EPA should end the economically and environmentally destructive ethanol mandate

February 03, 2014 | By JONATHAN WOOD

Each year, EPA establishes a threshold amount of renewable fuels — most notably ethanol made from corn — that must be blended into gasoline under the Clean Air Act. It may waive this requirement, in whole or in part, if it determines that it severely harms the economy or the environment. In a comment letter, PLF encouraged EPA to eliminate the part of the standard requiring corn ethanol blending entirely.

When it created this requirement, Congress — perhaps unjustifiably — assumed that it would be a panacea for both the U.S. economy and the environment. It hasn’t lived up to this billing. The comment letter explains that corn ethanol has likely, and paradoxically, increased greenhouse gas emissions despite the reduction of such emissions being the main selling point of the program. It turns out that the reduction in emissions during the combustion process can’t offset the increased emissions from growing and processing the corn into ethanol.

In addition to failing to achieve its goal, the standard has significant environmental costs. To grow enough corn to satisfy the significant increase in demand, land had to be converted from growing other crops, grasslands, or conservation areas. This has meant the conversion of wetlands and species habitat. Because the expanded production occurred on relatively less productive lands, it requires more fertilizer which contributes to water pollution. And the entire process increases the emissions of particulate matter and other air pollutants.

What do we get in exchange for these environmental costs? Not much, if anything. Whereas most productive activity involves a trade-off of costs and benefits, the ethanol mandate actually harms the economy while causing this environmental damage. It needlessly drives up the price of food. The pain from the resulting price increases is felt most acutely by the poor, both in the United States and abroad. As the comment letter explains, the poorest residents of our South American trading partners are suffering particularly harshly from rising prices.

The ethanol mandate has a ripple effect on many other prices as well. As corn has increased, the price of substitutes has also increased. Shifting land from other uses to corn production has increased the costs of the crops that otherwise would have been grown in those fields. The cost of gas, too, has been pushed up by the standard.

Opposition to the ethanol mandate is one of the few policy issues where industry and the environment can agree. The combination of high environmental costs with little to no environmental or economic benefit should make EPA’s decision easy.