Fuel inefficiency
The following editorial appeared Sunday in the Chicago Tribune.
We recently looked at U.S. politicians’ curious love affair with ethanol, which is employed as an additive to gasoline to cut air pollution. Congress has provided heavy tax breaks for ethanol production and has mandated that the use of ethanol nearly double by 2012.
The focus in that editorial was on how manipulation of the domestic production of ethanol has driven up the price of it – and thus driven up the cost you’re paying for gasoline that uses ethanol in a fuel blend. The politicians decrying the high cost of gas have been helping to push that cost higher through their treatment of ethanol. The price of ethanol has doubled since last summer.
Now here’s another piece of the ethanol issue. Not only have politicians been manipulating the cost of domestically produced ethanol, they’ve been guaranteeing that you can’t buy cheaper ethanol from overseas.
Foreign imports of ethanol are subject to a 54-cents-a-gallon tariff that works to the detriment of American motorists.
The tariff keeps out ethanol from such major producing nations as Brazil, which has gone further than any other country in switching from petroleum. It also keeps prices higher than they otherwise would be.
Because it relies on sugar, not corn, Brazil can make alcohol fuel a lot cheaper than American companies can. Ethanol made from sugar cane yields about eight times as much energy as ethanol derived from corn. But with the current import duty, none of that really matters.
The Renewable Fuels Association defends the tariff as a way of offsetting the 51-cents-a-gallon tax credit given to companies that blend ethanol with gasoline. Without it, the subsidy for U.S. producers would also go to foreign ones. “I don’t think Americans would be very happy about that,” says spokesman Matt Hartwig.
That’s one way to look at the tariff. Another way is to see it as a barrier to the vigorous competition needed to make ethanol economically viable. It serves not so much to promote ethanol use as to enrich domestic ethanol producers. By keeping out cheaper foreign sources, it makes ethanol a less appealing option to gasoline.
From this perspective, both the tax break and the tariff are ways of protecting the U.S. ethanol industry. Getting rid of the tariff would put it on the same footing as suppliers abroad.
The domestic industry might like you to think that relying on foreign supplies of ethanol would be as dangerous as relying on foreign supplies of oil. But it’s not. If Brazil were to curb production, plenty of other countries that are suited to growing sugar cane could fill the gap. That is one of the attractions of ethanol: It’s a renewable form of energy. Any price increase would also make American-made ethanol more attractive.
Ethanol deserves an opportunity to prove it can furnish a larger share of our energy needs in a genuine marketplace. It won’t get that chance until the tariff is gone.