Ethanol-Based Fuel Use in the U.S.
Despite a 1992 law mandating greater use of ethanol and billions of dollars in subsidies and tax incentives, E-85, the main kind of ethanol fuel, still accounts for less than 1 percent of total U.S. vehicle fuel consumption.

The Bush administration recently reported to Congress that the federal ethanol incentive program has done precisely the opposite of what was intended.  Instead of reducing gasoline consumption, foreign oil dependency, and air pollution, the program caused Americans to use 473 million more gallons of gasoline in 2000 than in 1999.  In fact, if this program remains in place, it actually will increase gasoline use by 9 billion gallons from 2005 to 2008. 

What happened?  The problem is the way the program is structured: The federal government lets Detroit build a greater number of large, less-efficient cars if automakers also manufacture a specified number of vehicles that can use both regular gasoline and the slightly cleaner burning ethanol, a type of alcohol that can be made from corn.

The theory is that if enough ethanol-burning cars are driving around, the supposed benefits—cleaner air and greater use of a renewable, domestic energy source—will outweigh the pollution and oil dependency wrought by the greater number of gas guzzlers.

Of course, this does not happen in practice.  First, ethanol is no air-pollution panacea.  Its boosters in the agriculture industry (who benefit from $3 billion in ethanol-related revenues annually and stand to rake in billions more if ethanol catches on as an alternative fuel) certainly tout ethanol's supposed environmental benefits.  But while ethanol does emit less carbon monoxide when burned, it appears to have no impact on the release of toxic ozone, a worse pollutant, and may even produce more of it. 

Although ethanol may offer some alternative to foreign oil, it is also costly to produce.  Experts including Jerry Taylor of the Cato Institute estimate that ethanol would cost at least a dollar more per gallon than regular gas without its menagerie of special state and federal tax breaks, subsidies, and incentive programs.  As Paul Gigot of the Wall Street Journal reminds us, ethanol is produced by mixing corn with our tax dollars.

Another problem is that in order for people to use ethanol, they must have an automobile that can burn it.  And if they have one, they need to know about it.  And if they have one and know about it, they have to have a gas station that sells it. 

Yet, only 101 service stations in the entire United States actually sell "E-85," the blend of 85 percent ethanol and 15 percent gasoline used by "flexible fuel vehicles" (FFVs).  And practically none of the owners of the 1.2 million Chrysler minivans, Chevrolet S-10 pickups, and Ford Taurus sedans and Windstar minivans that burn E-85 knows it.  There are over 75,000 FFVs registered in Michigan, yet the pro-ethanol-subsidy Michigan Ethanol Working Group recently felt it necessary to send postcards informing owners that their vehicles will burn E-85—which only eight Michigan service stations sell.

While FFVs haven't been burning ethanol, the extra gas guzzlers U.S. automakers built have been burning more gasoline.  But the ethanol lobby considers this just a regulatory glitch. The Bush administration and Senate leaders are considering legislation mandating that all gasoline sold in the United States contain 10 percent ethanol, a blend all automobiles can use.  And here at home, state Rep. Larry Julian, who represents farm-intensive Shiawasee and Clinton counties, has introduced a similar bill. He and other ethanol advocates support building an ethanol plant in Michigan's thumb at Caro.

But a fuel consisting of just 10 percent ethanol won't have an appreciable environmental benefit.  And such fuel will certainly be more costly to consumers, producers, taxpayers, or all three.  After all, if ethanol were less expensive, would we need a state law mandating it?

The issue is not so much the use of ethanol, nor the manufacture of ethanol-using automobiles, nor the building of ethanol plants, nor the desire of farmers or refiners to make money from ethanol.  The issue is the proper and prudent use of government power: Government simply has no business issuing ethanol mandates, especially when such mandates have effects directly opposite their stated goals.

Allowing free people to make choices in a free market is the best means by which the relative merits of competing fuels can be impartially judged, rather than artificially dictated by fiat.  It's time for federal and state officials to either end the regulatory buffoonery, or at least admit that ethanol policy has less to do with environmental protection and energy security and more to do with political opportunism. 
 

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(Joseph G. Lehman is executive vice president of the Mackinac Center for Public Policy.  He is a registered professional engineer with a degree in agricultural engineering from the University of Illinois.  Permission to reprint in whole or in part is hereby granted, provided the author and his affiliation are cited.)

Summary
Since the energy crunch of the 1970s, Congress has spent billions of dollars to promote the use of ethanol, a fuel made from corn, as an alternative to gasoline. Almost 30 years later, it is clear that ethanol mandates and subsidies have instead increased the use of gasoline. It's time for legislators to pull the plug on the wasteful and counter-productive ethanol program.

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