The Problem with Ethanol is the Mandate

After a decade of experimenting with mandates, tax credits and tariffs, a national consensus has been reached that ethanol is just not worth it. Late to arrive at this conclusion are farmers, their Congressional representatives, and presidential candidates eager to win over primary voters—a coalition that has made it nearly impossible to begin unwinding the various policies designed to prop-up ethanol. The driving force behind U.S. ethanol consumption is the Renewable Fuel Standard (RFS), otherwise known as the ethanol mandate, which was established with the enactment of the Energy Policy Act of 2005.The RFS mandated that a minimum of 4 billion gallons of renewable fuels be used in 2006 and that Americans consume at least 7.5 billion gallons by 2012. Two years later, in the midst of the 2008 campaign cycle, Congress passed the Energy Independence and Security Act of 2007 greatly expanding the RFS mandate. Americans now must consume 36 billion gallons of “renewable fuels” annually by 2022—15 billion gallons of which will be corn ethanol. This is bad for American consumers. Implicit in the ethanol mandate is the reality that without such a policy, Americans would not use nearly as much ethanol—and for good reason. During most of the past 30 years, ethanol has been more expensive than regular gasoline. Furthermore, ethanol contains one-third less energy than gasoline. This means that if you put one gallon of gasoline in your car and one gallon of ethanol in your friend’s identical model, you’ll go 15 percent farther than your friend. Responding to an increase in the RFS mandate, some automakers are even installing larger gas tanks in vehicles...more