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Biofuel Boondoggle Just Won’t Quit

Corn-based ethanol starves the world’s poor and increases greenhouse gas emissions, yet the US is intent on propping it up with ill-conceived mandates. Many fuel suppliers and oil refiners have been forced to buy credits to meet these quotas, and the price of these credits has risen a staggering 1,400 percent since the start of the year. The 2007 US Renewable Fuel Standard requires that 13.8 billion gallons of corn-based ethanol be blended into regular gasoline this year. But neither supply nor demand will be sufficient to meet this quota, and suppliers and refiners are scrambling to snatch up increasingly scarce credits called Renewable Identification Numbers (RINs). The Financial Times reports:

The Oil Price Information Service recently described the market as “RIN-Sanity”.

The US Renewable Fuel Standard, updated in 2007, requires blending 13.8bn gallons of corn-derived ethanol with petrol this year. But most forecourts sell petrol blends containing only 10 per cent ethanol, and with US petrol consumption projected to be flat at 134bn gallons this year, this translates into demand for 13.4bn gallons of ethanol — less than the mandate.

High corn prices and weak petrol demand have meanwhile forced some ethanol refiners to shut down plants. US ethanol production last week was running at an annual rate of about 12.3bn gallons, meaning insufficient domestic supply to meet the mandate.

So we can’t produce enough ethanol to satisfy the quota, and even if we could, there isn’t nearly enough demand for the ethanol we are expected to produce. Now companies are forced to pay out the nose for credits that exempt them from bringing a product to a market that no one wants and frequently doesn’t even exist. That’s outrageous.

This is already enough to qualify as a massive green failure. But the fact that the entire policy is designed to prop up corn-based ethanol, which starves the world’s poor by driving up the price of corn while failing to do a thing to reduce greenhouse gas emissions, is the icing on the cake.

This biofuel boondoggle is massive, and will continue to grow as the mandates set forth by the Renewable Fuel Standard become more stringent over time. RINsanity, indeed.

[Withered corn crop image courtesy of Shutterstock]

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