End Ethanol Subsidies Now!

by Jeff Garzik and Ralph Benko

Former president Donald Trump has recently and repeatedly visited Iowa and spoke to its voters. Iowa is ground zero for ethanol subsidies.

Per Politico:

Donald Trump criticized Florida Gov. Ron DeSantis for opposing a federal program supporting the ethanol industry, but the tactic could open up the former president’s mixed record on biofuels to scrutiny.

Trump in a campaign speech from Council Bluffs, Iowa, said Friday the state ‘needs to know’ that DeSantis, his chief rival for the Republican presidential nomination, “totally despises” ethanol and has been fighting it ‘for years.’

…

It’s a reoccurring political playbook in the influential corn state — one that resurfaced between Trump and President Joe Biden on the campaign trail in 2020 and emerged with Texas Sen. Ted Cruz, who won the Iowa caucus in 2016.

‘I fought for Iowa ethanol like no president in history and ethanol, period, like no president,' Trump said Friday.’”

Trump may be exaggerating.

That said, he’s not lying.

Nor is he alone.

With the Iowa caucuses being, or having been, a “first in the nation” event of disproportionate political impact, it is easy to understand the moral hazard at work here.

The real reason to eliminate (or at least decouple, if elimination is politically unfeasible) subsidies for ethanol is that they are bad for the ecology and bad for the economy. Not merely to save billions of dollars of good money thrown after bad.

On the federal budget side alone, those subsidies run around $5B/year, and $20B/presidential cycle. As Sen. Everett Dirksen famously may or may not have ever said, “A billion here, a billion there, pretty soon you’re talking about real money.”

A bargain, when it comes to seeking the bounce that an Iowa Caucus victory or “better than expected” outcome in the presidential primaries can provide. Especially as it is OPM: “other people’s money.”

In the interest in fomenting good policy, though, let’s turn away from the hustings and take a nonpartisan, apolitical, peek to better understand, and maybe even counter, the moral hazards.

To the authors it would make more sense to subsidize farmers NOT to grow corn for ethanol feedstock. Flunks the libertarian purity test. Yet, as Bismarck once remarked, “Politics is the art of the possible."

Hippies and libertarians? Use the side door!

Current ethanol policy is topsy turvy. Back here in the Real World, ethanol is neither Progressive green nor MAGA red-white-and-blue. It is disdained by both the left and the right. Democrats and Republicans.

And yet it goes on and on.

How? Ethanol gives the impression of (expensively) helping the environment while actually degrading it. The narrative got in the way of the facts. Bad thing!

G. K. Chesterton ascribed to humorist Artemus Ward the sentiment: “It ain’t so much men’s ignorance that does the harm as their knowing so many things that ain’t so.” So let’s non-ideologically, clear up the myths.

Generating and using fuel alcohols may be good politics (for a dozen or two presidential aspirants and a few farm state Representatives and Senators). Yet the data show that subsidizing that is bad policy.

Per a Reuters’ report about a paper by the National Academy of Sciences:

Corn-based ethanol, which for years has been mixed in huge quantities into gasoline sold at U.S. pumps, is likely a much bigger contributor to global warming than straight gasoline, according to a study published Monday.

…

“Corn ethanol is not a climate-friendly fuel,” said Dr. Tyler Lark, assistant scientist at University of Wisconsin-Madison Center for Sustainability and the Global Environment and lead author of the study.

The research, which was funded in part by the National Wildlife Federation and U.S. Department of Energy, found that ethanol is likely at least 24% more carbon-intensive than gasoline due to emissions resulting from land use changes to grow corn, along with processing and combustion.

Geoff Cooper, president and CEO of the Renewable Fuels Association, the ethanol trade lobby, called the study "completely fictional and erroneous," arguing the authors used "worst-case assumptions [and] cherry-picked data."

Under the U.S. Renewable Fuel Standard (RFS), a law enacted in 2005, the nation's oil refiners are required to mix some 15 billion gallons of corn-based ethanol into the nation's gasoline annually. The policy was intended to reduce emissions, support farmers, and cut U.S. dependence on energy imports.

As a result of the mandate, corn cultivation grew 8.7% and expanded into 6.9 million additional acres of land between 2008 and 2016, the study found. That led to widespread changes in land use, including the tilling of cropland that would otherwise have been retired or enrolled in conservation programs and the planting of existing cropland with more corn, the study found.

Tilling fields releases carbon stored in soil, while other farming activities, like applying nitrogen fertilizers, also produce emissions.

Not exactly new news. Per Greentechmedia over a decade ago:

There have been a number of recent articles and reports that have come out attempting to quantify whether the various subsidies for first-generation biofuels, such as corn ethanol and soybean-derived biodiesel, make economic sense.

And while they are interesting, most are missing the bigger picture.

This month, the National Resource Defense Council (NRDC) interpreted a University of Missouri study to mean that the "current corn ethanol tax credit is effectively costing taxpayers $4.18 per gallon and driving up grain prices."

Shockingly, pro-ethanol industry organizations like Growth Energy and the Renewable Fuels Association took issue with these claims.

Let's get to the facts.

12 billion gallons of corn ethanol has the btu equivalence of 9 billion gallons of gasoline -- roughly 6.5% of the U.S. gasoline supply of 140 billion gallons.

…

Although the talking heads of Big Agriculture and Big Ethanol's propaganda wings like to pretend otherwise, there is only a finite amount of cropland on this planet.  As more and more farmland gets planted for bioenergy -- and the global population continues to grow by 80 million people per year -- deforestation occurs in places like Brazil and Indonesia, where carbon-rich peat forests are cut down to grow crops that otherwise would have been grown in the West.

This deforestation is the primary reason why Indonesia and Brazil are now the third and fourth largest C02 emitters on the planet, respectively.

Moving from science to academia, C. Ford Runge writing at Yale School of the Environment:

Ethanol, which seemed like a good idea when huge federal subsidies and mandates were put in place a decade ago, now seems like a very poor idea indeed. Yet despite years of bad ethanol reviews, some prominent figures (including former Senator Tim Wirth and attorney C. Boyden Gray in the accompanying article) offer a revanchist argument: Ethanol is not really so bad after all, and we should significantly increase its blending with gasoline from 10 to 30 percent. As Samuel Johnson remarked of a second marriage, this narrative reads like a triumph of hope over experience.

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The truth is, however, that growing corn in the U.S. heartland still has a major environmental impact — one that will only increase if we add even more ethanol to our gasoline. Higher-ethanol blends still produce significant levels of air pollution, reduce fuel efficiency, jack up corn and other food prices, and have been treated with skepticism by some car manufacturers for the damage they do to engines. Growing corn to run our cars was a bad idea 10 years ago. Increasing our reliance on corn ethanol in the coming decades is doubling down on a poor bet.

…

To date, ethanol has been antithetical to fuel economy. … Without question, hydrocarbon fuels have negative health impacts. But ethanol is no exception. Stanford University’s Mark Jacobson estimates that E85 fuel in “flex-fuel” vehicles may increase ozone-related mortality, asthma, and hospitalizations by 4 percent compared to gasoline by 2020 for the U.S. as a whole and 9 percent in Los Angeles alone.

…

The Environmental Working Group’s Emily Cassidy has written that moving from E10 to E30 would mean “more carbon emissions, more toxic pollutants into drinking water, more toxic algae blooms, and higher water bills for Midwestern residents.” …

While the overall impacts on climate remain uncertain, there is no clear evidence that ethanol is part of the solution rather than the problem. If anything, a ranking of nine energy sources in relation to global climate found that cellulosic and corn-based ethanol (E85) were ranked last of nine technologies with respect to climate, air pollution, land use, wildlife damage, and chemical waste.

NBC reports on the left’s mounting opposition to the expansion of ethanol:

President Joe Biden's plan to reduce the price of gas by allowing the sale of higher-ethanol fuel this summer may make corn farmers and their elected representatives happy. But the move also has irked environmentalists who see ethanol as a climate-change villain.

…

“What the president is doing is the definition of short-term thinking,” said Carroll Muffett, president and CEO of the Center for International Environmental Law. “The goal here shouldn’t be to bring gas prices down by 10 cents in the near term by increasing emissions that will endanger large parts of the population.”

Although ethanol was embraced more than a decade ago as a renewable fuel, its green reputation has eroded. Scientists have found evidence that increased corn production for ethanol could increase greenhouse gas emissions; a study published in February said ethanol may be worse for the climate than gasoline.

From Prof. Mario Loyola at the center-left Atlantic:

The idea of requiring the nation’s gasoline supply to contain a certain amount of renewable biofuel was born in a short-lived doomsday fad of the 1970s. With experts warning that the world was quickly running out of oil, the shocks of ’73 and ’79 led President Jimmy Carter to call for wartime-style rationing of fuel and other draconian measures to avoid a “national catastrophe.” His proposals, fortunately, didn’t get much further than a small subsidy for corn ethanol.

Just a few years later, with its market share under assault from new non-OPEC oil producers, Saudi Arabia suddenly doubled production. Oil prices crashed around the world, and a decades-long oil glut ensued. So much for that doomsday fad.

As a way to replace dwindling reserves of oil, ethanol subsidies had a certain brutal logic, especially if oil prices were going to keep rising with no end in sight. But as a way to address climate change, the program never made any sense. Corn ethanol may well be worse for the climate than fossil fuels, and the program does significant damage to both the economy and the environment. Its sole beneficiaries are large agricultural corporations—and the politicians who serve them.

...

Cheap gasoline is nice in the short term, but in exchange for that, the RFS gives us more expensive food. In the United States, the cultivation of corn for ethanol now requires a staggering 38 million acres of land—an area larger than the state of Illinois. By comparison, the total area of cropland used to produce grains and vegetables that humans eat is only about twice that acreage. In other words, the U.S. devotes enough land to corn-ethanol production to feed 150 million people.

… Few Americans realize that to subsidize corn-ethanol production, they are paying almost twice as much for ground beef as they did before the RFS was created. The supermarket price of both flour and rice jumped about 50 percent after the RFS was created, and never fell back. The ethanol program functions as a hidden food tax—the most regressive of all taxes. And the effects on poor Americans are magnified for poor countries that depend on imports of food.

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Renewable biofuels are not necessarily doomed. If advanced biofuels can be economically competitive and avoid the impacts of corn ethanol on poor people and on the environment, they will be a welcome addition to our future energy portfolio. But today’s corn-ethanol program is a glaring failure, and it is unconscionable that politicians of both parties are conspiring to keep it alive despite knowing full well what its problems are.

Per the arch-libertarian FEE.org:

As an example of an unintended-yet-predictable consequence, it turns out that those actions by the U.S. government to push ethanol production and use in the United States are doing serious damage to the environment. The Daily Caller‘s Jason Hopkins reports on a new study from the Environmental Protection Agency:

In a study titled “Biofuels and the Environment: The Second Triennial Report to Congress,” the Environmental Protection Agency (EPA) determined that ethanol derived from corn and soybeans is causing serious harm to the environment. Water, soil and air quality were all found to be adversely affected by biofuel mandates.

…

Essentially, the study found that biofuel mandates are boosting production of corn and soybeans. Large-scale production of these crops is causing environmental degradation. The EPA also found that—at least in some instances—using ethanol in lieu of gasoline resulted in worse air emissions.

From Mark J. Perry writing for AEI over at the center right:

An excerpt appears below from my op-ed in yesterday’s US News and World Report “Unwind the Ethanol Mandate” about one of the biggest political boondoggles in history – ethanol and the ethanol mandate. Back in 2007 when political cheerleaders like Sen. Chuck Grassley of Iowa (the “king of ethanol hype”) were promoting ethanol with fantastic claims like “Everything about ethanol is good, good, good,” Rolling Stone magazine responded with the best sentence on ethanol I’ve ever read: “This is not just hype — it’s dangerous, delusional bullshit.” And what’s not good at all about demon ethanol (Paul Krugman’s phrase) are the serious negative effects it’s having on the environment….

And yet, today, despite our reverence for the Great Plains and the fragile ecosystem of the grasslands, more and more of this majestic landscape is being converted to corn production for purely political reasons. Ironically, those who should have been working to protect the grasslands have mistakenly encouraged their demise. Back in 2004, when concern about U.S. energy security was escalating and biofuels were promoted as an innovative, green solution to our growing dependence on foreign fuel, environmental groups enthusiastically supported the establishment of the renewable fuel standard, better known as the ethanol mandate.

In fact, the Natural Resources Defense Council, an influential international environmental advocacy group, released a 96-page report in 2004 predicting that a biofuels mandate would reduce greenhouse gas emissions by 1.7 billion tons per year, improve air quality, reduce soil erosion and even expand wildlife habitat. Now more than a decade after the ethanol mandate became law in 2005, these same environmental groups that lobbied so vigorously for its establishment are now recoiling in horror at the ecological Frankenstein they helped create.

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There is a growing consensus that it’s way past time to drop the renewable fuel standard. Good intentions aside, we now know that the promises used to sell the ethanol mandate a decade ago have not even come close to approaching reality. There are many good reasons to unwind the ethanol mandate, but perhaps none is more important than protecting the last vestiges of the Great Plains. Far too much of our famous prairie grassland has already been converted to crop land in pursuit of a flawed mandate that damages the environment and is bad for consumers, cars and the economy. …

…

“The big green groups that got invested in biofuels are tacitly realizing the blunder,” said John DeCicco, a research professor at the University of Michigan Energy Institute who previously focused on automotive strategies at the Environmental Defense Fund. “It’s really hard for the people who really — shall we say — hate oil viscerally, to think that this alternative that we’ve been promoting is today worse than oil.”

“The ethanol policy was sold to environmentalists as something that was going to clean up the environment, and it’s done anything but,” said Democratic Representative Peter Welch of Vermont, who is co-sponsoring legislation to revamp the RFS. “It’s truly been a flop. The environmental promise has been transformed into an environmental detriment.”

“For the Democrats who have an environmental constituency, when you have these respected environmental groups change their mind and say corn ethanol doesn’t work, that’s going to be a big boost that will give them a lot of comfort and cover,” Welch said. “You’re going to see more Democrats starting to question the wisdom of this mandate.”

We at Washington Power and Light do not take a political nor ideological stand on energy policy.  We are humanitarian pragmatists who only care about what has been proven to work both for an equitably prosperous economy and for the environment.

In addition, repealing the subsidy would set a valuable precedent.

For instance, the EU (and the UK) scores biomass -- wood pellets -- as renewables, scoring such energy as advancing their anti-CO-2 goals. Technically renewable but deeply misleading.

Per Mongabay.com:

Wood pellets have proven to be a comparable energy alternative to coal. But mounting scientific evidence shows that burning wood creates more carbon emissions than coal per unit of energy, thus undercutting the EU’s carbon-reduction targets in actuality, though reducing them on paper.

Burning woody biomass also levels forests that would curb climate change by absorbing carbon dioxide and storing it above and below ground, as long as the trees remain standing. Those standing forests also support significant biodiversity, which clearcut forests and replanted plantation monocultures don’t.

The long held, but disputed notion is that wood is renewable because trees can be regrown. But more than 500 scientists signed a letter to world leaders last year arguing that the carbon debt from burning biomass takes 50-100 years to be repaid from replanting trees or expanding forests — time humanity doesn’t have if it is to avoid climate catastrophe.

The data persuades that emissions from burning wood are not healthy for children and other living things.  Worse than coal?

If Uncle Sam would remove its subsidies for ethanol, it would have a much stronger moral authority in challenging other species of greenwashing that, internationally, give an illusion of being virtuous… while hurting the economy and the ecology.

Why do we have ethanol subsidies in the first place? A backstory and a confession.

As Blackwell’s Law states “personnel is policy.” Government programs do not come from nowhere. More often than not they, like Athena, spring from the forehead of an Olympian.

And one of us lived it up close and personal and is here to say, with Ishmael, “And I only am alone escaped to tell thee.”

The secondary co-author of this essay worked for several years as a career attorney-advisor/procurement and finance, in the office of the general counsel of the US Department of Energy. More specifically, he worked in its synthetic and renewable energy division in President Reagan’s Department of Energy.

The underlying synfuel ventures who enjoyed the Department of Energy’s loan guarantees defaulted … when the price of petroleum collapsed, deregulated by Reagan and with the dollar stabilized by Paul Volcker with Reagan’s backing. Of course, those benefiting from the subsidy rationalized matters. In retrospect, wrongly.

Per UPI:

[US Senator Bennett] Johnston [D-LA] praised [Energy Secretary] Herrington for his commitment to preserving the alcohol fuels program.

'With the temporary softening of world oil prices, it would be tempting to take the short-sighted and expedient course of action and abandon this program,' the senator said in Washington.

'But Secretary Herrington knows that this technology will be vital to us in the years ahead, when oil is again in short supply and alternate fuels are desperately needed.'

The economies of Iberia Parish and its neighboring parishes are expected to get a major boost from the New Iberia plant. The plant also is expected to provide a substantial new market for sugar cane and soybeans, which will be used as sources for ethanol production.

So let me introduce you to the late Honorable C. Boyden Gray, “instrumental in the enactment of the Clean Air Act Amendments of 1990, the Energy Policy Act of 1992, and a cap-and-trade system for acid rain emissions.”

This great mandarin was rightfully well-beloved (by many) in his era. He now is mostly forgotten figure except among us few remaining old guard Washington Insiders.

The ethanol paternity test fingers Boyden Gray as the godfather of this lingering subsidy. In his heyday, The Washington Post profiled him strikingly and with characteristic affection:

C. Boyden Gray multimillionaire tobacco heir, Harvard '64, certified member of America's patrician elite and now President Bush's controversial White House counsel and ethics czar -- rams the pedal to the metal. His long hair flying wildly, a chortle on his lips and a wicked gleam in his eye, "CB" -- as his blueblood buddies call him shouts over the wind, "See if I can race this Porsche!" He eyes the Porsche, which has come from behind to snake around the battered old methanol-powered Chevy that he's piloting along the George Washington Parkway. rrrrrrrrrrrrrrr-auh-RRRRRRRRRRR! goes CB's engine. "Huh huh, hahaha, HAHAHA!" goes CB uncharacteristically, it might seem, for a lean, 6-foot-6, ascetic-appearing man with thick bushy eyebrows who's given to striding around the White House like some stoop-shouldered Ichabod Crane with a somewhat distracted, professorial air. He pushes his Chevy past 75 mph, pressing toward 80. "It doesn't stop!" he shouts, referring to the zip the 110-octane, low-pollution alcohol fuel made from natural gas gives the ancient Chevy. "It keeps on going. IT JUST KEEPS ON GOING!" But the Porsche gets away. Did it occur to Gray as he revved more than 20 mph over the limit that it might not do the president any good if his legal counsel got picked up for speeding? Well, sort of. "I don't really want to get picked up," he grinned, lifting his foot. But a moment later he jammed it down again, in the passionate belief that alcohol fuels are the solution to the nation's energy problems.

Yes, admittedly Gray was drag racing a methanol, rather than ethanol, hotrod. That said, he celebrated both forms of alcohol fuel.

Now, Boyden has left the building.

What to do?

Given its prominence in the presidential nominating process it has proven politically daunting to take away the $5B/year subsidy from our Iowans. But it should be possible to, at least, detach the subsidy from ethanol.

And at a minimum starting point, let’s help our policy makers focus on real world data as to what works – both for people and the planet – as opposed to blithely persisting to smoke the hopium that is fuel ethanol.

Let our policy moment seize a rare grand conjunction of a consensus from scientists, academe, left-leaning climate activists, market-leaning libertarians and right-leaning conservatives and at least begin to have some high level discussions on how to wind down the destructive federal subsidies for creating alcohol fuels.

by Jeff Garzik and Ralph Benko

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Jeff Garzik serves as the founder and chairman of the policy institute Washington Power and Light. Before co-founding Bloq, he spent five years as a Bitcoin core developer and ten years at Red Hat. His work with the Linux kernel is now found in every Android phone and data center running Linux today.

Ralph Benko serves as co-founder and general counsel to Washington Power and Light. He is the co-founder and general counsel for F1R3FLY.io and has worked in or with 3 White Houses, two executive branch agencies, and the Congress as well as many political and policy institutes.