With gasoline above $4 a gallon, it’s time to rethink the $6 billion Uncle Sam spends annually on ethanol subsidies paid to corn growers and ethanol producers.
Ethanol increases the price of gasoline, pollutes the air and drives up food costs. It also increases the deficit, which this fiscal year stands at $1.6 trillion.
Ethanol is a corn-based fuel that can be substituted for some of the gasoline needed to operate vehicles. But the gasoline-ethanol blend, currently 10 percent ethanol, lowers vehicles’ gas mileage, leaving motorists with higher fuel bills.
Congress, in the energy bill signed into law in December 2007 by President George W. Bush, agreed to require the use of 14 billion gallons of ethanol or other renewable fuels this year, with quantities gradually increasing to 36 billion gallons in 2022.
Ethanol producers receive a tax break of 45 cents a gallon, and corn growers receive subsidies that Congress may increase in the next farm bill, in 2012.
Ethanol is costly to ship, because it separates from gasoline in the presence of water. So blends of ethanol and gasoline cannot be transported through pipelines. Instead, ethanol is shipped by rail, and mixed with gasoline near the point of distribution.
Even with congressional mandates and federal subsidies, America is having difficulty absorbing the required 14 billion gallons of ethanol.
With high gasoline prices, motorists are driving less and purchasing more fuel-efficient cars, reducing gasoline — and ethanol — consumption.
The Environmental Protection Agency’s solution? Force more ethanol consumption, by allowing ethanol levels in gasoline to rise from 10 percent to 15 percent for cars from model years 2001 onward.
Since higher ethanol blends are harmful to older car engines — some believe to newer engines also — gas stations would have to operate different pumps for the 10 percent and 15 percent blends.
If motorists put the 15 percent blend in older cars by mistake — an accident that would likely occur not infrequently — the engine would be damaged.
Rep. John Sullivan, R-Okla., authored an amendment to block the EPA from using funding this fiscal year to raise ethanol levels in gasoline. The Sullivan Amendment passed the House 285 to 136 in February, and is now awaiting action on the Senate floor.
The more ethanol produced, the more greenhouse gases generated. Rising corn prices encourage farmers to transform their land from forests to corn, losing the capture of carbon dioxide performed by trees and shrubs.
Ethanol production contributes to increases in global food prices. Not only is corn that would be used for food made into ethanol, but other crops are being abandoned for corn.
Despite such disadvantages, why does President Barack Obama continue to call for more renewable and biofuels, even if they drive up prices of food and gasoline?
In the past, ethanol has commanded a bipartisan majority in Congress because of the number of Democratic members who dislike fossil fuels and Republican members from agricultural states.
But House Republicans are beginning to reconsider their support for ethanol. House Republican Study Committee Chairman Jim Jordon, R-Ohio, has come out firmly against ethanol subsidies. Only 31 Republicans were in favor of allowing EPA to increase ethanol levels in motor fuel, and 206 were against.
Obama may figure that, in the next election, he needs ethanol to win the corn-growing states from Ohio westward through Iowa that he won in 2008.
Whatever the politics of ethanol, the problem for Obama is that this new generation of fuels is not yet commercially economically viable on its own. Meanwhile, rising gasoline prices threaten his re-election prospects.
Instead of subsidizing ethanol, America needs to ramp up domestic oil exploration and refining. That will start bringing gasoline prices down.
Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.