Corn is incredibly versatile — it makes paper, porcelain, toothpaste, solvent, instant coffee, drywall, and ethanol. But too much of a good thing can kill you. In 2000, 5 percent of the U.S. corn crop was converted to ethanol. By 2012, that figure had spiked to 40 percent, most of which became a gasoline additive. Given that ethanol contains one third less energy than gasoline, no competitive business in its right mind would be selling the stuff — unless, of course, they were forced to.
The federal government artificially created that 800 percent spike with the 2005 Energy Policy Act — and later, the 2007 Energy Independence and Security Act. A regulation called the Renewable Fuel Standard (RFS) required four billion gallons of renewable fuels be used as additives beginning in 2006, with requirements escalating to 35 billion gallons by 2022. Additionally, gasoline manufacturers will have to blend at least 10 percent of their fuel with ethanol.
The two acts aimed to make the United States simultaneously energy independent and eco-friendly, but what the bills actually created was a massive demand for corn. Ethanol was the cheapest alternative to gasoline, and corn was the only crop grown in the U.S. that could support such a massive demand. Agricultural land-rents skyrocketed, along with fertilizer use and water consumption. Large swaths of forest were clear-cut to create new farmland. Farmers who rotated their crops began to plant only corn. But supply was unable to keep up with the U.S. government demand.
In 2007, the global price of corn doubled. Foods which were no longer being grown became more expensive, as did all corn-based food products. Foreign countries which rely on imports of U.S. grain to feed their population were having trouble finding the money for payments. It didn’t help that in 2012 the Midwest experienced its worst drought since 1956.
But corn farmers and ethanol manufacturers were raking in profits, aided by two key government regulations dating from the 1970s — a tax credit for gas companies for every gallon of ethanol mixed into their fuel and a tariff on every gallon of ethanol imported from foreign manufacturers. Congress created the benefits for a fledgling industry during the time when sky-high oil prices were controlled by OPEC.
Late in 2011, those regulations finally died, and a lot of people celebrated a victory over government-subsidized agriculture. They should have noticed the odd fact that the ethanol lobby hardly made a sound about the passing of their industry’s two most important government handouts. The lobby touted its respectful understanding that the industry was finally mature and no longer depended on government help. The truth is exactly the opposite — ethanol wouldn’t have a market if the U.S. government didn’t compel U.S. citizens to fuel their cars with it. The tax credits and the tariffs are insignificant.
The Congressional Budget Office wrote in 2010 that “the scheduled rise in mandated volumes would require the production of biofuels in amounts that are probably beyond what the market would produce even if the effects of the tax credits were included.”
The government is still subsidizing ethanol, and, by extension, corn, to the detriment of sustainable agriculture, the wallet of anyone who fills her car with gas, all for an misguided agenda of cronyism masked as environmentalism. All the latest research shows that ethanol fuel takes more energy to make than we can get out of it. Far from “sustainable,” corn-based ethanol is a net contributor to global warming that feeds off of the energy industries we can and should be depending on.
Jason Stverak is President of the Franklin Center for Government and Public Integrity.