Robenalt via flickr

It's all but conventional wisdom at this point that corn ethanol isn't the renewable energy savior that it was once cracked up to be. Several power farm lobby groups still portray corn ethanol as the answer to the United States' energy problems and this is why Robert Bryce argues in a new Yale Environment 360 piece that Federal ethanol blending mandates have not be scaled back or repealed. Bryce gives a good overview of the issue:
Corn Gets Twice the Subsidies as Anything Else

The corn sector has long enjoyed staunch backing from Congress. According to the nonprofit Environmental Working Group, between 1995 and 2006, federal corn subsidies, which are provided through a myriad of programs, totaled $56.1 billion. That's more than twice the amount given to any other commodity, including American mainstays like wheat and cotton, and 105 times more than was paid to tobacco farmers.

Lobbyists Aim to Increase Ethanol Demand
States like Iowa and Ohio have their own ethanol associations, which work in tandem with national groups like the Renewable Fuels Association. In 2006 alone, that group collected about $3.7 million in dues from its members and paid its president, Robert Dinneen, a salary of $300,000 to push the ethanol-is-good message on Capitol Hill.

Additional support for the ethanol mandates comes from groups like the American Corn Growers Association and its larger cousin, the powerful National Corn Growers Association (NCGA), which reported 2006 total revenue of $8.6 million. The NCGA has some 33,000 dues-paying farmers spread among 48 of the 50 states. On its Web site, the NCGA makes it clear that it aims to "increase ethanol demand" by establishing a federal program that is "part of a comprehensive energy policy."


Ethanol Mandate Will Be Hard to Remove
Any sustained attack on the ethanol mandates would have to counter the enormous amounts of capital that have been invested in the corn ethanol sector. The industry's momentum can be measured in the billions of dollars. According to the Renewable Fuels Association, the trade group, some 168 ethanol distilleries with an annual capacity of 9.9 billion gallons are now operating in the U.S. Those plants are spread among 26 states, and another 43 plants are under construction or are being expanded. If you assume that each of those 200-plus plants costs $75 million to construct (a conservative estimate), the total cost of those distilleries is about $15 billion. If the federal mandates are eliminated or rolled back, the owners of the ethanol plants could seek compensation from the federal government.

Ending Subsidies Won't End Ethanol Industry
Even without federal supports, some distilleries will still be profitable. And their profitability will be directly linked to the price of oil: As the price of oil continues to rise, some of the most efficient ethanol producers will be able to compete with high-priced gasoline.

No matter what Congress decides to do in the future with regard to the ethanol mandates, it has birthed an industry that has an incentive to burn food in order to fuel cars. And the ramifications of that move — in food prices and environmental effects — are likely to reverberate throughout the global economy for years to come.

Read all of "The Corn Ethanol Juggernaut" at :: Yale Environment 360
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Tags: Biofuels | Economics | Ethanol | Renewable Energy | United States