Ethanol Subsidies: Not Gone, Just Hidden a Little Better

Mother Jones, an organization with a very liberal viewpoint posted that the subsidies for ethanol fuel have expired but that this doesn’t trouble the ethanol fuel producers.  Kevin Drum authored the posting and I will let him tell you why.

A few years ago I called subsidies for corn ethanol “catastrophically idiotic.” And why not? Corn ethanol, it turns out, is actively worse for the environment than even gasoline. Farmers responded to the subsidies by reducing the amount of farmland used for food production, and this drove up the price of staple food worldwide.  At the end of last year, ethanol subsidies quietly expired and no one tried to extend them.

So why did the powerful corn ethanol lobby let it expire without an apparent fight? The answer lies in legislation known as the Renewable Fuel Standard (RFS), which creates government-guaranteed demand that keeps corn prices high and generates massive farm profits. Removing the tax credit but keeping the RFS is like scraping a little frosting from the ethanol-boondoggle cake.

The RFS mandates that at least 37 percent of the 2011-12 corn crop be converted to ethanol and blended with the gasoline that powers our cars…[As a result] the current price of corn on the Chicago Mercantile Exchange is about $6.50 per bushel—almost triple the pre-mandate level.

 You might not be aware that when the EPA does mpg ratings for new cars, they use gasoline that does not contain any ethanol.  Adding ethanol at 10% of the fuel mix, the energy in a gallon of fuel is about 96.7% of a fuel not containing ethanol.  Ethanol has less energy per gallon than normal unleaded gasoline.  So the MPG rating is probably just a bit high.    See


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