Who is driving our ethanol policy? And why does it matter?

a stock photo of ethanol

Over the past three years, ethanol policy has shifted quickly in the world’s two largest ethanol producing countries, the United States and Brazil. The political stakes are high — it’s a $168 billion industry — but the key players can be hard to identify, with farmers, producers, oil refiners, and two unpredictable presidents, Donald Trump and Jair Bolsonaro, all playing roles. But the real drivers of biofuel policy in both countries are powerful multiparty blocs of legislators representing rural areas and agricultural interests. Understanding the political dynamics behind biofuel policy is necessary to legislate effectively and will be essential for the coming transition from fossil fuels to renewable energy.

Ethanol has been one of the Trump administration’s most intractable problems. In October, the Environmental Protection Agency (EPA) announced that it would require refiners to blend more than 15 billion gallons of ethanol into the U.S. fuel supply to comply with the 2007 Renewable Fuel Standard. Instead of tamping down the ethanol controversy that has boiled for months, the EPA’s announcement managed to anger both corn ethanol advocates and the refining industry.

Ethanol producers argue that the EPA’s regulation does not account for exemptions granted to refineries that have violated the spirit of the law and destroyed ethanol demand. Refiners argue the Renewable Fuel Standard (RFS) has always been unwieldy and the latest rules are a pro-agribusiness boondoggle. Conflict over biofuels policy is framed as Trump vs. farmers or agribusiness vs. big oil, but neither framework accurately captures what’s really pushing biofuel policy. Conflict over the RFS pits a bipartisan bloc of midwestern legislators against the Trump administration, showing that region prevails over party when it comes to biofuels. For instance, Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill.) both strongly support the RFS and oppose the Trump administration using waivers to undercut RFS blending requirements.

There is nothing new about U.S. biofuel policy being set by bipartisan blocs of senators and representatives. In the depths of the Great Depression, farmers across the Corn Belt demanded that alcohol made from excess crops be blended into gasoline to raise crop prices. Iowa in 1933 debated a law that would have required all fuel sold in the state be a blend of 90 percent gasoline and 10 percent alcohol. Alcohol fuel mandates reached Capitol Hill when Bennett Champ Clark (a Missouri Democrat) and Lester Dickinson (an Iowa Republican) proposed nationwide subsidies for alcohol-gasoline blends. These Great Depression “power alcohol” bills never passed, but they illustrated biofuel’s power to inspire midwestern legislators. Ethanol returned to the nation’s political agenda amid the oil crisis of the 1970s. By the end of that decade, a powerful “gasohol lobby” in the Senate pushed former Presidents Carter and Reagan to support ethanol.

The world’s other huge biofuel producer, Brazil, recently charted a course toward a 70 percent expansion of its biofuel sector over the coming decade. A new National Biofuels Policy, known as RenovaBio, will go into effect in January. The government will issue decarbonization credits to biofuel producers in proportion to the volume of fuel they sell. Distributors, in turn, will be required to buy the securities each year in proportion to the amount of fossil fuels they sold the previous year. So biofuel producers will have an additional source of revenue and fuel distributors will face a financial penalty for buying and selling fossil fuels. Ethanol producers will gain twice, through the sale of their decarbonization securities and with rising fuel prices.

Brazil’s political history with ethanol looks something like America’s, as sugarcane-growing states fed ethanol into regional fuel supplies in the 1930s and 1950s and Depression-era President Getúlio Vargas considered expanding ethanol into a national fuel. “Motor alcohol” did play an important role during World War II but low post-war oil prices derailed a national program. Vocal sugarcane producers and their political allies led a renewed campaign for ethanol during the oil shocks, spurring the creation of the world’s largest production program.

For decades now, a formidable, cross-party caucus has kept generous federal support flowing to Brazilian agriculture, including bioenergy. Known popularly as the Rural Bench or “ruralistas,” these politicians comprise the largest single interest group in Brazil’s congress. By some counts, a stunning 72 percent of senators and deputies have ties to the Rural Bench, if not formal membership. The group has also spawned a formidable Cane Bench, dedicated to advocating for sugar and ethanol and claiming nearly 40 percent of the Chamber of Deputies.

If RenovaBio does not reduce carbon emissions as intended, it will still be difficult to repeal. The ruralistas pushed it through both houses of congress and the former deputy who wrote the bill, Evandro Gussi, later moved into the presidency of UNICA, a trade association that represents more than 50 percent of the country’s ethanol producers. The senator who ushered the bill through the upper house is the father of the Minister of Energy, who championed the program from the executive branch.

Understanding how these powerful rural blocs shape biofuel policy in the United States and Brazil is important for two reasons. First, unless these multiparty rural blocs can be broken up, or appeased in another way, ethanol will continue to receive lucrative subsidies. For critics of biofuels, appeals to science and economics are unlikely to sway this political reality. For ethanol’s supporters, it means increasing party polarization threatens to undermine the cross-party regional alliances that now drive biofuel policy.

Second, the regional support that drives biofuel policy contains a lesson relevant for the transition from fossil fuels to renewable energy. In hindsight, energy policy during the 20th century was unusually global and concentrated due to oil’s dominance. Companies such as Standard Oil, BP and Shell commanded great wealth and operated on a global scale. Energy policy in the age of oil involved nation-to-nation politics, most notably in the Middle East. Unlike oil, renewable energy is more likely to be dispersed and regionally variable, such as solar power’s dominance in the southwest, wind energy coming from the Great Plains and biofuels from the Corn Belt. So energy policy for a green future needs to grapple with the influence of these regional power blocs to legislate effectively.

When a government treats energy sources and fuels individually, organized groups like the rural blocs can capture policymaking. Instead, the United States and Brazil should pursue comprehensive national energy policies that prioritize decarbonization. This would diminish agribusiness’s influence over policymaking and move us toward a distributed and diverse energy system.

Jeffrey T. Manuel is associate professor of history at Southern Illinois University Edwardsville. Thomas D. Rogers is associate professor of history at Emory University. They are writing a book on the transnational history of biofuels in the United States and Brazil.