NCPA - National Center for Policy Analysis

Propping Up Ethanol

May 16, 2002

If ethanol is as good a fuel as its proponents claim, why does it need subsidies and competitive crutches mandating its use, observers ask?

  • For years, it has received a 53-cent-per-gallon taxpayer subsidy to make it cost-competitive with gasoline.
  • It got a sales boost thanks to the 1990 Clean Air Act Amendments, which require a gasoline additive such as ethanol in polluted areas of the country.
  • And now it is about to achieve a federal mandate requiring using 5 billion gallons of ethanol in the nation's gasoline by 2012 -- triple today's use.

But the public benefits are still suspect:

  • Ethanol's environmental benefits aren't yet verified -- with a National Research Council study finding that adding it to gasoline in the summer could result in an increase in smog.
  • As for producing energy savings, the Congressional Research Service contends that when fuel used for harvesting and processing the corn which is an ethanol base is factored in, expanding ethanol use might "do nothing to contribute to energy security."
  • As for the consumer, forcing more ethanol into gasoline would raise pump prices -- with some studies predicting the impending mandate would result in price increases upward of nine cents a gallon.
  • Ethanol also cuts fuel economy, requiring more frequent fill-ups.

Source: Editorial, "Despite Grand Plans, Ethanol Falls Short as 'Miracle Fuel'," USA Today, May 16, 2002.

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