Corny Capitalism: This is one campaign promise we wish President Trump would break. But alas, he just told his EPA to give up any thought of cutting back on the federal government’s anti-consumer, anti-environment ethanol mandate. Sad.
The story begins in 2005, when President Bush approved the Renewable Fuel Standard program as part of an energy bill, which required oil refiners to blend in predetermined amounts of “biofuels” into their gasoline, starting at 4 billion gallons in 2006.
A revised version of the RFS, which Bush signed in 2007, expanding the program, requiring ethanol levels to climb steadily to 36 billion gallons by 2022.
The argument at the time was that forcing ethanol into the market — which is mainly derived from corn — would cut energy imports, improve energy security, reduce pollution, lower fuel costs and create jobs.
Even if those reasons were sufficient at the time to justify this heavy-handed government intervention in the energy market — and we don’t think they were — today’s energy picture makes the ethanol mandate entirely obsolete.
Thanks to the fracking revolution, the U.S. is now awash in domestic supplies of oil and natural gas. Oil prices have dropped and net imports are lower than they’ve been in more than 30 years. The U.S. could become a net exporter of oil within a decade.
So the idea that replacing some oil with ethanol is vital to national security or stable energy prices is a relic of a bygone era.
Nor is the RFS a win for the environment. In fact, various studies have shown that, when you consider the entire life cycle of each energy source, ethanol is a bigger polluter than gasoline. A 2014 University of Minnesota study, for example, found that “corn ethanol is about twice as damaging to the air quality as gasoline.” The Environmental Working Group has called ethanol “a disaster for the climate.”
Ethanol is also bad for fuel economy because it is less energy dense than gasoline. The Department of Energy says that mixing 10% ethanol into gasoline cuts vehicle mileage by up to 4%. The more ethanol, the worse the mileage.
But here’s the worst part about the Renewable Fuel Standard — it threatens to wreck millions of cars on the road.
At the moment, the standard for ethanol blends is 10%. There’s a good reason for that. Studies have shown that higher levels of ethanol can damage engines and fuel systems in existing cars, to say nothing of lawn mowers, boats, and other equipment. In fact, several carmakers have said that using a 15% ethanol blend could void a car’s warranty if the car isn’t specifically designed to handle higher ethanol levels.
The problem is that when lawmakers set the annual RFS amounts back in 2007, they assumed that gasoline use would continue to climb at a rapid pace, and so ethanol would remain a small percentage of the total gasoline consumed.
Gasoline sales, however, climbed far more slowly than expected. And refiners say that they won’t be able to meet the rising RFS annual mandates without breaching that 10% limit.
When the EPA under Scott Pruitt announced in early October that the agency was considering slightly lowering the mandated level for ethanol next year, it sparked a firestorm from Republicans. Iowa Sen. Chuck Grassley accused Trump of a “bait and switch.” He and Iowa’s other senator, Joni Ernst, threatened to block Trump’s EPA appointments. Several Republican governors from the Corn Belt sent a letter to Trump warning him than any cutback in the RFS would be “highly disruptive, unprecedented and potentially catastrophic.”
This week, Trump told Pruitt to back off any talk of cutting the RFS mandate.
It’s a shame that Trump caved on this issue. He, more than anyone else, should know that the free market is the best way to determine how much, if any, ethanol should be added to gasoline.
Read more at IBD