The EPA hearts Big Ethanol

posted at 5:11 pm on November 16, 2012 by Erika Johnsen

I’m not even going to get started on the vast — vast, I say — number of federal policies whose justification for existence is that they help protect small family farmers and/or the environment, when in fact, they accomplish precisely the opposite. For now, I’ll just pick the one — the Renewable Fuel Standard, which requires a certain amount of fuel be blended with ethanol (which is generally made from corn) every year. Daniel Horowitz at Red State does the topic justice:

The single most regressive market-distorting policy to ever emanate from Washington is the absurd tendentious treatment of ethanol.  Over the past decade, ethanol has been the poster child for the worst aspects of big-government crony capitalism.  The ethanol industry has used the fist of government to mandate that fuel blenders use their product, to subsidize their production with refundable tax credits, and to impose tariffs on more efficient sugar-based ethanol from Brazil.  These policies have distorted the market for corn to such a degree that 44% of all corn grown in the country is diverted towards motor fuel blends.  If we would literally flush half the corn harvest down the toilet, we would be better off than using it to make our motor fuel less efficient.

Now, consumers are stuck with higher food and fuel prices, while rich farmers enjoy the favors of free legislation forcing people to buy their odious product.  Although the subsidy has expired, the Renewable Fuels Standard (RFS), which requires that 10% of all fuel be mixed with ethanol, is still in effect.  There is no worse tyranny than using the power of the law to coerce citizens into purchasing an ineffectual product that costs more, and in turn, drives up the cost of everything else along the food chain.

The Midwest suffered through some serious drought conditions this summer, meaning that the price of corn has gone up as harvest yields have gone down, and farmers’ organizations, meat industry groups, a bipartisan group of federal lawmakers, and nearly a dozen states petitioned the Environmental Protection Agency to waive the RFS requirements (the government’s interference in the market means that the amount of corn used for ethanol creates artificially high demand that helps hike up the price of corn, and livestock and food producers can’t cope).

The Environmental Protection Agency is not impressed. After hemming and hawing for months, they finally announced their decision today. Surprise — they’re sticking with their BFF, the ethanol lobby. From The Hill:

“[T]he agency has not found evidence to support a finding of severe ‘economic harm’ that would warrant granting a waiver of the Renewable Fuels Standard,” EPA said Friday. …

“We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers,” said Gina McCarthy, EPA’s top air regulator, in a statement. “But our extensive analysis makes clear that Congressional requirements for a waiver have not been met and that waiving the RFS will have little, if any, impact,” she said.

The ethanol industry applauded EPA’s decision.

Yeah, I bet they did. And just in case you’re tempted to think that the EPA’s decision may’ve been born of environmentalist zealotry rather than cronyish interests… it wasn’t. Even true environmentalists tend to dislike ethanol, since it incentivizes agribusiness to bring marginal lands into production (which means more pesticides, transportation, etcetera).

Said Michal Rosenoer, biofuels policy campaigner at Friends of the Earth: “If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make EPA act, it falls to Congress to provide relief from our senseless federal support for corn ethanol.”

Agribusiness, however, most definitely loves a federal decree that essentially mandates people to buy their product. The Obama administration has no problem with business, you see — they love business, and they love to be loved by business. It’s the free markets they’re not too keen on, which in the long run comes at the cost of economic growth for everyone.


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