Landon Stevens, MPP, Strata Policy
Randy T Simmons, PHD, Utah State University
Ryan M. Yonk, PHD, Utah State University


Ethanol accounts for 94 percent of all biofuel production in the U.S. The Renewable Fuel Standard (RFS), which began in 2006 and requires fuel sold in the United States to contain a certain volume of biofuels, has added significantly more weight to an already-large subsidy structure incentivizing U.S. ethanol production. While these ethanol policies have long been known to negatively affect the average American, a new report from Strata Policy analyzes how U.S. ethanol policies have not only been detrimental to the United States as a whole, but also to the Corn Belt specifically.

KEY FINDINGS

U.S. ethanol policy comes with a hefty price tag. $57 billion has been directly spent on policies like the Volumetric Ethanol Excise Tax Credit (VEETC). Even more economic loss has been realized as a result of decreased eciencies resulting from non-direct government supports, such as ethanol mandates. In fact, ethanol mandates are set to outpace the ability of fuel blenders to add ethanol to gasoline without damaging vehicle engines, which will need to be remedied by the Environmental Protection Agency to avoid onerous fines being placed on fuel blenders.

The environmental benefits of ethanol are negative at worst and paltry at best. Best case estimates of energy gain (energy gained from energy input) from ethanol production show a meager gain of less than 5 percent. To make matters worse, ethanol policies encourage planting on conservation land and use tremendous amounts of precious local water resources.

Even the communities typically thought to benefit most from ethanol policies are being hurt. While the benefits are concentrated among a handful of ethanol refineries and corporate farming companies, the RFS is correlated with both higher unemployment and lower per capita income for Corn Belt residents as compared to the rest of the country. When it comes to U.S. ethanol policy, the losers far outnumber the winners.