Taking a mulligan on the ethanol mandate

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Saturday, July 20, 2013

In a state known for its golf, Floridians understand the concept of a mulligan. That’s why five years after passing a costly ethanol mandate, Florida lawmakers opted for a do-over.

On May 31, Gov. Rick Scott signed a bill repealing the requirement that most gasoline sold in the state contain nearly 10 percent ethanol. Florida residents overwhelmingly supported the repeal — and for good reason. Ethanol has been blamed for increasing fuel costs, damaging engines and reducing fuel economy.

But Florida’s repeal is hardly the end of ethanol. The federal government mandates its use, with production targets set each year by the EPA. This year, the EPA requires the production of 13.6 billion gallons of corn-based ethanol. Over the next decade, the Renewable Fuel Standard calls for rising amounts of biofuels to be blended into U.S. gasoline and diesel. To put an end to ethanol in the state and across the nation, Florida should call on Congress to repeal the federal mandate as well.

Corn-based ethanol is widely recognized as harmful to both the economy and the environment. Once hyped as a solution to high energy costs, global warming and reliance on foreign oil, ethanol is increasingly seen for what it really is: a political boondoggle. Even after receiving billions in subsidies, the ethanol industry still relies on government mandates to survive.

Consider the economic implications. Ethanol is known to accelerate damage to car engines and fuel systems, especially among older vehicles. To meet its annual production targets, the EPA is pushing for a 15-percent ethanol blend, or E15 — an amount considered by AAA to be harmful to most car engines. Even at 10-percent levels, ethanol is causing corrosion, engine damage and other costly repairs.

The costs of ethanol are not limited to engine problems. Ethanol contains one-third less energy by volume than gasoline. This means drivers must make more trips to the pump than they would with pure gasoline, resulting in poorer mileage and higher fuel costs.

Food prices are also significantly affected by turning corn into fuel. Today, 40 percent of the U.S. corn crop is used to produce ethanol, fueled by a combination of tax credits, import tariffs and production mandates. In turn, retail food prices have risen at home and abroad. World corn prices have more than doubled in the last decade.

Environmental groups have slammed on the brakes in their support for ethanol as well. The release of greenhouse gas emissions from forests and grasslands converted into cropland can offset any environmental benefits from using ethanol. A recent study by the National Academy of Sciences found that the use of ethanol “is likely to increase such air pollutants as particulate matter, ozone and sulfur oxides.”

Without environmental or economic justification, ethanol is really about politics. The benefits to corn growers and ethanol producers are large, while the costs are spread throughout society. Support for the state mandate primarily came from Florida’s bio-energy industry, which is already awash in subsidies from the federal government.

While states such as Florida are moving to use less ethanol, the federal government is working in the opposite direction. By 2022, the federal mandate will reach 36 billion gallons. Experts warn that the U.S. will soon reach a “blend wall” in which more ethanol will be required than can be physically blended into the fuel supply. To keep up, the EPA has called for blends as high as E85, further increasing the mandate’s economic and environmental costs.

Florida’s repeal matters, but Floridians shouldn’t stop there. The federal ethanol mandate needs to end as well. So far, the EPA has refused to exercise its authority to waive ethanol targets, even after widespread corn shortages from last year’s drought. Congress, however, can and should act. Following Florida’s leadership on this issue, Congress should recognize, like any good golfer, when to take a mulligan.

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Shawn Regan is a research fellow at PERC and the managing editor of PERC Reports. He holds a M.S. in Applied Economics from Montana State University and degrees in economics and environmental science from Berry College. His work has appeared in the Wall Street Journal, Quartz, High Country News, Reason, Regulation, Grist, and Distinctly Montana. ...
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