NCPA - National Center for Policy Analysis

Ethanol Harms the Economy and the Environment

June 21, 2013

Praised as a policy that would reduce dependence on oil and reduce greenhouse gas emissions, the Renewable Fuel Standard (RFS), which requires refineries to blend ethanol into gasoline, has been fraught with unintended consequences, says Nicolas Loris, the Herbert and Joyce Morgan Fellow at the Heritage Foundation.

  • The Energy Policy Act of 2005 mandated the first requirement that renewable fuels be mixed into America's gasoline supply.
  • By 2022, there must be 15 billion gallons of corn-based ethanol and 21 billion gallons of non-corn biofuels in the nation's fuel supply.

In essence, the RFS mandates a market for corn farmers and biofuel producers, gives preferential treatment to the production of corn and soybeans, and artificially eliminates the risk and competition necessary for a healthy and growing economy.

RFS requires that fuel blenders use biofuels regardless of the cost. If Congress's goal is to have a commercially viable alternative to oil-based fuels, the best approach is not for the federal government to distort invention and investment by hanging its hat on a single possibility, such as ethanol.

The 2012 summer drought in the United States ravaged crops, driving corn prices up dramatically. Since corn is a staple ingredient for many foods and an important feedstock for animals, many in the food industry (from cattle and chicken farmers to restaurant associations) have expressed concern regarding the mandate's effect on food prices.

Environmentalists are now arguing that the ethanol mandate is poor environmental policy.

  • After accounting for land-use conversion, the use of fertilizers, insecticides and pesticides, as well as the fossil fuels used for production and distribution, biofuel production is quite carbon-intensive.
  • To grow corn, farmers must plow more land, and more land plowed means not only less area for trees but also the release of carbon dioxide stored in trees, plants and soil.
  • The Environmental Protection Agency also acknowledges that increases in soybean production as a result of the mandate can cause adverse effects to water quality and ecosystems.

The RFS mandates the use of an inefficient fuel, drives up food prices and causes adverse environmental effects. The 2012 drought and problems meeting the quotas in the RFS have put the program under the political microscope. The only true reform to the Renewable Fuel Standard is to eliminate it.

Source: Nicolas Loris, "The Ethanol Mandate: Don't Mend It, End It," Heritage Foundation, June 12, 2013.


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