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America Needs More “Fiascos” Like Ethanol

October 28, 2011


If you were to listen only to critics of ethanol, you would believe that ethanol is responsible for nearly every trouble the world is facing. Food riots in corrupt nations where nearly half of food supplies sit and rot? Ethanol did that. Black market loggers and subsistence farmers in Brazil clear cut rainforests? Thats ethanol in the good ol US of A. And the list goes on and on engines fail because of poor design. Ethanol. Gummy bear prices rise in Germany. Ethanol. (this really happened) All of ethanols critics share a common flaw when it comes to their claims they cherry-pick the topics on which they opine and ignore very relevant facts. The most recent example is this rant from Dave Juday in The Weekly Standard. Mr. Juday is a frequent critic of ethanol. In fact, that seems to be the only topic on which he will opine for The Weekly Standard. Therefore, attempting to change his mind by arguing his selected points would be an exercise in futility. Rather, it would be far more worthwhile to readers to provide all of the facts about ethanol with the proper context. Lets start with the oldest of the canards ethanol takes more energy to produce than it yields. According to the most recent analysis of ethanols energy balance, researchers at USDA demonstrate that ethanol returns between 1.7-2.3 units of energy for every unit of fossil energy put into the process. This is consistent with other research and trends in ethanol production. For example, between 2001 and 2008, ethanol biorefineries reduced energy requirements by 28 percent on average. Efficiency gains were also made in electricity use (down 32 percent) and ethanol yields (up 5.3 percent). Then, there is the most famous of the canards ethanol is using up the worlds food. On a net basis, US ethanol production uses just 3 percent of the worlds grain supply. On a US scale, ethanol production uses just 25 percent of the nations corn supply on a net basis. That is a far cry from the 40 percent numbers to which critics of ethanol desperately cling. Lets be clear: the net here is extraordinarily important. Critics of ethanol often refuse to acknowledge the contribution ethanol production makes to the feed market by returning one-third of every bushel of corn back to the market in the form of feed and displacing some soybeans in the feed market as well. Ethanol feed production will grow to nearly 40 million metric tons this year enough feed for some 50 billion quarter-pounders (with or without cheese). A recent analysis from USDA determined that a metric ton of ethanol feed replaces 1.22 metric tons of tradition feed rations composed of corn AND soybean meal. That means that those commodities are free to be used elsewhere in the market. Lets not forget ethanols contribution to ending Americas reliance on imported oil. In 2010, the use of 13 billion gallons of ethanol reduced the need for oil imports by 445 million barrels more oil than we import from Saudi Arabia. That saved some $34 billion in direct oil purchases and countless billions in indirect costs that are associated with increasingly harmful sources of petroleum, like tar sands. It also needs to be mentioned that ethanol is an extraordinary economic opportunity for thousands of rural communities. Ethanol production helps give 400,000 Americans a job to get to in the morning. It adds value to crops produced by local farmers in the form of a high-octane fuel and highly nutritious animal feed. All of this helped increase household incomes by $16 billion in 2010 and added even more to local economies as farmers, truckers, machinery dealers, and auto retailers all have more economic opportunities. This is on top of the $0.89 per gallon that ethanol helped save all American families at the pump, according to research from Iowa State University and the University of Wisconsin. All of these benefits are a direct result of Americas commitment to ethanol and renewable fuels. It is true that a very targeted tax incentive for the use of ethanol helped grow the industry today. It didnt cost Americans a dime it was simply a tax credit that end users of ethanol could take that ultimately lowered the price of gasoline blended with ethanol at the pump. But that tax incentive expires at the end of the year. So, too, does the tariff on imported ethanol that exists only to offset the value of the tax credit which is available to every gallon of ethanol blended in the US, regardless of its origin. Americas antiquated fuel system and regulations have created a situation in which the market for ethanol is artificially constrained. This fact, combined with the fact that US ethanol is the most cost-competitive motor fuel in the market today, has created export opportunities. The ethanol industry would much prefer to use every gallon of ethanol we produce domestically. But, that cannot happen until regulations are modernized. That is why E15 ethanol blends and higher ethanol levels designed for use in flexible fuel vehicles (FFVS) are so critical. The US EPA has determined that, after testing vehicles for the equivalent distance of 6 round trips to the moon, E15 is safe for cars, trucks, and SUVs made in 2001 and since. Now, some critics of ethanol have cried foul (or fowl, depending upon who is crying) asserting that this split of the market will create refueling chaos. The ethanol industry believes that these lobbies are shortchanging their customers. Not only is EPAs testing more than sufficient to support the decision they made, their labeling and misfueling mitigation plan provides consumers with the factual information they need to use, or not use, E15 according to the vehicle or boat or weed whacker they are refueling. Ethanol is not the perfect fuel; that fuel does not exist. Nor are the policies encouraging greater reliance on domestically-produced biofuels. But, they are leaps and bounds ahead of anything relating to petroleum or other fossil fuels and are laying the cornerstones of an even more aggressive, forward looking energy strategy that, to borrow a phrase from Amory Lovins new book, will turn petroleum into whale oil. If more domestic jobs, reduced reliance on imported oil, and cleaner air is a "fiasco," then America needs more "fiascos."