Planet Gore

Shocker: Billions in Corn-Ethanol Subsidies Haven’t Cut Oil Imports

A must-read from the Manhattan Institute’s Robert Bryce:

Despite Billions in Subsidies, Corn Ethanol Has Not Cut U.S. Oil Imports

In the next few weeks, the Environmental Protection Agency is expected to rule on a proposal to increase from 10 percent to 15 percent the amount of ethanol that may be blended into gasoline. If the EPA approves the move, the U.S. motor-fuel market would yet again become the victim of misguided federal intervention.

Since the 1970s, Congress has justified subsidies to the corn ethanol industry with the oft-repeated claim that boosting domestic production of ethanol will increase America’s energy security by reducing U.S. oil imports.

That claim has no basis in fact.

Between 1999 and 2009, U.S. ethanol production increased seven-fold, to more than 700,000 barrels per day (bbl/d). During that period, however, oil imports increased by more than 800,000 bbl/d. (In addition, U.S. oil exports — yes, exports — more than doubled, to about 2 million bbl/d.) Data from the U.S. Energy Information Administration show that oil imports closely track domestic oil consumption. Over the past decade, as oil demand grew, so did imports. When consumption fell, imports did as well. Ethanol production levels had no apparent effect on the volume of oil imports or on consumption.

So despite more than three decades of subsidies costing taxpayers tens of billions of dollars, the ethanol industry cannot point to any decline in oil imports during the period when it experienced its most rapid growth. And yet:

  • Tax subsidies provided to corn ethanol producers have been larger than those given to producers of any other form of renewable energy.

  • Corn ethanol subsidies are now costing U.S. taxpayers about $7 billion per year, the Congressional Budget Office reported in July. The CBO found that producing enough corn ethanol to match the energy contained in a single gallon of conventional gasoline costs taxpayers $1.78.

  • Corn ethanol is a financially inefficient method of cutting carbon dioxide emissions, costing taxpayers $754 per metric ton of CO2 avoided, the Congressional Budget Office also reported.

The possibility that the EPA will mandate an increase in the ethanol content of fuel has drawn heavy opposition from numerous environmental and industry groups. In August, thirty-nine of them — ranging from the Alliance of Automobile Manufacturers to the Natural Resources Defense Council — asked Congress to hold hearings on the matter.

The rest here.

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