The Sugarcane Blog

Now here’s an interesting op-ed published in the Detroit News. While putting 15% ethanol in gasoline is a good move, this article make a novel arguement that the U.S. Congress should repeal the ethanol tariff.

Tap ethanol’s car benefits by ending tariff
Dr. Gary Wolfram, Professor of Economics & Public Policy at Hillsdale College

The latest push by the corn-based ethanol industry to increase the required amount of the alternative fuel to be mixed in with gasoline should be defeated because it leads to higher corn prices and land values for farmers at the expense of everyone else.

Although most pumps already sell a blend of gasoline that is 10 percent ethanol, the massively subsidized industry wants the Environmental Protection Agency to increase the proportion to 15 percent (as known as E15 fuel). Not only does such a mandate present corrosion issues for engines that aren’t built to handle the higher ethanol content, but it unnecessarily props up an industry that has been floundering.

Vera Sun, once the nation’s second-biggest ethanol producer, filed last fall for bankruptcy. Other large operators have suspended operations. This has occurred even though there exists a tax credit of 45 cents per each gallon of ethanol blended with gasoline and a federal mandate that by 2015 at least 20.5 billion gallons of biofuels must be used annually in the United States, and 36 billion by 2022. The Institute for Sustainable Development estimates the total government support for ethanol in the United States was $6.9 billion in 2007.

Existing subsidies and mandates already have resulted in an increase in the price of food, such as meat, dairy products, soft drinks and poultry products, which are affected by the price of corn. The Congressional Budget Office recently estimated the increased food costs to consumers at about $1 billion annually. The ethanol program is effectively a food tax falling most heavily on lower-income families.

Other unintended consequences occur. To meet ethanol mandates, more corn must be grown in arid states, requiring substantial amounts of water. This exacerbates the decline in fresh water aquifers, and the additional fertilizer adds to water pollution. Conversion of land that was not previously used for farming into corn growing reduces the sequestering of carbon. which can more than offset any potential reduction in greenhouse emissions that may occur due to the use of ethanol in motor fuels.

As it is, the arbitrary mandates for blending ethanol with gasoline have become unrealistic now that gas prices have declined to about $2.30 a gallon in Metro Detroit and similarly low prices around the country. Rather than admitting that government planning has failed, we now hear that we should increase the ethanol blend, piling even more harm upon the average consumer. Only a few flex-fuel vehicles are designed to run on ethanol blends this high. Hundreds of millions of small engines in boats, chain saws, weed trimmers and similar devices also could be hurt.

There is a simple solution. If there are indeed environmental benefits from using ethanol as a motor fuel, then America should end the mandates for use of ethanol and eliminate the tariffs on imported ethanol.

Brazil produces ethanol much more efficiently from sugar cane than American farmers produce corn ethanol. America imposes a tariff of 54 cents per gallon and 2.5 percent of the value of the imported ethanol. By eliminating the tariff, the United States could enjoy whatever environmental benefits result from using ethanol in motor fuel, while reducing food prices and water pollution. Removing the arbitrary mandates on the amount of ethanol that must be blended in gasoline would remove the risk to your car, lawn mower and boat from E15 fuel.

The EPA is seeking comment on the ethanol lobby’s proposal to push for E15 fuel. America should use this opportunity to have a national call for common sense — end government interference in what we put in our cars and lawn mowers and let the Brazilians and others provide consumers with efficiently produced ethanol.