The U.S. Environmental Protection Agency has proposed reducing the amount of ethanol and other biofuels that must be mixed into the nation's fuel supply. Fuel blenders would be required to use 15.21 billion gallons of biofuel in 2014, down from 16.55 billion gallons last year.
That's a good sign that the EPA finally recognizes the federal mandate for ethanol is creating economic distortions. But the mandate should be cut much more significantly, with the ultimate goal that it be eliminated.
The Energy Independence and Security Act of 2007 set benchmarks for a huge increase in the production of domestic biofuels, supposedly to boost national security and help the environment by reducing U.S. consumption of foreign oil.
Ethanol does reduce oil consumption. But most of the ethanol in the U.S. is made from corn. Nearly 40 percent of the U.S. corn crop goes to ethanol.
Corn is the No. 1 source of livestock feed. When so much corn is diverted into making ethanol, feed prices go up. Americans subsidize ethanol through tax breaks, and then they pay for ethanol again through higher food prices.
The 2007 law encouraged research and development of biofuels made from nonedible products: grass clippings, wood chips and other forms of cellulose. The idea was to jump-start a new, environmentally friendly motor-fuel industry that did not rely on foodstuffs. That, so far, has been all promise. No cellulosic biofuel is produced on a commercial scale yet.
In the meantime, conservation efforts and a tough economy have curbed the nation's demand for fuel. North American oil and gas production has skyrocketed, thanks to new extraction techniques. So the demand for ethanol has been far less than expected.
That has put fuel blenders in a bind. Federal law requires them to mix their gasoline with huge, fixed amounts of biofuels. The standard mix is nine parts gas to one part, or 10 percent, ethanol. Every major auto manufacturer approves the use of 10 percent ethanol. At that level, ethanol is safe for gasoline-powered cars.
