EPA Admits Ethanol Mandate Not A Good Idea

You know the government has really screwed up when even the government admits it screwed up. And so it is with the mandated use of biofuels in gasoline, something the Environmental Protection Agency admits was a bad idea.

WSJ.COM 8/18/13: A strong candidate for the most expensive policy blunder of recent years would have to be the mandate to blend corn ethanol and other biofuels into the nation's gasoline supply. This month even the Environmental Protection Agency essentially acknowledged that the program is increasingly unworkable and costly to consumers. The EPA just won't do much to fix it.

I don't expect the EPA to do much about it because it is Congress that must address the issue. It was Congress that crafted the law that mandated the mixing of ethanol in gasoline to begin with. But there is one thing the EPA might be able to do and that is stop fining refiners for not using a biofuel that doesn't exist.

One of the biggest debacles has been the law's requirement that the oil and gas industry mix cellulosic ethanol—made from the likes of switch grass and wood chips—into gasoline. The original law mandated the use of one billion gallons of cellulosic fuel in 2013, with even higher levels through 2022. This may have been the worst government forecast in history, which is saying something. Even with taxpayer subsidies, total cellulosic volume in 2012 was about 20,000 gallons. The government was off by a mere 99.9%.

In its annual program review this month, EPA reduced the mandate to six million gallons from 14 million. But even that is several million gallons above what can be bought anywhere. So the oil and gas industry has to pay what amounts to a fine (mostly passed on to consumers) for not buying enough cellulosic fuel that doesn't exist.

And you wonder why gas prices have been going up even as the supply of crude oil has grown by leaps and bounds? But wait, there's more! A federal court struck down the EPA's 2012 mandated use of cellulose-based biofuels as being unrealistic. The court saw it as an oxymoronic mandate: “Do a good job, cellulosic fuel producers. If you fail, we'll fine your customers.”

Ethanol has been a disaster from the word go. It hasn't lived up to its promises, is more expensive that promised, uses more energy to make it than it saves, and drives up the costs of food because crops that were once used for food are now being used to make ethanol.

The argument has been made the ethanol can be made to work, with many proponents citing its success in Brazil. But those touting Brazil as a model choose to overlook one big difference that makes ethanol viable down there: sugar cane.

For equal volume of feedstock, sugar cane produces 8 times more ethanol than corn. Sugar cane doesn't require fertilizer, pesticides, or irrigation. And one thing Brazil has a lot of is sugar cane. So using Brazil as an example of how ethanol can succeed is deceptive and doesn't address the realities of that success. But that hasn't stopped ethanol proponents here from pushing ahead full steam regardless of the abject failure of ethanol to 'get the job done.'

(H/T Pirate's Cove)