EPA Shrinks Ethanol Mandate as Biofuels Lose Favor

In a giant blow to the ethanol/corn belt lobby, the U.S. Environmental Protection Agency (EPA) has proposed to reduce the ethanol mandate of incorporating 14 billion gallons of the biofuel into the nation’s gasoline supply.  Due to lower overall fuel consumption from a more efficient vehicle fleet since 2007, the EPA would have in effect required higher than 10% ethanol blends in gasoline for 2014, which automakers believe could cause damage to fuel system parts. The new EPA requirement is between 12.7 and 13.2 billion gallons of ethanol for 2014.

Back in 2007, as gasoline prices were poised to surge and it appeared that American was never going to be free of its imported-oil addiction, Congress mandated that certain quantities of ethanol be included in the nation’s fuel supply.  With the elimination of MTBE as a gasoline additive to cut smog due to its tendency to contaminate soil and groundwater, ethanol became the clean-air, renewable” fuel solution.

Loopholes in fuel-economy regulations made it prudent for vehicle manufacturers to build flex-fuel capability into their vehicles, even if the highest ethanol concentration the majority of the U.S. vehicle fleet can handle is E10 (10% ethanol).  Flex fuel vehicles can run ethanol concentrations up to E85 (85% ethanol, 15% gasoline), but non-FFVs are likely to experience fuel system damage when exposed to ethanol concentrations above E10.

With less gasoline being consumed each year while the ethanol content requirement is an absolute number of gallons rather than a percent of all gasoline, the EPA was faced with the choice of either endorsing higher-than-E10 blends for vehicles not designed to use that high of a concentration, or lowering the requirement so that it’s back to roughly 10 percent of the gasoline mix.

The ethanol lobby, supported by lobbyists for corn-producing states, had been pushing the EPA for an increase in the requirement, and for the widespread introduction of E15 (15% ethanol, 85% gasoline) against the better judgment of most automakers.  Why would they do this?  Follow the money, of course.  The ethanol mandates that the 2007 law required created a giant market for corn, which is the primary ingredient in most ethanol sold in the U.S.

Plus, not only did corn producers have a large built-in market for their crops, but ethanol producers also received various forms of subsidies over the years.  From 1980 to 2011, ethanol producers received $0.45 for every gallon of ethanol they produced.  Though that particular subsidy has ended, at the low end of the EPA’s 2014 ethanol production mandate, that would have cost $5.7 billion and the government has spent over $45 billion in ethanol subsidies over the past few years.  The mandate itself is a subsidy.

Aside from the wasted money in ethanol subsidies (whether they be direct or indirect subsidies), converting food to motor vehicle fuel brings a set of ethical issues to the forefront.  With hunger as a serious problem in many parts of the world, including in many places within our own backyard in the U.S., does a policy that 1) causes the inefficient destruction of corn for the creation of fuel – a process that itself is a large consumer of energy, and 2) artificially raises demand for corn, therefore raising corn prices, and making food more expensive.  For individuals and families living paycheck-to-paycheck and struggling to make ends meet, the ethanol “tax” on their food prices has surely been an unwelcome development.  If you read nutrition labels, you’re aware that many, many foods contain corn syrup as a sweetener.

With sequestration still in effect in Washington and constant budget battles, not to mention dramatically increased domestic oil production over the past few years, don’t expect there to be much political appetite for re-instating subsidies for ethanol anytime soon.  While some subsidies and government assistance probably do have a place in the development of alternatives to fossil fuels, the reduction in the ethanol mandate for 2014 is welcome news for nearly everyone  – taxpayers, automakers, gasoline producers, and consumers – except for those in the corn-growing or ethanol-production businesses.