The Policy of Good Intentions

During a newscast concerning the impacts of this summer’s drought which is decimating corn crops, the reporter stated that the President planned to direct the military to buy extra beef to alleviate the burden on farmers.  Corn is a major ingredient in livestock’s diet.  The reporter also discussed how this action, while it may help beef farmers, does nothing to help dairy farmers.  I am sympathetic to the farmers’ plight.  Farming is a tough job with little influence over the weather, disease, or pests.  But what if the military didn’t buy extra beef?  Would the farmers flood the market when they take their cattle to market early, thereby lowering beef prices?  Sure, the farmers would take a loss, but wouldn’t lower prices be good for the rest of the economy? 

 

The newscast quickly moved on to a related story that really surprised me.  The report stated that many lawmakers were requesting the Environmental Protection Agency (EPA) suspend its mandate concerning ethanol production.  It turns out that approximately 40% of this year’s corn crop is mandated to become ethanol.  Lawmakers wanted more of this year’s crop, limited due to the drought, to be available for livestock feed.  Why is the EPA controlling the distribution of the US corn crop?  I had to find out, so I did some research.

Here’s what I found. In 2007, Congress passed the Energy Independence and Security Act (Public Law 110-140), which amends certain provisions of the Clean Air Act.  The 1990 version of the Clean Air Act required the EPA to establish a national renewable fuel program. The purpose, according to the EPA website, is to significantly increase the volume of renewable fuel that is blended into fuels.

By law, the corn-based ethanol production quota for 2012 is 13.2 billion gallons.  According to a Cornell University study (http://www.news.cornell.edu/releases/Aug01/corn-basedethanol.hrs.html), it takes 21.6 pounds of corn to create 1 gallon of ethanol. That’s 5.1 billion bushels of corn required to meet the quota. The study also states that it takes 70% more energy to create ethanol than is available in ethanol. So why are we using it in gasoline if it’s so inefficient?

Supporters say that using ethanol as a fuel reduces dependence on foreign oil and reduces greenhouse gases (i.e., carbon dioxide).  Does it really? Ethanol has only 67% of the energy contained in gasoline, so a gallon of 90% gasoline-10% ethanol (designated as E10) has 96% of the energy of a gallon of gasoline.  I drive roughly 6,500 miles per year to work and back.  Assuming my vehicle gets 20 miles per gallon, that’s 325 gallons of gasoline.  With E10, my vehicle will only get 19.2 miles per gallon.  That means 338.5 gallons of E10 to travel 6,500 miles.  So I use an extra 12.2 gallons of gasoline per year to travel the same distance using E10.  E10 isn’t as efficient as gasoline and at $4 a gallon that is $48.80 more out of my pocket.

And, E10 isn’t better for the environment.  Gasoline produces 2.44 kilograms of carbon dioxide per liter burned and ethanol produces 1.94 kilograms of carbon dioxide per liter burned.  However, because I have to burn more E10 than gasoline to drive the same number of miles, the E10 produces more carbon dioxide than the gasoline.  A study by Stanford University, indicate that increased usage of ethanol as a fuel increases smog.

Based on the math, the reasons for using ethanol don’t add up. Converting 40% of the corn crop into ethanol, especially when the corn crop is predicted by the US  Department of Agriculture to be the smallest in 17 years, will drive up corn prices.  The price will be passed along to the farmers and to the consumers.  This, in turn, will drive up food prices.  Not only is corn used to feed livestock, it is also an ingredient in many of our processed foods and beverages.  Given that we already have a weak economy, is it really smart to do this?

Reducing dependence on foreign oil and limiting air pollution are important and necessary.  But, good intentions are not a viable replacement for sound policy.  The country needs an energy policy that makes sense and doesn’t cripple the economy.  The impacts of policies should be analyzed beyond the immediate consequences.  The impacts of the drought will raise the cost of putting food on your table in many ways, but imposing ethanol use versus free market demand shouldn’t be one of them.  Contact your senator (http://www.senate.gov/) or congressmen (http://house.gov/) and let them know what you think about the current policy.