Al Gore, Newt Gingrich, and the Unintended Consequences of Ethanol Policy

corn.serendipityThumb Al Gore, Newt Gingrich, and the Unintended Consequences of Ethanol PolicyBy Eric Lowe

Successive presidential administrations over the past 50 years have vowed to aggressively pursue energy independence, attempting to decrease the amount of oil imported from the Middle East. The federal government has latched onto corn ethanol as the silver bullet solution to domestic fuel production disparities. Yet again, public policy creates a set of unintended consequences that ought to be fully considered if Oregon and the nation as a whole are going to continue to transfer demand and taxpayer dollars to this fledgling industry.

As it currently stands, regulation requires a certain volume of ethanol to be blended into domestic fuel supplies annually, and a percentage ratio of this ethanol-to-petroleum blend is “permitted” in gasoline refining by the EPA. Additionally, the subsidies, grants and tax loopholes for the ethanol industry are numerous. According to Rice University’s Baker Institute for Public Policy, in 2008, roughly $4 billion in taxpayer dollars were spent to subsidize replacement of about 2 percent of the U.S. gasoline supply. Up to 15% of gasoline now can be replaced with ethanol (E15 blends), and taxpayers subsidize half of all related costs for ethanol.

Starting with the 2005 Energy Policy Act, 12.95 billion gallons of renewable fuel must be used in 2010, increasing to 36 billion gallons per year by 2022. The EPA recently raised the amount of ethanol permitted in the blending of fuel to 15%, effectively mandating that many refiners produce at this level to meet legislative requirements. U.S. ethanol enjoys a roughly half-dollar per gallon import tax, making domestically produced ethanol artificially competitive over cheaper, more energy-dense Brazilian sugarcane ethanol. In addition, domestic producers receive a whopping 45-cent per gallon tax credit, a handout even certain refiners within the industry have said they don’t need.

Many have begun realizing that ethanol policies may be causing more problems than they solve. Studies show that vehicles built in or before 2007 and all non-road engines aren’t designed to operate on the E15 ethanol (15% ethanol) currently being pushed by the EPA. These higher blend fuels increase emissions of particulate air pollution, ground-level ozone (which is harmful to humans) and other toxic air pollutants. These emissions can mitigate or entirely eliminate the public health arguments for ethanol.

Ethanol policies on the state and federal levels also don’t account for cost. According to the U.S. Department of Energy research, E10 has a 3.6% fuel economy loss compared to traditional gasoline, E15 has a 5% loss, and E20 has a 7.7% loss. Furthermore, older vehicles and all non-road engines (ATVs, leaf blowers, tractors, generators, etc.) are put at risk by these policies. These generally do not have oxygen sensors, so with more oxygen-rich fuel they burn “lean,” or hotter than normal, contributing to significant wear and tear and early degradation. For the average family, having these expensive machines break down far faster than they otherwise would is an expense they can hardly afford. This means that the roughly 247 million “legacy” vehicles and 400 million non-vehicle gasoline engines are negatively impacted by these policies.

The mandates, regulations, grants, tariffs and tax credits surrounding the ethanol industry are, unsurprisingly, of a political origin, and not necessarily pertaining to sound environmental or economic policy. Even Al Gore admits as much in a recent public reversal of his support for what he then referred to as “gasohol.”

“One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for President,” he said. This isn’t the first time a presidential candidate has supported something purely to gain favor from a specific constituency.

Al Gore also admits a common problem with government programs, particularly the ethanol industry, when he said, “It’s hard once such a program is put in place to deal with the lobbies that keep it going.”

Interestingly enough, at a recent Renewable Fuels Association conference (in, of course, Iowa), Newt Gingrich called upon the government to mandate all vehicles sold be flex-fuel models. Mr. Gingrich explained that “the big-city attacks” on ethanol subsidies are really attempts to deny prosperity to rural America. Not only were his remarks politically tinged and partisan, they lacked any sound basis.

While it is hard to believe Al Gore is wiser on the topic of government intervention than Newt Gingrich, in the case of corn ethanol, he is. Politicians ought to account for the unintended consequences of public policies that affect every American. It is well overdue to reverse the subsidies, taxes and mandates on the state and national levels that force ethanol upon consumers and artificially prop up the industry for reasons of political favoritism.


Eric Lowe is a research associate at Cascade Policy Institute. He recently graduated from Willamette University and is now attending the University of Maryland School of Public Policy to earn his master’s degree in public policy analysis.

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Posted by at 05:00 | Posted in Economy, Energy, Global Warming | Tagged , , , , | 10 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Volt

    Many poor people around the world (not here, though) are starving due to these morons and their stupid ideas about ethanol. It simply does not work, is not cost effective, reduces mileage, damages vehicles, causes widespread political corruption, and literally starves people.
    All you morons who thought this was a good idea had better wake up and help us feed these people who can no longer afford corn.
    Idiots.

    • noibn

      Ethanol should NOT be mandated. Periiod! Maybe a free market commodity but absolutely ” zilch, zero, zippo, nil, nada and null” the oxymorons, as such, insist placing upon US.

      • noibn

        …as in a YOKE, the oxymorons insist upon…

  • Volt

    Many poor people around the world (not here, though) are starving due to these morons and their stupid ideas about ethanol. It simply does not work, is not cost effective, reduces mileage, damages vehicles, causes widespread political corruption, and literally starves people.
    All you morons who thought this was a good idea had better wake up and help us feed these people who can no longer afford corn.
    Idiots.

  • Bob Clark

    This is one more bit of confirmation Gingrich is mostly a charlatan. He really pushes the donation part of his conservative sales pitch.

    One bit of information I read recently is premium gasoline above a certain octane is not required to have as much ethanol content. What’s the official word on this?

  • Rupert in Springfield

    The Gingrich statement is utterly idiotic. In this day and age for anyone to be maintaining Ethanol is nothing but yet another wasteful Green Welfare program is absurd.

    Government should end the ethanol mandate and should refund everyone not only for the additional taxes they paid due to reduced mileage, but also for the car repairs involved.

    • valley person

      And where would government get that money? Never mind.

      Corn-based ethanol has been and will continue to be brought to you by mostly self described conservative Republican farmers and their senators (both parties) from the greater Midwest and Great Plains region. The Iowa caucus rules.

      But ethanol appropriateness aside, no one is putting more oil in the ground. We don’t like this or that solution to our energy problems, all for good reasons taken in isolation, but we still have the same energy problems at the end of the day.

      • Rupert in Springfield

        >And where would government get that money? Never mind.

        Simple, deduct it from dopey windmill subsidies.

        >Corn-based ethanol has been and will continue to be brought to you

        My point had nothing to do with the political aspects of who supports or doesn’t support this thing.

        The mistake you are making here is in assuming everyone is as partisan and non thinking as you and will support anything if their own party is responsible for it. This is behavior you engage in, not I.

        >But ethanol appropriateness aside, no one is putting more oil in the ground.

        Right, so watering down oil with a product that consumes more oil to make than it displaces is especially stupid.

        >We don’t like this or that solution to our energy problems, all for good reasons taken in isolation, but we still have the same energy problems at the end of the day.

        If a solution turns out to be a dumb idea, it does not mean you continue the solution simply because a good idea has not presented itself.

        I’m afraid you haven’t added a lot here.

        • valley person

          Simple? Sorry, those “subsidies,” which are tax credits, are already spent. What has been spent no longer exists, and you can’t deduct something from nothing, outside of Rupert math theory that is.

          When you say “government” should end the ethanol mandate, it helps to know who in “government” is responsible for it in the first place, and what political constituency is most behind it. “Government” does not make policy in a vacuum. Your side just won an election. You have a majority in the House. Nothing is stopping your side from proposing to end ethanol subsidies, and there is a lot more money there than in NPR subsidies. Nothing that is, except yourselves. Gingrich at least gets it.

          “Watering down” oil? Huh? I’m no chemist, but I would think that if you mix 90% oil with 10% ethanol you have not “watered down” anything. You still have a fuel that is greater than the 90% of it that is still oil. You haven’t diminished the BTU delivery of the oil, you just haven’t gotten much BTU out of the stuff you added.

          Corn based ethanol is a dumb idea unless and until it fulfills one of its stated objectives, which is to create an ethanol infrastructure that would be used by better source fuels that take much less energy to create. That goal should be time limited, and time may be up politically. Not that it matters to Iowa-Nebraska-Dakota farmers and their small government tea party representatives.

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