Ethanol isn't the answer; picking winners never is
Ethanol, once touted as a viable way to reduce America's dependence on imported oil, is rapidly fading from view as an automotive fuel. It's about time.
On Jan. 1, a 30-year-old federal tax subsidy for corn-based ethanol went away when Congress didn't renew it. The subsidy gave oil refiners 45 cents a gallon for ethanol-blended gasoline and by some estimates cost taxpayers $6 billion a year.
That development followed the Obama administration's proposed fuel economy rules for the 2017-25 model years, which dropped the fuel economy credit that automakers get for building flex-fuel vehicles that can burn E85, a blend of gasoline and up to 85 percent ethanol. Automakers use the credit to produce more low-mpg vehicles -- mostly trucks -- and still meet CAFE standards. About 14 percent of 2011-model cars and trucks sold in the United States were equipped to use E85.
But ethanol never gained widespread consumer acceptance. For one thing, E85 has not been widely available. Of the 160,000 gasoline pumps nationwide, just 3,500 -- or about 2 percent -- are for E85 fuel, according to the Renewable Fuels Association, a trade group for ethanol producers.
Since the first OPEC oil embargo in 1973, successive U.S. administrations have wrestled with how to reduce petroleum consumption and the country's dependence on imported oil.
But no administration has had the political courage to raise the federal tax on gasoline enough to reduce demand. CAFE standards remained unchanged for decades as politicians tried politically safe but ineffectual alternatives.
The Clinton administration concocted the Partnership for a New Generation of Vehicles as a way of sidestepping the issue. PNGV was a government-industry collaboration intended to develop fuel-saving and vehicle safety technologies in lieu of tougher CAFE standards or meaningful gasoline taxes.
The second Bush administration scrapped PNGV and launched its own song-and-dance routine: an initiative to develop fuel cell technology, plus those CAFE credits for producing E85-capable vehicles.
The Obama administration got serious about fuel economy. The current proposal would mandate the equivalent of a 54.5 mpg CAFE by the 2025 model year. But the administration merely traded corn for batteries. By skewing the proposed standards to favor vehicle electrification, which many true believers consider the silver bullet, the administration limited the range of possible solutions to our nation's energy issues.
It's OK for government to set reasonable fuel economy standards and raise fuel taxes. But it is wrong for politicians to pick winning and losing technologies. That should be up to automakers and consumers.
That's one lesson of the ethanol experiment.