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Round and Round the Ethanol Goes

If you want to understand why people are so down on the American biofuel industry, look no further than the ethanol trade relationship between Brazil and the United States. Last year, the US imported 9.6 million barrels of ethanol from Brazil. And yet Brazil imported 2 million barrels from the US.

How does that happen, you ask? Here’s how it works. The US has a renewable fuel standard that sets quotas for both corn-based ethanol and ethanol produced from “advanced” sources like cellulose or sugarcane. But actual production of those “advanced” biofuels has fallen woefully short of those mandates. To meet that shortfall, producers import sugarcane ethanol from Brazil, where the sugarcane industry is heavily subsidized.

Once you add those 9.6 million barrels of advanced Brazilian ethanol to the vast quantities of corn ethanol producers are churning out to meet the other side of the mandate, the US is left with more ethanol than can be safely blended in to gasoline. As a result, we ended up shipping 2 million barrels of corn ethanol right back to Brazil.

The environmental cost of shuttling these barrels back and forth across the globe makes this more than just an absurd story of misguided government policy. The fact that this program is effectively subsidizing needless voyages by high-emitting ships makes a mockery of biofuel’s dubious status as a “green” program.

Fortunately, there are two bills wending their way through Congress at the moment, one to completely repeal the renewable fuels standard and the other to reform it. Both of these bills would fix this senseless trade circle. Let’s hope they pass, and soon.

[Corn image courtesy of Shutterstock]

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