Members of the Conservative Political Action Conference panel “Energy Rationing: The Tragic, Unintended Consequences,” argued the federal ethanol mandate isn’t benefiting the regions of the country it’s supposed to.
Panel members stated that ethanol mandates are one the most obvious examples of the government spending lots of money for very little effect.
“It is hard to know all the effects you’re going to have in public policy,” Dr. Randy Simmons, an economics professor at Utah State University, said during the panel. “We didn’t expect the effects [of ethanol mandates and subsidies] when we first started to study them.”
“They gave a tax credit and a tariff [to ethanol] which cost taxpayers a whole lot of money,” Simmons said. “We asked if the Corn Belt is really better off since implementation of the Renewable Fuel Standard [RFS]. It’s not.”
America supports ethanol via billions in subsidies and federal programs like the RFS, which requires gasoline sold in the U.S. to contain a certain amount of ethanol. These ethanol subsidies and mandates cost motorists $10 billion annually in additional fuel costs, according to a study published in March 2015 by the Manhattan Institute.
“The unemployment rate did not drop as much or as fast in corn belt counties,” Simmons noted. “Per capita income fell more in Corn Belt counties than in others…We shouldn’t be subsidizing any form of energy, but especially not corn.”
Federal ethanol mandates are extremely expensive and won’t meet their goals, according to a Government Accountability Office (GAO) report. GAO estimates that between 2013 and 2015, the federal government invested more than $1.1 billion into research and development of advanced biofuels despite these inherent problems.
Roughly 45 percent of American corn is now used to produce biofuels like ethanol.
Simmons speculated that politicians think they’re helping corn-growing areas when they promote ethanol and that they have a powerful incentive to support biofuels because of the Iowa Caucus’ role in presidential primaries.
Originally, ethanol subsidies were justified by claims that they would reduce America’s dependence on foreign oil and to lower CO2 emissions, according to the Congressional Budget Office. Other research has shown ethanol subsidies were not responsible for America’s declining dependence on foreign oil.
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