Today, Environmental Protection Agency Administrator Stephen Johnson denied Texas its requested waiver of the ethanol mandate. While a disappointment, the decision was not unexpected as the Bush administration continues to defend its ethanol policy and argue that its adverse economic impacts are minor. In any event, the real answer is not state-by-state, year-by-year piecemeal reprieves of this ill-advised mandate, but legislation repealing or at least scaling it back.
The 2007 energy bill requires that 9 billion gallons of renewable fuels, mostly ethanol derived from corn, be added to the fuel supply in 2008. The mandate goes up in future years, and eventually will require 15 billion gallons of corn ethanol and another 21 billion of other agriculturally based renewable fuels by 2022.
The diversion of corn from food and feed to fuel use has contributed significantly to the rise in corn prices, which have more than doubled in recent years. This has posed a hardship for many, including Texas cattlemen who rely on corn as feed. It has also contributed to higher food costs, both here in the U.S and throughout the world. At the same time, the ethanol mandate has not provided relief at the gas pump, nor has it delivered the promised environmental benefits.
The federal law creating the mandate had provisions allowing individual states to apply to EPA for a waiver based on economic hardship. Discretion lies with EPA in consultation with USDA and other agencies, all of whom continue to defend the mandate and make the claim, contradicted by many food aid organizations as well as the World Bank, International Monetary Fund, and various UN bodies, that the impact of the mandate on grain prices has been small. Thus, the denial was not unexpected.
The real answer is not temporary waivers from bureaucracies but a permanent legislative fix. In truth, the mandate is irrational – the extent to which ethanol is mixed into in the gasoline supply should be left to the market, not to Washington and its arbitrary targets. If the mandate cannot be completely repealed, as H.R. 5911sponsored by Rep. Jeff Flake (R-AZ) would do, at least we should consider, as has Sen. Kay Bailey Hutchison (R-TX) in S.3031, freezing the use of corn ethanol at current levels rather than allowing it to increase in 2009 and beyond.