With heightened attention surrounding the Midwest drought and the resulting spike in corn prices, members of both parties are beginning to question policies that mandate increasing amounts of ethanol in gasoline—namely, the Renewable Fuel Standard (RFS).
Created as part of the Energy Policy Act of 2005, RFS requires a minimum amount of ethanol to be mixed with gasoline (read more here). By the end of this year, the policy requires 13 billion gallons of ethanol to be mixed with U.S. gasoline, which a TulsaWorld article says amounts to 42 percent of this year’s corn crop. The ethanol industry, cited in this Wall Street Journal article, estimates the number to be under 25 percent. While the inclusion of ethanol in fuel helps stabilize cost, many politicians are hoping the Environmental Protection Agency (EPA), which controls RFS, will exercise the emergency fuel waiver built into the legislation. Doing so would temporarily waive the ethanol requirement in hopes of relieving pressure on food prices (now at $7.95 per bushel). The EPA is currently reviewing the relationship between RFS and food prices.
Though waiving the mandate would likely not occur until after the elections, many Republicans and Democrats are adamant that the ethanol policy at least be waived, if not abolished. As of August 26th, the Wall Street Journal reported that at least seven governors (3 Republicans, 4 Democrats) and 183 members of Congress requested the EPA to waive the mandate. The newspaper quoted Arkansas Governor Mike Beebe (D) as saying, “Put simply, ethanol policies have created significantly higher corn prices, tighter supplies, and increased volatility” in a letter to the Environmental Protection Agency (EPA). Tom Thompson (R)—former Governor of Wisconsin and front runner for a seat on the agricultural panel of Senate Appropriations Committee—is quoted as saying, “I used to support ethanol. I don’t anymore. I made a mistake.”
As we have discussed in the past, ethanol is far from perfect. On such a large scale, it not only can raise food prices, but it requires a vast amount of resources to produce and causes a host of downstream environmental problems. If the ethanol lobby loses some of its political clout after November, it may be a good time to revisit ethanol’s role in our fuel supply altogether.