Study Questions Ethanol’s Image

The Heritage Foundation Blueprint for Agriculture includes a lengthy chapter on U.S. biofuels policy and the renewable fuel standard (RFS). Heritage concludes that ethanol and other current biofuels are harmful to agriculture, the environment, and consumer.

My first two reviews of Heritage’s positions on ag, found here and here, may have concerned you; I suspect the charges made by Heritage against ethanol will anger many of you.

Heritage claims the U.S. biofuels policy “is a case study in the unintended consequences of government intervention.” For example, biofuels have created higher livestock prices for livestock farmers and ranchers. Heritage suggests biofuel policies, over a 30-year time frame, have diverted over $35 billion in taxpayer money to agriculture. It goes on to conclude renewable fuel mandates have assisted corn growers at the expense of livestock producers. (I suspect my friends in the livestock community are not complaining about corn prices now.)

Higher food prices?

The report claims “The renewable fuel standard has certainly contributed to increased prices [in food].” To support this charge, Heritage quotes the USDA Economic Research Service, which writes, “Increased corn prices draw land away from competing crops, raise input prices for livestock producers, and put moderate upward pressure on retail food prices.”

Heritage also claims that diverting food to fuel has hurt both rural America and the world’s poorest citizens. I suspect there is some dispute over this assertion.

The report relies on the 2012 summer drought to assert that existing subsidies for ethanol and other biofuels “needlessly” diverted food to fuel. Although the report does accurately state “The magnitude of the ethanol mandate’s effect on corn prices and overall agricultural products is difficult to determine, partly because of the uncertainty of estimates regarding how much ethanol would be used for fuel absent a mandate…”

Heritage claims biofuel programs and the renewable fuel standard create unintended adverse environmental consequences. Heritage cites the United Nations’ Intergovernmental Panel on Climate Change (IPCC). IPCC asserts that United States biofuel policies negatively harm the lives of the poor and divert land to produce biofuels and suggests biofuels have “…dubious climate impacts.”

EPA is also quoted. Regarding renewable fuels, EPA writes, “…that increased renewable fuel would result in higher emissions of air pollutants such as particulate matter and nitrogen oxides while adversely impacting water quality.” (A dubious claim.)

Heritage has specific recommendations to the new farm bill relating to biofuels such as ethanol and biodiesel. For example, it believes the Renewable Fuel Standard (RFS) has promised a great deal but delivered little. Heritage believes “…bioenergy policies have hurt taxpayers, energy consumers, the environment, the world’s hungriest citizens, and the large segment of the agricultural community that does not profit from subsidies and the RFS.”

Repeal all energy programs in farm bill
Heritage would have Congress repeal all of the energy programs in the farm bill set forth in Title IX as well as those in Title VII. It further requests that the new farm bill repeal the renewable fuel standard in its entirety and have consumers determine how much biofuel they want to buy at the pump. It wants Congress to repeal not only the corn-based ethanol requirements but also get rid of the cellulosic requirements.

Heritage has a valid point in asking Congress to eliminate the cellulosic ethanol requirement. For example, the RFS mandates that 16 billion gallons must be created by 2022. In 2010 the U.S. was to “create” 100 million gallons of cellulosic fuel. In 2010 only 6.5 million gallons of cellulosic fuel was refined. Clearly this requirement is nonsense. For example, in 2016, the nation was to create 4.25 billion gallons of cellulosic biofuels. EPA mandated 230 million gallons and the production is so insignificant Heritage doesn’t even give a number. This nonsensical requirement does require the refiners to spend millions of dollars because they cannot comply with EPA’s minimum volume requirements because the fuel does not and cannot exist. These fines on the refiner, imposed by EPA, are passed on as costs to the consumer. As on so many issues, cellulosic requirements are simply out of touch with the market.

Again it is important to read and understand what the Heritage Foundation is advocating which may have an impact on your bottom line.

(This article first appeared in Farm Futures on June 8, 2017)

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About Gary Baise

Gary H. Baise is an Illinois farmer and trial attorney at the law firm Olsson Frank Weeda Terman Bode Matz PC. Specializing in agricultural and environmental issues, he also serves as outside General Counsel for the U.S. Grains Council, Agricultural Retailers Association, and National Sorghum Producers.
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