Column: Renewable fuel standard has failed
A decade ago corn ethanol subsidies and mandated use of ethanol were viewed as environmentally friendly and important to wean the U.S. from unstable and high-priced foreign oil. Today these are clearly outmoded thoughts. A number of factors have led to environmentalist opposition to the renewable fuel standards that require use of corn-based ethanol in the refining of gasoline, as well as opposition from those concerned about the effect on food prices.
The 1973 oil crisis sparked an interest in finding a domestically produced non-petroleum fuel. Corn-based ethanol became the solution of choice. This interest was further advanced by the greenhouse gas debate with the claim that ethanol blended into gasoline was more environmentally friendly. The result was a tax subsidy for corn-based ethanol and what is known as the renewable fuel standard.
While the tax credit for refining gasoline with ethanol expired in 2011, Congress’ 2007 requirement for an increasing amount of biofuels to be blended with gasoline remains. Five years from now the requirement will be 15 billion gallons of corn ethanol and an additional 21 billion gallons of advanced biofuels.
While the ethanol mandates have been good for Iowa corn farmers, they have not lived up to their expectations with regard to lowering greenhouse gas emissions. They have also been made irrelevant to the oil reliance issue with the advent of fracking and America’s place as the largest producer of oil. In addition, they have inadvertently increased the price of a staple food for billions of people across the globe.
A 2009 study by the National Academy of Sciences found that once one accounts for the costs of producing ethanol from corn, the combined climate-change and health costs are greater for corn ethanol than from gasoline.
Today there is little discussion about finding a substitute for oil. Depending upon the estimate, the U.S. is either first, second, or third in the production of crude oil. The use of horizontal drilling and fracking ensures the U.S. will be a major oil producer for a lengthy period of time.
Additionally, 40 percent of the U.S. corn crop was used to produce ethanol in 2011, according to a report in The Economist. If all the American maize that goes into ethanol were instead used as food, global edible maize supplies would increase by 14 percent.
Environmentalists are taking note of the effects on prairie land and water. Renewable fuel standards have converted more than seven million acres of native prairie, rangeland, wetlands, and forests into cropland, according to the National Wildlife Federation. Using a different methodology for estimating the conversion, the World Wildlife Fund estimated that the conversion of grassland into cropland since 2009 exceeds 50 million acres. The threat to the last of America’s prairie land and the wildlife that inhabits it is obvious.
Water quality is being threatened as well. Clearing land and draining wetlands to produce corn for ethanol has affected water tables. This is a particular problem in the Prairie Pothole Region of the upper Midwest, a primary breeding ground for waterfowl. More fertilizers and pesticides have led to more runoff and diminishment of water quality. Ethanol refineries also consume very large quantities of water, adding to the environmental costs.
It is clear that the demand for biofuels is not driven by consumers, but by an artificial mandate set by Congress a decade ago under entirely different circumstances and without the an analysis of the unintended consequences of its actions. Repealing the renewable fuel standard will improve the environment, reduce the threat to endangered grasslands and their wildlife, and feed the world’s population.
Gary Wolfram is the William Simon Professor of Economics and Public Policy Hillsdale College.