Trump pushes the ethanol blend wall

Trump pushes the ethanol blend wall
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President TrumpDonald John TrumpCould Donald Trump and Boris Johnson be this generation's Reagan-Thatcher? Merkel backs Democratic congresswomen over Trump How China's currency manipulation cheats America on trade MORE intends to hand out $12 billion to various farmers to offset the financial losses they are facing due to his trade war. That’s his attempt at directly padding his supporters’ pockets.

But during a recent visit to Iowa he went even further by announcing a plan to indirectly help corn farmers. “I’m very close, I have to tell you, to pulling off something you have been looking forward to for many years and that’s the 12-month E15 waiver.”

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The president was referring to standards for ethanol, a mostly corn-based fuel blended into gasoline. The waiver would allow the year-round sale of gasoline that contains 15 percent ethanol, which is prohibited during the hot summer months due to smog concerns. However, there are several reasons for opposing E15 expansion.

 

The government’s embrace of ethanol can be traced back to the mid-1970s. At that time, U.S. crude oil production began to decline and Middle Eastern countries began restricting their oil exports to punish the U.S. for its pro-Israel policies. In response, Congress began looking for ways to reduce U.S. dependence on imported oil while creating a more environmentally friendly alternative to gasoline. So the government began subsidizing ethanol.

Then in 2005 Congress passed the Energy Policy Act, which created the renewable fuel standard, or RFS. Instead of subsidizing ethanol, the new law mandated that 4 billion gallons of ethanol be mixed into gasoline beginning in 2006.

President George W. Bush embraced that effort. In his 2006 State of the Union Address, he asserted that “America is addicted to oil,” and set a new goal: Replacing 75 percent of America’s Middle Eastern oil imports with renewable energy sources such as ethanol by 2025.

In 2007, Congress expanded the mandate by passing the Energy Independence and Security Act, which required a minimum of 36 billion gallons of ethanol to be mixed into gasoline by 2022. 

However, the Great Recession led to a downturn in economic activity and gasoline usage leveled off for years, even as innovative drilling techniques dramatically increased our supply of crude oil. However, static gasoline demand created a problem: The RFS envisioned the country using more gasoline and thus more ethanol every year.

As a result, the Environmental Protection Agency began scaling back the total amount of ethanol to be blended into gasoline in order to keep the gasoline-ethanol “blend wall” at about 10 percent.

Even so, ethanol producers wanted to put even more ethanol in our gas tanks because that increases the demand for, and therefore the price of, corn. So they have been lobbying for a blend-wall increase to 15 percent.

Carmakers have pushed back against E15 arguing that it would harm many older engines. The Renewable Fuels Association says that nearly 90 percent of 2018 models are approved for E15. But the association concedes, “RFA estimates that approximately 34 percent of the estimated 235 million cars, trucks, and SUVs on the road today are clearly approved by the automaker to use E15 (including FFVs).” 

That means that two-thirds of the cars in service right now might be harmed.

And it’s not just cars. Boating magazine recently issued this warning: “You will now see this sticker warning against the use of ethanol blended gasoline containing 15-percent or more ethanol (E15) aboard new boats. Ethanol is bad for your boat’s engine, and its fuel system. Under no circumstances should you ever fuel up with E15.” 

There’s more. Environmental groups are increasingly concerned that corn-based ethanol may not be the clean energy option they once thought. Farmers use energy to run the machinery that clears fields and plants, harvests and transports corn to a processing plant. Is that fuel-consuming process “cleaner” than just putting that gasoline in our cars?

But since Iowa produces more corn-based ethanol than any other state — nearly twice as much as second place Nebraska — and since it is the first state up in the quadrennial presidential primaries, nearly every presidential candidate, Republican or Democrat, promises to keep Iowa corn flowing into our gas tanks.

Trump supported ethanol from the get-go. And now it could be a means of smoothing the rough patches created by China’s retaliatory tariffs on many U.S. farm products. Increasing the blend wall to E15 means more demand for corn, which means higher prices and more money in farmers’ pockets — or maybe it just offsets some of their tariff-related losses.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.