How bad a deal is Ethanol?

The state where I live, Oregon has laws that mandate the use of a blend of gasoline and ethanol. My personal experiences are not good. In my lawnmower, weedeater and chainsaw I MUST run ethanol free premium fuel. Our cars both get WORSE mileage on the blended garbage, it costs more and both our vehicles do not run as well as on straight gasoline. Don't even bring up the idea of electric mowers etc. because they are unable to do the job that gasoline powered mowers and saws do. I have followed the debate of etahnol for some time now. This is from the local paper, the Bend Bulletin.

---

CBO: Ethanol tax credits are a bad bargain
Bend Bulletin Editorials

The recession has turned many Americans into bargain shoppers, and they’re not limiting their number-crunching to the contents of their grocery carts. They’re also interested, for good reason, in the cost of government policies. Which means this isn’t a happy time for ethanol.

Policymakers have lavished subsidies upon ethanol for decades, citing the need to spur domestic fuel production, lower greenhouse-gas emissions and, not incidentally, support agriculture in corn-heavy states like Iowa. These subsidies have persisted despite a growing awareness that ethanol leaves a lot to be desired as both a fuel and an environmental panacea.

And then, of course, there’s the cost, which the Congressional Budget Office discussed in a report released last month: “Using Biofuel Tax Credits to Achieve Energy and Environmental Policy Goals.” If the title were written by a normal person rather than a nonpartisan government agency, it would have been: “What a Waste.”

The report examines credits for several biofuels, but corn ethanol is the one that really matters. Of the 11 billion gallons of biofuel produced in the U.S. last year, according to the CBO, corn ethanol accounted for 10.8 billion, or 98 percent.

Because ethanol costs more to produce than gasoline, the federal government provides both mandates (gasoline must contain a certain amount of biofuel) and, of course, tax credits. Each gallon of ethanol combined with gas receives a 45-cent credit, most of which ends up in the pockets of ethanol producers and corn farmers.

But figuring out the true cost of ethanol is more complicated. Because ethanol contains far less energy than gasoline, it’s more accurate to calculate the tax credit on the basis of energy equivalency. Doing so, according to the CBO, yields a subsidy of 67 cents per gallon.

And the spending doesn’t stop there. Though every gallon of ethanol produced receives a tax credit, most of the ethanol sold in the U.S. would be produced even without the credit, thanks in part to the blending mandate.

Citing a University of Missouri study, the CBO estimates that only 32 percent of current biofuel consumption can be linked to the tax credit. Thus, taxpayers cough up a whopping $1.78 to replace each gallon of gasoline with a volume of ethanol containing an equivalent amount of energy. If the CBO had instead used a study by Iowa State University, which attributes only 15 percent of ethanol consumption to tax credits, the per-gallon cost would soar to $4.

But replacing gasoline with ethanol reduces greenhouse gas emissions, right? Not particularly well, and certainly not cheaply. Growing corn and turning it into biofuel consume more fossil fuels than, say, drilling for and refining oil. As a result, the greenhouse gas benefit of ethanol is small.

The CBO estimates that it takes $754 worth of ethanol tax credits to reduce carbon dioxide emissions by one metric ton. In case you were curious, burning one gallon of gasoline produces 8.8 kilograms of carbon dioxide. Thus, that $754 would eliminate the carbon dioxide produced by a mere 114 gallons of gas. At roughly $6.60 per gallon, that’s roughly double the cost of gasoline, er, gas-ethanol blend.

As for the supposed environmental benefits taxpayers buy with their billions in annual ethanol credits, the CBO has this to say: “Because the production of ethanol draws so much energy from coal and natural gas, it can be thought of as a method for converting natural gas or coal to a liquid fuel that can be used for transportation.” But “biofuel” sounds so much better than “transformed fossil fuel.”

As public policies go, ethanol tax credits are a bad bargain, yet they and related policies (Oregon’s ethanol mandate, for instance) persist. Why? Because they have determined constituencies, which include farmers who want higher prices for their corn and ethanol producers who want a guaranteed market for their product. And because, in Oregon’s case, they’re backed by lawmakers determined to buff up their environmental résumés regardless of the cost to their constituents. Even bad polices, once adopted, are hard to uproot.

But not impossible. Taxpayers who don’t like spending $754 to reduce carbon emissions by a single ton can complain, of course. But if they want to change anything, they have to vote. In November, they’ll have an opportunity to support like-minded candidates for both Congress and the Oregon Legislature. Both policymaking bodies could use more bargain shoppers.

Link to original opinion in the Bend Bulletin is here