Apr 30 2014, 9:18pm CDT | by Forbes
Biofuels – including ethanol produced from corn in the United States – have taken a real beating over the last few weeks, and for good reason. They are not competitive in the marketplace, requiring massive subsidies and mandates from a broke federal government to even exist, they drive up the price of all kinds of food at the grocery story, drive up the cost of gasoline at the pump, provide no environmental benefit over traditional petroleum-based fuels, and cause harm to all manner of combustion engines.
Other than that, they’re just great.
The production of cellulosic biofuels- those made from non-edible parts of plants and wood waste – has almost completely collapsed over the last few years. This has forced the EPA to finally acknowledge reality and dramatically cut the volumetric mandates it makes on the refining industry to blend this stuff with real gasoline. The mandate for 2013 started out at 1.75 billion gallons, and the refining industry would have been fined if it did not use that much in its collective operations. The pesky little problem with that was the fact that the U.S. biofuels industry only produced 810,000 gallons during the year.
Rather than just sit back and take it as they had done in prior years when fined for not using enough of a largely non-existent fuel, the refiners collectively made enough noise in protest to convince the EPA to retroactively cut the 2013 mandate to 6 million gallons. Still absurd in the context of the actual supply, but the bureaucrats at the EPA can never bring themselves to admit they are completely wrong about anything.
This year’s target mandate is 17 million gallons. Todd Woody, writing in The Atlantic, reports that In the first quarter of this year, the biofuels industry managed to spit out a paltry 75,000 gallons of production. This farce that benefits literally no one must come to an end.
As Forbes contributor James Conca reported in April, Corn ethanol has had an equally bad few weeks, largely thanks to the recent release of several international reports that indicate the fuel, which EPA has forced refiners to blend for ostensible environmental benefits, simply has no such benefits at all. The UN’s International Panel on Climate Change issued two working group reports in March that contained the following passges:
“Biofuels have direct, fuel‐cycle GHG emissions that are typically 30–90% lower than those for gasoline or diesel fuels. However, since for some biofuels indirect emissions—including from land use change—can lead to greater total emissions than when using petroleum products, policy support needs to be considered on a case by case basis”
The International Institute for Sustainable Development also admitted earlier this year that replacing petroleum fuels with ethanol produces essentially no benefit. Their report estimated it is almost 100 times more efficient and far less costly to raise CAFE standards and increase vehicle emissions requirements than it is to continue blending ethanol into gasoline.
The problem the government faces is the problem that arises whenever any mandate or subsidy program is demonstrated to be wrong-headed and ineffective, as almost all of them ultimately are: how to cure the addiction without destroying the patient? The ethanol and biofuels mandates have created an addiction in the farming and business community, created an artificial marketplace that is unsustainable, and encouraged farmers to convert millions of acres of land that is more suitable to farming rice, cotton, wheat and other crops to corn in order to take advantage of the programs. The process of winding these addictive programs down almost requires a 12 step program.
How big has the distortion in the real marketplace been? According to the Agricultural Marketing Resource Center, between 2000 and 2013, the percentage of the U.S. corn crop used to feed people and livestock fell from 90% to 60%. In the same period of time, the percentage used to produce ethanol rose from 5% to 40%.
Conca sums up the human implications of that transition in very compelling terms:
In 2014, the U.S. will use almost 5 billion bushels of corn to produce over 13 billion gallons of ethanol fuel. The grain required to fill a 25-gallon gas tank with ethanol can feed one person for a year, so the amount of corn used to make that 13 billion gallons of ethanol will not feed the almost 500 million people it was feeding in 2000. This is the entire population of the Western Hemisphere outside of the United States.
It is clear these mandates that serve no benefit and cause so much distortion in the marketplace must end. The problem for the government are:
Don’t hold your breath waiting for a good outcome there. The EPA has never been very good at things like self-examination and making amends to those they have harmed.
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