Consumers don't want ethanol

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Article Highlights

  • By now it should be very obvious that many Americans oppose the renewal fuel standard.

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  • The scientific and economic reality is that ethanol is much more costly to produce than gasoline.

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  • Mandating the use of ethanol has led to a number of other unintended consequences.

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  • The ethanol mandate is a broken policy that is in need of urgent need of reform.

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To understand the public’s deeply-rooted opposition to the government’s renewable fuel standard, consider the multiple web sites that list ethanol-free service stations. Just one of the web sites, Pure-Gas, lists 672 ethanol-free stations in Wisconsin, 394 in Minnesota, 262 in Virginia, 145 in Michigan, and so on.  Altogether, PureGas lists more than 7,300 stations in the U.S. and Canada that sell ethanol-free gasoline or diesel.

By now it should be very obvious that many Americans oppose the renewal fuel standard (RFS) and want it scratched so that they can purchase ethanol-free gasoline at every gas station.    

By way of background, the U.S. is now almost halfway through the federal mandate to produce 36 billion gallons of ethanol by 2022. But since Congress enacted the RFS in 2005, it has created a host of problems.  The root of the RFS problem is that it has created an artificial market by giving the biofuels industry a guaranteed share of the transportation fuels market. Never mind that since the RFS was implemented there has been a decline in gasoline consumption, resulting from slower economic growth and vehicle fuel economy that is the highest in history.

The scientific and economic reality is that ethanol is much more costly to produce than gasoline, while providing 27 percent lower fuel economy than gasoline on an energy equivalent basis.  Hence consumers have to purchase more fuel to drive the same distances, and is why consumers are willing to search for gas stations with ethanol-free fuel.

Mandating the use of ethanol has led to a number of other unintended consequences: higher food prices, severe erosion of cropland, a loss of groundwater resources, and destruction of fragile grassland and forests.

What’s more, the Environmental Protection Agency (EPA) approved the use of E15, a fuel blend consisting of 15 percent ethanol and 85 percent gasoline, over the objections of automakers and the oil industry.  The EPA’s decision wasn’t based on consumer demand.  To the contrary, many unsuspecting motorists risk hitting what’s known as the “blend wall,” the point at which the increased amount of ethanol in gasoline can destroy many automobile engines and fuel systems.  Automakers have warned that they may void warranty coverage for drivers using E15 to fuel their vehicles.

When Congress adopted the Renewable Fuel Standard in 2005, it assumed that by 2010 the advanced biofuels industry would have taken off.  But that didn’t happen. In spite of the expectation that ethanol could be produced from switch grass, wood chips and other materials, no cellulosic ethanol was produced in either 2010 or 2011, and only a relatively small amount became available in 2012.

The reality is that corn ethanol is essentially the only domestically produced biofuel, with 40 percent of the nation’s corn crop now being diverted to support an unachievable ethanol mandate.

The ethanol mandate is a broken policy that is in need of urgent need of reform.  What Congress does about the RFS in the next few months will tell us about the political resolve to provide relief to average Americans from unworkable and costly government regulations.  There’s no guarantee this will happen, but it certainly should. Quite simply, the RFS is causing much more harm than good to America’s economy, cars, and environment

Perry is a resident scholar at The American Enterprise Institute and a professor of economics at the Flint campus of The University of Michigan. 

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About the Author

 

Mark J.
Perry
  • Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

    Follow Mark Perry on Twitter.


  • Phone: 202.419.5207
    Email: mark.perry@aei.org

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