The EPA has finalized label requirements for E15, backing down a bit from initial proposal which included the word ‘caution.’ The new label, as you can see, is a slightly less alarmist ‘attention.’ I will note that the new label does not point out in any form that ethanol will provide fewer miles per gallon for your vehicle. Adjusted for energy content, ethanol is more expensive than gasoline. However, if you do not adjust for energy content, ethanol costs less than gasoline. Being that the label doesn’t point this out, it seems that consumers might fill up with E15 as it will be slightly cheaper than E10, as few are aware that they will be reducing their fuel economy when moving from E10 to E15. I suspect that the government would be taking action if a private company were to do this.
The Corn Grower’s Association has weighed in, and they are unsurprisingly less than thrilled despite the fact that the EPA kowtowed to their demands:
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We recently posted about the EPA’s decision to reduce the cellulosic ethanol blending requirement from 500 million gallons in 2012 to somewhere between 3.45-12.9 million gallons, which is 0.69- 2.5 percent of the original “mandate.”
Via Greenwire ($ubscription required), we see that refiners are still required to purchase “credits” from EPA indicating that they are complying with the mandate, despite its impossibility:
The proposal fine-tunes blending mandates for 2012 called for by the federal renewable fuel standard, and EPA said yesterday it expects to require a total use of between 3.45 million and 12.9 million gallons of cellulosic biofuels next year. Officials said the final figure could come out to more or less than the 6.6 million gallons required in 2011.
Charles Drevna, president of NPRA, said given that EPA’s own data show the ethanol industry has produced no qualifying fuel in the past year, the requirement for blenders to either use the fuel or pay EPA about $1 per gallon for a credit makes no sense. [click to continue…]
Under attack from almost everyone these days, the ethanol industry has been digging deep to find ways of convincing America that they really are the best. They’ve been running advertisements everywhere claiming that ethanol (and presumably, federal ethanol policies) have helped to keep the price of gasoline up to $0.89 per gallon cheaper in 2010. They commissioned a report from the Center for Agriculture and Rural Development at Iowa State University. The report itself merely updates similar research from past years, the original study can be found here. The abstract (of the 2010 report):
This report updates the findings in Du and Hayes 2009 by extending the data to December 2010 and concludes that over the sample period from January 2000 to December 2010, the growth in ethanol production reduced wholesale gasoline prices by $0.25 per gallon on average. The Midwest region experienced the biggest impact, with a $0.39/gallon reduction, while the East Coast had the smallest impact at $0.16/gallon. Based on the data of 2010 only, the marginal impacts on gasoline prices are found to be substantially higher given the much higher ethanol production and crude oil prices. The average effect increases to $0.89/gallon and the regional impact ranges from $0.58/gallon in the East Coast to $1.37/gallon in the Midwest. In addition, we report on a related analysis that asks what would happen to US gasoline prices if ethanol production came to an immediate halt. Under a very wide range of parameters, the estimated gasoline price increase would be of historic proportions, ranging from 41% to 92%.
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As was widely reported, the Senate voted last week on a bill that would terminate the ethanol tax credit and corresponding tariff. While many were excited by the prospect of finally moving towards better energy policy, it seems likely that things will still get worse before they get better. The ethanol industry does not seem worried.
Consider the following: John McCain (R-AZ) offered additional legislation, while the Senate was voting down the tax credit, that would have ended federal subsidies for ethanol fuel pumps at gas stations. This was voted down 41-59:
“It lost because of the influence of the ethanol lobby,” McCain said on Fox News Thursday, alleging ethanol “is probably the greatest rip-off that I’ve seen since P.T. Barnum.
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Reuters is reporting that the White House has given its seal of approval to the EPA’s proposed label for E15 (85% gasoline, 15% ethanol). The picture above is of an earlier draft label, no actual images are public yet (to my knowledge) of what the final image ended up being. I suspect the label will be quite similar though it will change 2007MY to 2001MY.
Despite cheers from the ethanol industry, its not clear where the path goes from here. The EPA has suggested that E15 could be sold across the country by September, but a number of gasoline stations are in opposition. Here is a letter (.pdf) sent to Lisa Jackson from the National Association of Convenience Stores (NACS) and the Society of Independent Gasoline Marketers of America (SIGMA), whom together represent roughly 80% of retail fuel sales in the United States. In it they write:
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In what is being described as an ambush, Senator Tom Coburn (R-OK) has successfully forced a vote (next Tuesday, June 14) on legislation that would, upon July 1, terminate the ethanol tax credit and corresponding tariff. A back of the envelope calculation suggests it would save approximately $3 billion in the remainder of 2011.
According to the article, Coburn is cautiously optimistic that he has 60 votes. Politico gets it right, this is a big deal regardless if it passes:
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General Wesley Clark and Congressmen Bruce Braley have teamed up with a Huffington Post op-ed to remind Americans that they still want you to care about those darned oil imports (we also import olive oil).
Right now, the United States has an addiction to foreign oil — an addiction that is not only crippling our economy, but is also funneling hundreds of billions of dollars to foreign governments and corporations. It’s the biggest problem in America that no one seems serious about discussing and solving.
Part of breaking that habit is acknowledging just what kind of problem we have, and who benefits from it. That’s why we’ve been working together to build support for country-of-origin labeling at the pump — so that we know where that $4/gallon is coming from, and move beyond acknowledging our problem to solving it. [click to continue…]
The non-profit Chicago Council on Global Affairs this week gave the Obama administration a B-minus grade for its progress in furthering food security in poor countries, according to a story in today’s ClimateWire (subscription required).
I do not understand how any rational foreign policy expert could award the Obama administration a B-minus for its performance on global food security. This high a score is possible only if the U.S. was graded on a curve with North Korea and Zimbabwe.
During the period under evaluation by the Chicago Council on Global Affairs, America’s Soviet-style production quota for ethanol, a motor fuel distilled from corn, increased almost 4 billion gallons, or 104 billion pounds of maize. This year American farmers will dedicate about a third of the U.S. corn crop—the largest in the world—to ethanol. As I explain here, here, and here, this massive distortion pushes up the price of foodstuffs on the global grains and oilseeds market, which harms urbanites in developing countries. Simply put, our stupid ethanol policy is one of the greatest threats to food security in the world today, if not the greatest.
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In announcing his intention to seek the GOP nomination in 2012, Tim Pawlenty visited Iowa yesterday to deliver so-called “hard truths” to the American people. Given that he was in Iowa, Pawlenty’s stance on ethanol is the perpetual elephant in the room. Most non-Iowan fiscal conservatives seemed happy with Pawlenty’s comments, though its not clear why. The WSJ, today, wrote a short op-ed praising the Pawlenty for his unprecedented, “amazing” steps in Iowa:
One of the immutable laws of modern American politics is that no candidate who wants to win the Iowa Presidential caucuses can afford to oppose subsidies for ethanol. So it’s notable—make that downright amazing—that former Minnesota Governor Tim Pawlenty launched his campaign for the Republican Presidential nomination Monday by including a challenge to King Corn.
I suppose its worth praising him for making a slight improvement to the Obama/Bush/Gingrich/*insert politician* doctrine, but it ends with slight. The “don’t pull the rug out from under them,” slowly-end the subsidy approach isn’t a real stance, and its not an end to the subsidies. [click to continue…]
1. Ethanol Mandates: In an effort to further “energy independence,”* major agricultural producing countries have enacted Soviet-style production quotas for ethanol, a motor fuel distilled from food.
This year, about a third of the U.S. corn crop will be used to manufacture 13 billion gallons of ethanol. By law, that will increase to 15 billion gallons every year after 2015. The European Union mandates that ethanol distilled primarily from palm oil and wheat, constitute an increasing percentage of the fuel supply, ultimately 10% by 2020.
Global ethanol production is a new and tremendous source of demand for food that has had a significant impact on the price of grains and oilseeds. According to a report commissioned by the World Bank, global demand for fuels made from food accounted for nearly 70% of the historic price spike in wheat, rice, corn, and soy during the summer 2008.
2. Rainforest Protections: Burning rainforests is an important link in the global food supply chain. In Brazil, farmers are clearing the Amazon rainforests to meet rapidly growing global demand for soybeans. In Indonesia, they slash rainforests to harvest palm oil seeds for export to Europe.
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