Time for Congress to end its ethanol addiction

Ethanol is showered with more presents and protectionism than a newborn baby.  Under current law, ethanol receives a 45 cent-per gallon subsidy for blending into gasoline.  At roughly $7 billion a year, that might seem like enough support for a 30 year-old industry.  However, agribusiness and farm belt senators disagree.   

Congress has mandated that motorists use 7.5 billion gallons of renewable fuels (read ethanol) by 2012.  Not to be outdone, agribusiness was able to increase this to a staggering 36 billion gallons by 2022.  Finally, for good measure, Congress also enacted a 54-cent tariff on imported ethanol.  Subsidies, mandates, and tariffs; this must stop.

Ethanol corrodes engines, reduces miles per gallon (MPG) performance, and has a terrible environmental record.  No wonder Al Gore, a previous supporter, has stated, “[E]thanol, I think, was a mistake.”  As for current Secretary of Energy and Nobel Prize recipient Steven Chu: “Ethanol is not an ideal transportation fuel.”  To an extent, even the EPA agrees.

In trying to comply with Congress’s ethanol mandate, the EPA is charged with increasing the amount of blended ethanol.  Unfortunately for motorists, ethanol can corrode engine parts and damage catalytic converters.  

In November the EPA proposed a prohibition of E15 (fuel blended with 15 percent ethanol and 85 percent gasoline) for Model Year (MY) 2000 and older vehicles because of likely engine damage.  Similar concerns have forced the EPA to delay implementation of E15 for MY 2001-2006 vehicles, and even some newer vehicle manuals warn that the use of E15 can void warranties.  Congress might love ethanol, but ethanol hates your car.

Ethanol also wants you to make more trips to the pump.  It is widely accepted, even by the federal government, that ethanol contains less energy content per gallon than gasoline.  Owner’s manuals note this and fueleconomy.gov states that E10 can reduce MPG by 3-4 percent, while E85 reduces fuel performance by 25-30 percent.  Ironically, the Administration has mandated that MPG performance increase 57.7 percent over the next five years, allowing for healthy competition between dueling federal mandates.

Finally, ethanol has a mediocre environmental mandate.  Some studies have concluded that ethanol increases greenhouse gases (GHG) and is a net energy loser.  The Congressional Budget Office found that ethanol cut GHG emissions at a cost of $750 per ton.  This might sound laudable but the cost of one ton of GHG is roughly $19, according to the European Climate Exchange.

Fortunately, a groundswell of opposition is starting to form in the Senate.  Seventeen senators from across the ideological spectrum (Tom Coburn (R-Okla.) to Dianne Feinstein (D-Calif.)) are opposed to the current policy that showers ethanol with every conceivable protection.  They wrote, “Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use.  We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time.”  Leave it to Congress to break all the wrong records.  

At a time when states and even foreign governments are forced to adopt austerity measures, shouldn’t we start the process with ethanol?  If we can’t confront $7 billion in wasteful spending, how can we begin to address a deficit 180 times larger?

Congress should dedicate its remaining days in Washington to quitting its ethanol addiction.  Politicians can spend the holidays going through withdrawal while consumers celebrate a much needed step toward deficit reduction and sensible energy policy.

Sam Batkins is the Coordinator of Regulatory Issues at the American Action Forum and Doug Holtz-Eakin is the president of the American Action Forum.