Search: ethanol

Post image for EPA Scales Back Ethanol Mandate for First Time!

For the first time in the history of the federal Renewable Fuel Standard (RFS) program, the Environmental Protection Agency today proposed to scale back the government’s overall biofuel blending target for the forthcoming year. Specifically, the EPA is proposing to cut the 2014 blending target from 18.15 billion gallons to 15.21 billion gallons.

Market realities forced the agency’s hand. Like all central planning schemes, there comes a point where even the commissar has to admit that it’s just not working.

Two factors compelled the EPA to make this adjustment. One is that the RFS requires obligated parties – refiners, blenders, and fuel importers – to sell 1.75 billion gallons of cellulosic ethanol in 2014. However, despite years of research and taxpayer support, commercial production of cellulosic biofuel was only 20,000 gallons last year.

The second factor is the blend wall — the maximum quantity of ethanol that can be sold each year given legal or practical constraints on how much can be blended into each gallon of motor fuel. The most common blend today is E10 — motor fuel with up to 10% ethanol. Although the EPA approved the sale of E15 in October 2010, potentially increasing by 50% the total amount of ethanol sold annually, lack of appropriate fueling infrastructure, warranty and liability concerns, and consumer skepticism effectively limit the standard blend to E10.

The EPA’s proposal is a welcome step in the right direction but does not go nearly far enough. Nobody likes the RFS program except the special interest groups who directly profit from it. Even as environmental policy, the RFS is a bust, as an extensive AP investigation published this week confirms.

Even if the RFS did not inflate food prices, increase pain at the pump, exacerbate world hunger, expand aquatic dead zones, or contribute to habitat loss, Congress should still repeal it, because the RFS flouts the core constitutional principle of equality under law. [click to continue…]

Corn Ethanol: Not Green – AP

by Marlo Lewis on November 15, 2013

in Blog

Post image for Corn Ethanol: Not Green – AP

An extensive investigation by the Associated Press (AP) confirms what many critics of the Renewable Fuel Standard (RFS) program have been saying for years — the ethanol mandate does more environmental harm than good.

The AP article begins with an overview of key findings:

But the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today. 

As farmers rushed to find new places to plant corn, they wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies, an Associated Press investigation found. 

Five million acres of land set aside for conservation – more than Yellowstone, Everglades and Yosemite National Parks combined – have vanished on Mr. Obama’s watch.

Landowners filled in wetlands. They plowed into pristine prairies, releasing carbon dioxide that had been locked in the soil.

Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.

* * *

All energy comes at a cost. The environmental consequences of drilling for oil and natural gas are well documented and severe. But in the president’s push to reduce greenhouse gases and curtail global warming, his administration has allowed so-called green energy to do not-so-green things. [click to continue…]

Post image for Odd Bedfellow Coalition Blasts “Havoc” Caused by Corn Ethanol Mandate

An odd-bedfellow coalition of agriculture, engine manufacturer, food retail, environment, hunger, taxpayer, and free-market public interest groups are asking the House Energy & Commerce Committee to ensure that any legislation proposed to reform the Renewable Fuel Standard (RFS) address the “havoc that the corn ethanol mandate” has imposed on a “multitude of stakeholder interests.”

In their joint letter to the E&C Committee, the 44 signatories state in part:

While our reasons vary, all of us have long maintained that the RFS is a uniquely flawed policy. The mandate on corn-based ethanol in particular has had a devastating effect on the entire food economy from livestock and poultry producers facing record feed costs, to food retailers facing record food costs, to consumers here and abroad struggling to balance food budgets in tough economic times. Some signers of this letter also question the propriety of Congress establishing production quota and guaranteed market shares for any type of commercial business. Ethanol from corn also is concerning to many due to its global warming impact and the use of natural resources such as water and native grassland for producing fuel. The corn-based ethanol mandate is also having a devastating impact in communities throughout the world, where people living in poverty are facing increased food prices that threaten their food and land security.

The coalition advises that “any RFS proposal advanced by the Committee should include significant, meaningful and permanent decreases in the conventional biofuels (corn ethanol) mandate.”

Click here to read the joint letter in full.

Update (added 5:30 pm)

A Reuters article by Cezary Podkul underscores the timeliness of the odd bedfellows coalition letter. Podkul reports that House E&C ”is weighing a proposal to cap the ethanol requirement at below 10 percent for two or three years, according to a person close to the committee. The proposal, which is not yet finalized, would give the industry time to study the use of higher ethanol blends . . . and then raise the target above 10 percent, according to this source.”

Although this sort of stop-gap measure would postpone the impending blend wall crisis, it falls short of the “significant, meaningful and permanent decreases” in the corn-ethanol mandate that the odd bedfellows coalition is advocating. [click to continue…]

The New York Times ran a front page story Sunday  on a new outrage resulting from one of the biggest scams in America today, ethanol mandates, and how they have made American consumers poorer, while enriching Wall Street profiteers through ethanol credits.  The story is entitled “Wall St. Exploits Ethanol Credits, and Prices Spike,” and focuses on

the rapidly growing role of Wall Street banks in gaming the ethanol credits market. Ethanol credits (or RINs, as they’re called) were created by the Environmental Protection Agency and Congress as a way to assure the inclusion of ethanol in gasoline as an energy-saving measure. But gasoline producers who couldn’t or didn’t want to include ethanol could buy credits from those who did. . . In stepped the speculators, amassing millions of credits and making a killing on the wide spread between the bid and ask prices of the credits. Predictably, this drove the price through the roof: the credits, which cost 7 cents each in January, peaked at $1.43 in July and now are trading for 60 cents.

The net result is that consumers will pay at the pump, notes investment adviser David Kotok of Cumberland Advisors.  As he  observes, ethanol mandates are having very negative “geopolitical effects” as well.  He agrees that “Ethanol was a bad policy, primarily to buy and reward grain-state votes. It spurred grain planting to meet the mandate, but not fast enough, so prices called out for more. The poor were hurt overseas,” and unrest in the Middle East ensued.  As Kotok points out, ethanol is

a massive scam. Our national policy diverts 40% of the U.S. corn crop (14% of the global corn crop) in order to produce a fuel that requires almost as much energy to produce as it supplies. Our ethanol mandate has starved millions of people; I’ve watched it with my own eyes in many countries in my travels. A 2011 study by the National Academy of Sciences estimates that, since 2007, the expanding U.S. biofuels subsidy has fueled 20%-40% of the increase the world has seen in the prices for agricultural commodities. In a country like Guatemala, that means that tortilla prices double and egg prices triple. (Source: [New York Times]).  Ethanol damages engines, too — ask any user; I’ve seen it myself throughout the US, and Popular Mechanics concurs [Link]. Corn ethanol has poisoned our planet while it has lined certain private and politically connected pockets with billions. It has succeeded in raising our costs, for minimal net energy gains. . . .Global urban dwellers at the low end suffered again. . . .The spike in prices this year was a reaction to the shortage in corn caused by the drought last year. Rather than pay high prices for corn, blenders bought stockpiled RINs. The real story of the market was the explosion from $0.02 per RIN, when nobody wanted them, to $0.07 in August 2012 when the short corn crop became clear. This surge attracted the Wall Street players. They benefited when corn prices spiked again in Jan-Feb on the perception that South America crops would not clear the market before US crops came in in August-September. . . .Please remember that this all starts in the corn-farmed, politically charged Iowa caucuses. Which means, it is our sick and rotten political system that produces these behaviors.  That will likely continue until we repeatedly and mercilessly pound the politicians who have sold our nation down a river of ethanol.

[click to continue…]

Post image for Diverse Coalition Calls for Ethanol Policy Reform

On Wednesday, Rep. Bob Goodlatte (R-Va.) introduced H.R. 1461, a bill to repeal the renewable fuel standard (RFS) program, and H.R. 1462, “The RFS Reform Act,” a bill to eliminate the corn ethanol component of the RFS program, cap the amount of ethanol that can be blended into conventional gasoline at 10%, and require the EPA to set cellulosic ethanol blending targets at commercial production levels.

A diverse coalition of agriculture, business, environment, hunger, taxpayer, and free-market groups joined Rep. Goodlatte and co-sponsors at a press conference announcing the introduction of H.R. 1462. Spokespersons for 15 of the groups each provided a paragraph explaining their particular reasons for supporting RFS reform in a joint letter. Here’s what I wrote on behalf of the Competitive Enterprise Institute:

If ethanol is such a great deal, why do we need a law to make us buy it? Although ethanol is cheaper than gasoline by volume, ethanol has about one-third less energy than gasoline and does not make up the difference in price. Consequently, the higher the ethanol blend, the worse mileage your car gets, and the more you have to spend for fuel. For example, at today’s prices, the average motorist would have to spend an extra $400 to $650 a year to switch from gasoline to E85 (the highest commercial ethanol blend). Congress should stop forcing Americans to make a “fuel choice” that increases our pain at the pump.

 

Post image for Ethanol Mandate: Proud Milestone in the Glorious History of Central Planning

Today on National Journal’s Energy Experts Blog, I post a comment celebrating the Renewable Fuel Standard (RFS) as a triumph of centralized economic planning. You think I’m joking? Far from it. The RFS is working at least as well as other central planning schemes!

Well, okay, the RFS would be funny if it weren’t so destructive. A new report by NERA Economic Consulting warns that the RFS is heading for a “death spiral” — a vicious circle in which rising fuel costs, declining sales, and dwindling biofuel credits make compliance increasingly “infeasible.”

In one scenario analyzed by NERA, the death spiral produces a 30% increase in gasoline prices and a 300% increase in the cost of diesel fuel in 2015. Potential adverse macroeconomic impacts include a “$770 billion decline in GDP and a corresponding reduction in consumption per household of $2,700.” Ludwig von Mises coined a term for such debacles: “Planned Chaos.” [click to continue…]

Back in 2007, EPA issued a regulation known as the Renewable Fuel Standard (RFS), requiring billions of gallons of corn ethanol to be blended into the U.S. gasoline supply. This mandate is a continuation of the U.S. biofuel policy, and has been celebrated by environmentalists and GW alarmists as a way of reducing greenhouse gases and lowering our dependence on supposedly dangerous foreign oil.

In October of 2011, the Competitive Enterprise Institute and ActionAid USA petitioned EPA to review its position on the impact of its RFS mandates on world hunger. Since a large portion of available farmland is being used to grow corn for ethanol instead of for food, this lowers the food supplies drastically and in turn drives up prices. Our petition was based on the Data Quality Act, which enables anyone to seek correction of data that has been disseminated by a federal agency. The request argued that the information in EPA’s regulatory analysis and on the agency’s website incorrectly downplayed the impacts of the U.S. mandates on world hunger. To support this claim, CEI and ActionAid cited several studies showing that higher food prices from biofuel mandates have caused malnutrition in developing countries, resulting in nearly 192,000 excess deaths annually.

Not being in much of a hurry to examine if whether it might be partly responsible for such carnage, EPA exceeded its 90-day response deadline-three times. Fourteen months would pass before they finally, in December of 2012, denied the petition.

This delay is particularly ironic since the Obama administration and EPA frequently have complained about the slow pace of Congress, issuing executive orders and fuel economy regulations with the slogan “We Can’t Wait.” Apparently, when it comes to assessing whether their policies are killing people, they can.

EPA claimed that assessing deaths due to biofuel programs was beyond the scope of its analysis, which apparently only focused on the incremental effects of the U.S. biofuel mandate. CEI and ActionAid USA filed a request for reconsideration on March 11, providing new evidence of the policy’s devastating effects on food prices and global hunger. A copy of the request is appended to the end of this post. Given EPA’s alleged “global leadership” role and the fact that people in developing countries spend up to 80 percent of their income on food, the new request shows that the U.S. mandate alone has far-reaching negative implications that EPA should address.

The request was fittingly filed during the Government in the Sunshine Week, a national initiative to promote the importance of open government. However, given EPA’s notorious lack of transparency on other matters, we wonder what effect our request will have on the agency whose motto is “protecting people and the environment.” We have an in-house joke that EPA ought to take that slogan and insert the phrase “but not in that order” to the end of it.

CEI and Action Aid – March 2013 Data Quality Reconsideration Request by Competitive Enterprise Institute

Post image for Study Links Ethanol Policy to Food Price Increases, Mideast Turmoil

A report published in October 2012 by the New England Complex Systems Institute (NECSI) links soaring corn and agricultural commodity prices to food riots and turmoil in North Africa and the Middle East.

Although several factors may contribute to political unrest, acknowledge Dr. Yaneer Bar-Yam and two co-authors, “the timing of violent protests in North Africa and the Middle East in 2011 as well as earlier riots in 2008 coincides with large peaks in global food prices.” In poor countries with little or no local agriculture to “buffer” swings in global supply conditions, the central government “may be perceived to have a critical role in food security. Failure to provide security undermines the very reason for existence of the political system.”

In short:

When the ability of the political system to provide security for the population breaks down, popular support disappears. Conditions of widespread threat to security are particularly present when food is inaccessible to the population at large.

Soaring food prices triggered food riots in both 2008 and 2011.

Figure explanation (references omitted): Time dependence of FAO Food Price Index from January 2004 to May 2011. Red dashed vertical lines correspond to beginning dates of “food riots” and protests associated with the major recent unrest in North Africa and the Middle East. The overall death toll is reported in parentheses. Blue vertical line indicates the date, December 13, 2010, on which Dr. Bar-Yam and colleagues submitted a report to the U.S. government, warning of the link between food prices, social unrest and political instability. Inset shows FAO Food Price Index from 1990 to 2011. [click to continue…]

Post image for Ethanol: Bad Deal for Consumers Gets Worse

Responding to the anti-Renewable Fuel Standard Hill briefing discussed on this blog yesterday, Tom Buis, CEO of ethanol trade group Growth Energy, asserted that “homegrown American renewable energy provides consumers with a choice and savings” (Greenwire, subscription required). Rubbish. Under the Renewable Fuel Standard (RFS), ethanol consumption is a mandate, not a choice. 

Buis’s claim that ethanol relieves pain at the pump sounds plausible because a gallon of ethanol is cheaper than a gallon of gasoline. However, ethanol has about one-third less energy than gasoline and does not make up the difference in price. Consequently, the higher the ethanol blend, the worse mileage your car gets, and the more money you spend to drive a given distance.

FuelEconomy.Gov, a Web site jointly administered by the U.S. Environmental Protection Agency (EPA) and the Department of Energy (DOE) calculates how much a typical motorist would spend in a year to fill up a flex-fuel vehicle with either E85 (motor fuel made with 85% ethanol) or regular gasoline. The exact bottom line changes as gasoline and ethanol prices change. The big picture, though, is always the same: Ethanol is a net money loser for the consumer.

For example, at prices prevailing in late November 2012, it cost $500 more per year to drive on E85. When I checked FuelEconomy.Gov last week, E85 cost the average motorist an additional $600 per year.

A bad deal just got worse. At today’s prices, it would cost an extra $700-$900 a year to switch from regular gasoline to E85. Some savings! Small wonder that our ‘choice’ to buy ethanol must be mandated.

  [click to continue…]

Post image for Ethanol Litigation: Another Powerful Dissent by Judge Kavanaugh

On Tuesday, the D.C. Circuit Court of Appeals denied by 7-1 a petition for a full-court re-hearing of its 2-1 decision last summer to dismiss litigation challenging EPA’s approval of the sale of E15 at retail motor fuel pumps. E15 is a blend of 85% gasoline and 15% ethanol.

In both decisions, Judge Brett Kavanaugh was the sole dissenter, and both times he trounces the majority on the facts and statutory logic.

In a previous post, I reviewed Kavanaugh’s dissent in the August 2012 decision. Herewith a brief recap:

  • The 2-1 majority held that petitioners – refiners and livestock producers — would not be injured by the EPA’s grant of a waiver authorizing the sale of E15 and thus lack standing to challenge the agency. The majority somehow missed the obvious.
  • There being no commercial substitute for ethanol to meet the ever-increasing production quota established by the Renewable Fuel Standard (RFS), EPA approval of E15 is a de facto mandate on refiners to increase the blend from E10 to E15 — a roughly 50% increase from about 14 billion gallons to 21 billion gallons annually. That will necessarily impose a cost on refiners. 
  • In addition, because virtually all U.S. ethanol is made from corn, approving E15 will increase the demand for and price of corn, imposing a cost on livestock producers, who purchase billions of bushels annually to feed their hogs, cattle, and poultry.
  • Clearly, EPA approval of E15 injures both petitioner groups, so the Court should have reviewed the petitions on the merits.
  • Section 211(f) of the Clean Air Act (CAA) prohibits the EPA from approving the sale of any fuel additive that causes or contributes to the failure of emission control systems in any vehicle manufactured after 1974. 
  • By the EPA’s own admission, E15 can contribute to emission control failures in vehicles manufactured during model years 1975 through 2000.
  • Therefore, the EPA lacks authority to approve the sale of E15.

Kavanaugh’s dissent in Tuesday’s decision reiterates those points but also adds some illuminating refinements. [click to continue…]