Three Pronged Support for Ethanol

As a fuel, corn based ethanol is a dog that strangely enough provides rich pork for its producers.  It uses about as much energy in its production as it yields in consumption.  It diverts agricultural land from other crops, decreasing their supplies and increasing prices to consumers.  It is not environmentally friendly in its production or consumption.1  With no apparent beauty, corn based ethanol has been protected with three programs by the government: mandated use, subsidies, and tariff protection. All three harm the economy by inefficiently allocating resources and increasing fuel costs without a corresponding improvement in the environment.

The mandated use forces consumers to buy 13.8 billion gallons of ethanol, a product that they normally would purchase in smaller quantities or forgo.  Ethanol producers, not satisfied with mandated use alone, have legislatively secured a 45 cent-per-gallon blending tax credit at a cost of $6 billion annually to American taxpayers.  American corn based ethanol has foreign competitors that produce ethanol from sugar, a more energy rich crop.  To ensure that American consumers do not benefit from the low cost production, and that American corn growers have a guaranteed market, ethanol producers have legislatively secured a 54 cent-per-gallon tariff on imported ethanol. 

The political battlefield may be shifting in the Senate.  The current fracas concerns the extensions of the blending tax credit, and tariff on imported ethanol.  It pits Senators from corn producing states against everybody else.  Two competing letters to Senate Majority Leader Harry Reid illustrate that this is not a right vs. left conflict but geographic.The first letter, signed fifteen Senators, nine Democrats and six Republicans supports an extension of both the blending subsidy and the tariff.  While the support for the bill is bipartisan, it is not geographically dispersed.  Only 7.5% of Senators signed the letter, but 60% of the Senators from the top ten corn producing states signed.  The three Senators who signed the letter represent states that were 12th and 13th in corn production.  In the letter, the Senators argue that ethanol frees the country from dependence on foreign oil.  As a consumer, I don’t feel “freed” from foreign gasoline costing $2.50 a gallon when I am forced to buy ethanol blended gasoline costing $2.75.  As an American taxpayer, I do not feel safer knowing that hostile foreign governments can secure cheaper fuel to help power their economies.

The second letter, signed by seventeen Senators, nine Democrats and eight Republicans oppose an extension blending tax credits and tariffs.  Opposition to the extensions is bipartisan but dispersed.  Only 8.5% of Senators signed the letter and no Senator from the top 15 corn growing states signed.  In the letter, the Senators site studies that conclude that “ethanol tax credits cost taxpayers $1.78 for each gallon of gasoline consumption reduced, and $750 for each metric ton of carbon dioxide equivalent emissions reduced,”  and that a “one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer money per job.”  

Tables 1 and 2 list the signatories, their party affiliation, the bushels of corn produced in their states, and their states ranking as a corn producer.  The bipartisan natures of those who support and oppose the extensions suggest that ideology is not an issue.  The sciences, both environmental and economic suggest that corn based ethanol is an inferior fuel.  The three pronged support for ethanol producers that not only mandate use, but use of American corn based ethanol combined with the other two inferences suggest a fourth and fifth: corn producers care more for their own wellbeing than that of the nation, and elected officials in their states from both parties are happy to indulge them. 

Table 1.  Senators Signing Letter to Support Extension of Ethanol Subsidies

Senator	Party-State	Corn Production (000 bushels)	Rank
Tom Harkin	D-IA	2,368,350	1
Charles Grassley	R-IA	2,368,350	1
Mark Kirk	R-IL	2,283,750	2
Ben Nelson	D-NE	1,472,000	3
Mike Johanns	D-NE	1,472,000	3
Amy Klobuchar	D-MN	1,138,800	4
Al Franken	D-MN	1,138,800	4
John Thune	R-SD	544,500	6
Tim Johnson	D-SD	544,500	6
Sam Brownback	R-KS	518,000	8
Christopher Bond	R-MO	461,500	9
Claire McCaskill	D-MO	461,500	9
Debbie Stabenow	D-MI	291,400	12
Kent Conrad	D-ND	272,600	13
Byron Dorgan	D-ND	272,600	13

Table 1.  Senators Signing Letter to Oppose Extension of Ethanol Subsidies

Senator	Party-State	Corn Production	Rank
Richard Burr	R-NC	102,000	19
Bob Corker	R-TN	83,210	21
Benjamin Cardin	D-MD	46,865	24
Tom Coburn	R-OK	39,150	25
Diane Feinstein	D-CA	36,000	27
Barbara Boxer	D-CA	36,000	27
Jim Webb	D-VA	34,425	28
Mark Warner	D-VA	34,425	28
Chris Coons	D-DE	17,945	31
Mike Enzi	R-WY	7,740	35
Jon Kyl	R-AZ	4,255	38
John McCain	R-AZ	4,255	38
Bob Bennett	R-UT	3,256	40
Jack Reed	D-RI	NA	NA
Sheldon Whitehouse	D-RI	NA	NA
Susan Collins	R-ME	NA	NA
Jeanne Shaheen	D-NH	NA	NA

1.  See for example, Sierra Magazine, “Bio-Hope, Bio-Hype” by Frances Cerra Whittelsey.

…corn is the source of 95 percent of the United States' ethanol. Although politically popular in farm states, corn is a problematic source of fuel: It requires good land and petroleum-intensive cultivation and fertilization, and it can also readily feed both humans and livestock. (Food prices are already increasing because of competition with ethanol.) If the mill processing the corn is powered by coal, ethanol produces more net greenhouse gases than gasoline does.