CORN ETHANOL IS A WELL SUBSIDIZED ENVIRONMENTAL ABOMINATION

A few years ago the “food versus fuel” debate raged in Washington. It centered on whether the US government’s corn ethanol mandate squeezed scarce grain supplies and pushed up food prices. We all remember the famines in Africa and the corn riots in Mexico.

Biofuels refineries starting to explore the use of other pulp to create ethanol, sugar cane, paper waste treatment, cellulosic feedstock, etc. but that time has passed and we back to good old corn. Biofuels refineries have been churning out record volumes of more than 1m barrels a day of corn ethanol.
The US Department of Agriculture predicts the American ethanol industry will digest 5.3 Billion bushels of corn this year, the most ever and 35 per cent of the domestic harvest. Yet last week, corn dropped to $3.01 a bushel, a level last consistently seen before lawmakers enacted the mandate in 2007. Supermarkets will raise food prices less than 1 per cent this year, well below the historical average, according to the USDA.

So everybody is happy?

Not so fast Corn requires a tremendous amount of water and the EPA was supposed to check the environmental aspect of corn ethanol. But the EPA has failed to determine whether the Renewable Fuel Standard, a so-called environmental policy that’s costing American taxpayers $1 billion to $2 billion a year, has a net benefit on the environment or public health. That’s the finding of a searing report released in August by the EPA’s own Inspector General.
Passed in 2007, the Renewable Fuel Standard, or RFS, promised to incentivize green cellulosic fuels made from non-food crops or crop waste. Instead, so far, the RFS has only stimulated the production of corn ethanol, which has led to more water and air pollution, and the destruction of millions of grassland acres.

During a June 2016 congressional hearing on the RFS, members of Congress on both sides of the aisle said they wanted information from the EPA on the environmental impacts of the rule. Congress said it needed more information to figure out if the RFS actually benefits the environment as corn ethanol advocates claim, and determine how much it is costing taxpayers and consumers at the pump.

The EPA’s Office of Inspector General was tasked with getting these answers; its report shows the EPA failed its job of tracking the impacts of the RFS on the environment.

At the United Nations, the ethanol debate raged when corn prices spiked in 2008 and again in 2012, seemingly in concert with rising biofuels volumes. Opponents of the mandate still believe it is distorting grain markets. “The requirement has created a huge demand for corn, which has dramatically increased its price". Argument lost: corn prices have declined, the simple reason is because the US is on the doorstep of a colossal corn harvest. The USDA foresees a crop totaling 15.2bn bushels this autumn, the most in history. The surplus still lying around next year is projected to total 2.4bn bushels — a figure that recalls the 1980s farm bust and the beauty the American tax payers are paying for it, the concept that water is precious and that ethanol still make no sense for environmental reasons is less powerful that the Agri-lobby in Washington DC.

The grain market managed to absorb strong ethanol industry demand because farmers cultivated more corn acreage, corn yields have continued to march higher and growing regions have been blessed by years of beneficial weather. The ethanol mandate has also levelled off.
The law called for raising corn ethanol use from 9bn gallons in 2008 and plateau at 15bn starting last year. Even then, the White House has tweaked the mandate to require only 14.5bn gallons in 2016. There are 42 gallons in a barrel.

Yet the Renewable Fuels Association expects the industry will produce about 15.2bn gallons of ethanol this year as it profits from cheap corn and exports to countries including Canada, India and even Brazil.

A coalition of food and oil companies, free-market think-tanks and environmental groups wants Congress to repeal the renewable fuel standard, each for its own reasons.

Let’s be realistic we will face another crisis drought and famines will go on when our cars are using ethanol…. we are not learning from our mistake. Money and lobbying is driving our overall direction with no respect whatsoever of the environmental and human consequences.

People familiar with the industry acknowledged that demand from the ethanol industry supports corn prices, a reason why farmers invested in new ethanol refineries on top of all corn subsidies the US Congress continues to vote for.

American farm subsidies are egregiously expensive, harvesting $20 billion a year from taxpayers’ pockets. Most of the money goes to big, rich farmers producing staple commodities such as corn and soy beans in states such as Iowa.

Few politicians are inclined to vote against farm subsidies: though farmers make up only a small number of voters, even in agricultural states, they are loud and very well organized enough to punish lawmakers who vote against a farm bill. Opposition to spending is muted; few voters realize how much of their money is given to farmers and even fewer would change their vote because of it.
The 2014 bill, which passed with 68 votes in the Senate and comfortably in the House, at least nodded to reform. Most importantly Congress abolished direct payments based on land ownership. Instead, farmers now get more subsidized insurance, and new payments which are linked to past crop prices and productivity. Those not “actively engaged” in farming are in theory banned from collecting subsidies—though Congress delegated the task of defining who is really a farmer to Mr Vilsack’s department.

The collapse of oil prices has had a dual effect on ethanol markets. On one hand, cheap petrol has enticed drivers back on the roads. About 10 per cent of each gallon of US gasoline is blended with ethanol, so high gasoline demand also lifts ethanol sales.
But wholesale gasoline is now cheaper than ethanol, curtailing consumption beyond what is needed to meet the mandate or follow air-quality regulations.

With tractors now gearing up for the harvest, all agree there will be plenty of corn to go around in 2016. “Extra demand from ethanol production helps corn prices,” says Bruce Babcock, economist at Iowa State university. “But the supply completely outstrips that demand.”
The “food versus fuel” debate is losing some of its excitement because price of corn is so low but it should not be construed as ratifying the support to corn ethanol which is not making any environmental sense, is depleting water, and creating a bad product for the heath of human beings.

But I guess that until the EPA finally do its job and issue a real report on the health consequences of corn ethanol it is business as usual in DC…..

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