The Top 10 Pitfalls of the Ethanol Mandate


Posted by Justin Sykes on Thursday, January 23rd, 2014, 1:04 PM PERMALINK


The Ethanol Mandate, maintained by the EPA under the Renewable Fuel Standard Program, requires renewable fuel to be blended into motor-vehicle fuels and fuels for non-road, locomotive, and marine engines in increasing amounts each year.

With a new year ahead, it's time to end the Ethanol Mandate and look to more sustainable options. By going to www.EndTheEthanolMandate.com you can voice your concern to Congress that the mandate is failed policy. Listed below are the 10 biggest pitfalls caused by the introduction of the Ethanol Mandate.

  1. Lower Fuel Efficiency
  2. Damage to Vehicle Engines
    • Increased percentages of Ethanol are likely to create erosion and cause long term damage to your engine.
  3. Increased Gas Prices
  4. Higher Corn Prices
    • Since the regulations took effect in 2010, corn prices have surpassed the EPA's long term estimate of $3.22 a bushel, and as of 2014 have risen to almost $7.00.
    • From 2005-2012, annual corn ethanol production grew from less than 4 billion to almost 14 billion. As of 2014, "40% of the U.S.. corn crop goes to ethanol."
    • Consumers are being hit by higher corn prices - especially low-income consumers who spend most of their disposable income on food.
    • A CBO study found - ethanol production "has exerted upward pressure on the price of corn, and ultimately, on the retail price of food, affecting both individual consumers and federal expenditures on nutritional support programs."
    • The CBO also found ethanol production drove up federal spending on nutritional programs by $900 million.
  5. Harm to Livestock Producers
    • The increase in corn prices due to the Ethanol Mandate has dramatically increased the price of animal feed and forced some livestock operators out of business.
    • In 2010, for the first time in U.S.. history, fuel was the No. 1 use for U.S.. corn.
    • Expanding corn productions have only partially offset the rapid growth in demand, resulting in higher corn prices for feed.
  6. Compliance Burden
    • Under the RFS, refiners must annually purchase a set amount of renewable fuels each year. The refiners are required to submit renewable fuel credits to the EPA, to show that they have covered their annual obligations.
    • These credits, known as Renewable Identification Numbers, or RINs, are generated by the production of biofuels and can be bought and sold by refiners, as well as banked for future use.
    • RIN credits cost 7 cents at the beginning of 2013 and could rise if the RFS is not mitigated or repealed.
    • In 2012, large refiners spent between $100-$300 million each for credits when prices were about 4 cents. "At $1 a gallon levels, the numbers become astronomical very quickly."
  7. The "Blend Wall"
    • Currently, corn ethanol refiners in the U.S. have the capacity to produce over 14.9 billion gallons, gasoline refiners can only blend 13.3 billion gallons into the fuel supply, which leads to the "Blend Wall" - the point at which the maximum amount of gasoline has been blended with 10% ethanol as required by law.
    • The declining demand for gasoline and increased fuel efficiency mean the "blend wall" will be reached this year, and some refiners have already reached it.
    • Fears they will hit the blend wall have made refiners more eager to buy credits on the open market, pushing RIN prices higher.
  8. Current and Future Ethanol Mandates are out of step with the Market
  9. Environmental Concerns
  10. Effects on the "Conservation Reserve Program"

More from Americans for Tax Reform

hidden