The US has an ethanol problem

The US ethanol industry can owe its existence to the whims of American presidential politics and international intrigue.  In 1973, the Arab oil embargo put a hurting on US gasoline supplies and outraged drivers, many of whom were the voting public.  Ethanol was seen as a solution to balance out the country’s gasoline addiction.  Since the main ethanol fuel is corn-based, that meant Iowa was ground zero for ethanol’s emergence, with its acres upon acres of corn fields. 

A coincidence that helped ethanol emerge and get traction in Washington was the fact that every four years, the presidential primary circus comes to Iowa.  Iowa is one of the most important states in the primaries, with it being placed second after New Hampshire.  That means that a lot of politicians out grandstanding were asked their position on ethanol and to no surprise, most supported the nascent industry.  Throughout the late 1970s, 1980s and 1990s, an individual could not get elected without embracing the ethanol vote in Iowa in hopes of winning that primary. 

The US’s current sorry situation with ethanol is a direct result of retail politics, and good public policy is rarely achieved with pandering promises made to prospective voters.  So ethanol flourished with fat subsidies from Washington and then the green movement came along and the drumbeat for alternative fuels became louder and ethanol was positioned to be that fuel.  This is despite the facts that its environmental value is questionable at best, it takes food out of the world’s food supply and places it in the fuel pool and it is a much less efficient fuel than petroleum based gasoline. 

There is no question that the world should explore and develop alternative fuels to help with transportation and energy production needs into the future.  But ethanol, the first horse out of the gate, is destined to be a major failure.  Even environmental guru Al Gore has come to the conclusion that pushing bulging ethanol subsidies was bad public policy.  Two good stories that cover Mr. Gore’s change of heart can be read here and here.

Compounding the US’ ethanol problem is that there is no quick and easy escape.  There are mandates on the books pushing an increase of ethanol in the fuel pool.   Even though the Environmental Protection Agency recently slashed the 2011 ethanol mandate from 250 million gallons to 6 million, the principle of these mandates were poorly thought out and in execution have become asinine.

The US is having financial problems, both its citizens and the federal government.  As Congress struggles with massive debt, there are two things they can do to help turn things around.  The first is to repeal all ethanol and cellulosic fuel mandates and start over with a better understanding of what alternative fuels offer the best assistance.  The second would be to cut the ethanol subsidy entirely.  If the brave senators and representatives at the Capitol could do that, they would save the nation at least $7.7 billion dollars (the total amount of last year’s ethanol subsidies).  By my reckoning, that’s a good chunk of change and sound financial policy. --Billy Thinnes (