More Fuel Ethanol – And More Trouble – On The Way

Adding ethanol to the gasoline supply raises the cost of driving, boosts food prices, gobbles up subsidies, and has failed to live up to its environmental promise. But there’s good news – the Environmental Protection Agency may let us use more of it.
EPA recently announced that E15 – gasoline with up to 15 percent ethanol blended in – has been approved for use in cars and trucks built since 2007. Until this decision, no more than 10 percent ethanol was allowed. The federal government is still conducting testing to determine whether older vehicles can use E15 without problems, and until that decision is made gas stations will be reluctant to carry it. Beyond cars and trucks, a coalition of producers and owners of watercraft, motorcycles and off-road vehicles, and gasoline-using equipment continue to express concerns that E15 will compromise performance and possibly damage engines.
Given the increasing ethanol mandate – 13 billion gallons of corn based ethanol and other renewable fuels must be added to the fuel supply in 2010, increasing to 36 billion by 2022 – raising the limit to E15 was necessary in order to incorporate the mandated amounts into the fuel supply. But the risk to millions of vehicle and equipment owners only adds to the problems created by the mandate. Ethanol has not lowered and in fact has increased the cost of driving. And the diversion of nearly a third of the nation’s corn supply from food to fuel use has raised the costs not only of corn itself but related items like corn-fed meat and dairy.
In addition to the mandate, ethanol benefits from billions in tax breaks as well as protectionist tariffs that limit competition against sugar ethanol from Brazil.
While the costs of ethanol have been higher than anticipated, the claimed air quality benefits and reductions in greenhouse gas emissions are failing to materialize. Indeed, several major environmental groups have joined in the fight against E15.
At least on the tax and tariff front, there may be a chance to stem the tide. The tax credit of 45 cents per gallon of ethanol (currently costing about $6 billion a year) as well as the tariffs are set to expire by the end of the year. Allowing them to end would be the first step to rein in the ethanol mistake.