Environmental Protection Agency Denies Request to Reduce Biofuels Mandate

August 8, 2008

Despite showing leadership in opposing a pork-laden farm bill, the administration failed to do so yesterday. EPA Administrator Stephen Johnson denied Texas Governor Rick Perry’s request to cut in half the government-mandated level for ethanol in gasoline to help reduce soaring corn prices. While debate continues over the exact contribution of biofuels to the recent global food price hikes, corn-based ethanol has clearly driven up the price of corn and Governor Perry is particularly concerned about the effect of rising feed prices on the state’s large livestock industry.

For me, the impact of biofuels on staple grain prices — white corn, wheat, and rice — is of even greater interest because people, not cows, depend on them for nutrition and the burden on poor people in developing countries, who often spend half of their household incomes on food, is especially high. Whatever the impact is, and the estimates range from the low single digits to as high as 75 percent in a recently-released World Bank paper, it will surely grow as the mandate for blending gasoline with ethanol is set to rise from 9 billion gallons to 15 billion gallons by 2015. This means that nearly one half (up from roughly one quarter) of the U.S. corn crop will be diverted from food, for people or animals, to fuel.
Waiving all or part of the mandate this year would not solve the food crisis on its own, but it would set the stage for a new president and Congress to reconsider this ill-advised policy next year. They should do so, not only because of the upward pressure on food prices, but also because corn is an inefficient ethanol feedstock (requiring almost as much energy to produce as it generates when burned), the taxpayer burden from government subsidies to the industry grows with production, and the competition for land to produce crops for both food and fuel probably contributes to higher greenhouse gas emissions compared with gasoline, rather than reducing those emissions as promised.

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1. FDE Says:
   August 11th, 2008 at 10:00 pm

   The new World Bank cauacus is pretty interesting. The USAID loans for biofuels were mainly to ‘buy’ land that was ‘not being used’ and loan money to corporations to produce the ‘bio fuels.’ The loans tied up land with corporations who keep the country together and use land that was used by squatters and people who want their own country.

2. Larry Says:
   August 18th, 2008 at 12:24 pm

   So many areas of US agricultural and foreign policies need to be corrected. And, there are so many other variables in the price of food that contribute a higher percentage of the final costs to consuming countries, than US energy and food policies.
   Excellent debates here and in the Economist blogs have pointed out the deficiencies in the World Bank paper you continue to cite, and your comment about half of the US corn crop being consumed by ethanol is a reach, and likely not to be acheived for several years, even if the current level of production does NOT respond to market forces and does not increase. I have faith in the markets and the US producer to increase production to meet it’s demand equilibrium.
   But you’re right about the impact of higher food prices on the poor and underdeveloped countries. There is an immediate need for aid, but also for mid and longer term policy changes. When did the responsiblity for feeding the World’s poor fall on US farmers? What deal was stricken to direct US foreign aid to feeding those people, versus teaching them how to feed themselves? That’s the crux of the entire problem surrounding food prices. Now we have many countries “hooked” on food aid, and it will take years for them to reach self-sufficiency.
   Congressional inquiries have ferreted this policy out, and also the fact that research over the last two decades has failed to keep pace with demand for food. Where is the funding and support for the necessary research to produce more on the finite land resources this world has? Another Green Revolution is of highest priority, and the benefits need to be directly transferrable to the poor countries, but not as handouts for their corrupt government to confiscate. It should be in the form of seed, fertilzer, equipment, and knowledge direct to local farmers. Get the development community behind such a program, and not content to blame “ill advised policies” to reform ethanol. We will all be better served.

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