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good news for the driving public is that Congress is trying to alleviate
concerns about the cost and reliability of the gasoline supply.
The bad news is that their solution — an ethanol mandate —
repeats the very mistakes that created the problems in the first
place, and will likely increase the price we pay at the pump.
To its credit,
the Senate has added to the pending energy bill a measure to eliminate
the two percent oxygen-content requirement for reformulated gasoline
(RFG). Under the 1990 amendments to the Clean Air Act, RFG is mandated
in those metropolitan areas with the highest levels of ozone (the
primary constituent of smog), and it currently comprises about one
third of the nation's fuel supply. The two percent oxygen provision
requires the addition of so-called oxygenates to RFG during the
summer months, most commonly methyl tertiary-butyl ether (MTBE).
Unfortunately,
MTBE has proven to be a disappointment, both environmentally and
economically. The National Research Council concluded in 1999 that
MTBE use "has little impact on improving ozone air quality
and has some disadvantages." It has also stirred groundwater-contamination
concerns. Consequently, several states plan to ban MTBE, and the
Environmental Protection Agency concluded in a 1999 report that
"the use of MTBE should be reduced substantially."
Moreover, the
oxygen-content requirement not only fails to deliver environmental
benefits, but adds to the cost of gasoline. It's part of the reason
some metropolitan areas have recently experienced price jumps in
the summer, when this provision is in effect. Thus, eliminating
the requirement is a step in the right direction.
However, Congress
seems intent on replacing its MTBE mistake with an ethanol mistake.
At the insistence of Sen. Tom Daschle (D., S.D.) and other Midwest
legislators, the Senate is also planning on mandating the use of
renewable motor fuels — largely ethanol derived from corn.
If this measure is enacted, ethanol usage would expand from its
current 1.7 billion gallons annually to 5 billion gallons by 2012.
Most of this ethanol would be blended in with gasoline throughout
the nation.
Despite the
environmental hype that surrounds ethanol, its use does not help
clean the air. The same National Research Council study that found
little air-quality benefit from MTBE use was equally negative about
ethanol. The problem is that ethanol-containing fuels tend to evaporate
readily, and evaporative emissions, along with combustion exhaust,
contribute to air pollution. Indeed, many environmental groups and
green politicians have done a flip-flop on the issue. For example,
Rep. Henry Waxman (D., Calif.), who strongly supported ethanol in
the past, has recently raised concerns that increased ethanol use
may actually worsen smog.
In addition,
ethanol generates more pollution during production than does gasoline.
A number of studies have shown that it takes nearly as much energy
(if not more) to make ethanol — the process, from growing the
corn to distilling it into fuel-grade ethanol, involves many energy-intensive
steps — than is derived from its combustion. As a result, before
it even reaches your tank each gallon of ethanol has already caused
more pollution than would a comparable gallon of gasoline.
Ethanol has
also been touted as a domestic fuel source, and thus a means to
reduce our dependence on foreign oil. But, as a Congressional Research
Service study recently noted, "if the energy used in ethanol
production is petroleum-based, ethanol would do nothing to contribute
to energy security." Unfortunately, this is true, because the
industry — despite its eagerness to impose ethanol on others
— often prefers cheaper fossil fuels for its own operations.
If the environmental
argument for ethanol is weak, the economic argument is even worse.
One might ask how a fuel that requires nearly as much energy to
make as it provides could be economically viable. The answer is
that it isn't: Ethanol costs about twice as much as gasoline. Even
preferential tax treatment has not significantly expanded its use,
which explains the push for this mandate by the ethanol industry
and its congressional allies. Economists can only guess at the costs
of scaling up ethanol production to such unprecedented levels —
especially now that the market will extend beyond the industry's
home base in the Midwest. Since ethanol can't be sent through pipelines,
transportation costs will make it even costlier on the East and
West coasts.
Clearly, companies
like Archer Daniels Midland — which controls nearly 40 percent
of the ethanol market — see the mandate as a potential windfall.
Unfortunately, that windfall will come on the backs of the driving
public, in the form of fuel-price increases estimated to range from
4 to 10 cents per gallon. And whenever corn has a bad year, the
costs could go even higher.
It appears
that MTBE is on the way out, but then MTBE per se was not the problem.
The real problem is the federal government's penchant for micromanaging
the nation's motor fuels, to the point where Congress is actually
dictating what ingredients should go into gasoline. All they're
looking to do now is to replace their MTBE mistake with an ethanol
mistake.
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