Everyone Hates Ethanol Subsidies. Why Can't We Get Rid of Them?

As CEI’s Brian McGraw points out, ethanol subsidies are opposed by just about everyone: researchers, environmental activists, free market wonks, and newspaper editorial writers across the ideological spectrum. Even Al Gore has come out against them.

I say "just about" everyone because of course the ethanol lobby and the farmers it serves still favor keeping the subsidies in place. 

Naturally, the current plan is to extend them for another year.

Sam Batkins and Douglas Holtz-Eakin of the American Action Forum do a nice job of explaining why subsidizing ethanol is such a terrible policy:

Ethanol is showered with more presents and protectionism than a newborn baby.  Under current law, ethanol receives a 45 cent-per gallon subsidy for blending into gasoline.  At roughly $7 billion a year, that might seem like enough support for a 30 year-old industry.  However, agribusiness and farm belt senators disagree.   

Congress has mandated that motorists use 7.5 billion gallons of renewable fuels (read ethanol) by 2012.  Not to be outdone, agribusiness was able to increase this to a staggering 36 billion gallons by 2022.  Finally, for good measure, Congress also enacted a 54-cent tariff on imported ethanol.  Subsidies, mandates, and tariffs; this must stop.

Ethanol corrodes engines, reduces miles per gallon (MPG) performance, and has a terrible environmental record.  No wonder Al Gore, a previous supporter, has stated, “[E]thanol, I think, was a mistake.”  As for current Secretary of Energy and Nobel Prize recipient Steven Chu: “Ethanol is not an ideal transportation fuel.”  To an extent, even the EPA agrees.

In trying to comply with Congress’s ethanol mandate, the EPA is charged with increasing the amount of blended ethanol.  Unfortunately for motorists, ethanol can corrode engine parts and damage catalytic converters.  

In November the EPA proposed a prohibition of E15 (fuel blended with 15 percent ethanol and 85 percent gasoline) for Model Year (MY) 2000 and older vehicles because of likely engine damage.  Similar concerns have forced the EPA to delay implementation of E15 for MY 2001-2006 vehicles, and even some newer vehicle manuals warn that the use of E15 can void warranties.  Congress might love ethanol, but ethanol hates your car.

Ethanol also wants you to make more trips to the pump.  It is widely accepted, even by the federal government, that ethanol contains less energy content per gallon than gasoline.  Owner’s manuals note this and fueleconomy.gov states that E10 can reduce MPG by 3-4 percent, while E85 reduces fuel performance by 25-30 percent.  Ironically, the Administration has mandated that MPG performance increase 57.7 percent over the next five years, allowing for healthy competition between dueling federal mandates.

Sadly, policy isn’t really the problem here. Instead, ethanol subsidies live on because corn-state legislators like Chuck Grassley defend them to the hilt. It's a purely political calculation (presumably Grassley is correct in assuming that the support he retains from defending the subsidies is greater than the support he’d get from opposing them). And so even though policy wonks and activists left, right, and center oppose the subsidies, they’ve so far proven effectively impossible to end.

More from Reason on ethanol subsidies here and here.

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  • Wind Rider||

    Hey, Grassley - Fuck you, Chuck. Go back and tell your constituents that the rest of us figured out the scam, and sent a message - that we'd prefer they build baseball diamonds, and sit out on summer evenings waiting for dead baseball players.

  • Old Mexican||

    It is widely accepted, even by the federal government, that ethanol contains less energy content per gallon than gasoline.

    People in the future will look back at how people right now subscribed to all these sorts of weird activities in the name of the environment, as silly and as tragic as the rationale behind the wicker man....

    http://www.youtube.com/watch?v=UEOQqnHMSMc

  • Nick||

    HOW'D IT GET BURNED?

  • Fatty Bolger||

    I've long said that about the panic over global warming/climate change. Someday all of those panicky ads and articles and so on will be looked at with amusement for how silly those people were "back then."

  • arhooley||

    If liberalism survives, the future people will be doing equally silly things and blaming past idiocy on conservatives.

  • André||

    Environment or not, I've always been pretty sceptical about the logic of turning perfectly good food into booze only to burn it.

  • ||

    This kind of nonsense is exactly why government doesn't work well on most any level. Sorry, politics demands that we wreak lots of economic destruction to pay off certain important constituencies.

  • WyoDave||

    I make money off of the subsidies (indirectly) and even I want them abolished.

  • ||

    "It is widely accepted, even by the federal government, that ethanol contains less energy content per gallon than gasoline."

    Not that I support ethanol subsidies, but if IC engines were designed exclusively for ethanol (as opposed to merely accomodating ethanol in the case of "flex-fuel" vehicles), they'd be able to get as good (or possibly even better) fuel economy than current gasoline engines.

    This is because ethanol has an octane rating of 115 and can accomodate much higher compression ratios (and turbos and superchargers) so they'd be able to improve the thermal efficiency to the point where it makes up for the lower energy content of ethanol.

  • ||

    I agree that the compression ratio could be higher, but I'm somewhat skeptical of the practical likelihood of this, considering that Brazil the last time I was there had a lot of "flex" vehicles (E25 to E100) but no E100 only vehicles, and they use more ethanol than anybody else.

  • Jeffersonian||

    I'm not sure when you were in Brazil last, but when I left in 1988, alcohol-only cars were the norm, though each had a small gasoline tank for cold-weather starting.

  • ||

    I remember seeing a lot of flex fuel ones.

    OK, I just got off the phone with my brother and asked him about it, since he's spent more time in Brazil than I have (I was visiting him). He says that there are a number of alcohol only cars, along with a whole bunch of other things (like cars with homemade natural gas tanks in the trunk).

    So I take that back, maybe it would work.

  • Colonel_Angus||

    That's for the market to decide.

  • Ebeneezer Scrooge||

    Uh, hold on. For just a teeny tiny second. I haven't done this particular kind of analysis in much depth but I've worked on lots of other types of engines and energy conversion processes. This idea just doesn't sound even close to right.

    The HHV for ethanol is (about) 11,500 BTU/lbm.

    The HHV for gasoline is (about) 20,850 BTU/lbm.

    We could look at LHVs too. And then we could balance the chemical equations and determine the stoichiometric combustion temperature to do a more thorough comparison. But we've got a nearly 2X difference in the HHVs, so I conclude:

    The odds that ethanol is going to burn anywhere near as hot as gasoline are about nil. Which means that even if you designed an engine to burn ethanol, it's potential upper limit on efficiency couldn't possibly match that of a gasoline fired engine.

    The max possible efficiency of an engine is eta (a Greek scribble), the Carnot efficiency, which is defined as

    eta = (TH-TL)/TH

    where TH is the high temperature reservoir (i.e. the combustion temperature) and TL is the low temperature reservoir (i.e. the surrounds that the engine exhausts to). Ethanol burns colder so it's potential efficiency is lower coming out of the gate.

    Now granted, the Carnot efficiency is not the whole story and it's entirely possible that by the time you're done engineering the whole system (engine), you might get something around a comparable efficiency out of a deliberately designed ethanol engine.

    But look at those HHVs above and they tell a story: to go x miles, you will need to start out with nearly 2X more lbs of ethanol on board, compared to gasoline. Which means you start out carrying more weight and that cuts the net end efficiency.

    Maybe the hit for that isn't huge in today's cars. But it does mean you a) have to reserve nearly 2X more onboard space for fuel, or b) you stop and refuel almost twice as often.

    In any case, in the long run I'd bet on the gas engine ultimately winning the efficiency race, between engines deliberately designed to burn gas vs ethanol.

    The average non-technical person does not understand the reason why we use fossil fuels: energy density. You get more energy per unit mass (and unit volume) out of fossil fuels than you do electric (batteries), alcohol, hydrogen, etc.

  • Sidd Finch||

    Replace stoichometric ratios with HV and the rest of your post might make a lick of sense.

  • Sidd Finch||

    OK. I read your full comment and you glossed over stoichometric ratios. They're about 14.7, 9, 6.5 for gas, ethanol, and methanol respectively. Clearly methanol is the best. Ethanol is low enough that just looking at HV is pointless.

  • Ebeneezer Scrooge||

    can accomodate much higher compression ratios (and turbos and superchargers) so they'd be able to improve the thermal efficiency to the point where it makes up for the lower energy content of ethanol.

    Sorry but no, that is simply not a true statement.

    Don't confuse "compression ratio" for "efficiency".

    You could compress the living hell out of lbm of air in an engine cylinder, but it's "efficiency" would be exactly zero. It has no energy content.

  • Ramsey||

    Look at the formula for carnot efficiency above. When you compress a gas you increase it's temperature, so higher compression increases efficiency by increasing the temperature difference between the combustion and exhaust cycles.

  • Ebeneezer Scrooge||

    Uh huh.

    And the energy required to do the work of compression came from where?

  • Sidd Finch||

    If you apply Carnot efficiency to the Otto cycle, you get eta = 1 - 1/(r^(k-1)). k is the ratio of c for constant pressure over constant volume.

  • Sidd Finch||

    "It has no energy content."

    Then what powers my air tools?

  • Ebeneezer Scrooge||

    This statement proves you have no idea what you're talking about.

  • Sidd Finch||

    Dude, seriously? You try to compare two fuels based on HV alone and don't know that theoretical efficiency for all combustion cycles is proportional to compression only ... and I don't know what I'm talking about?

    The "no energy content" stuff is too ignorant to address further.

  • Ebeneezer Scrooge||

    theoretical efficiency for all combustion cycles is proportional to compression only ...

    So in other words you're telling me you can run an engine on air if you just run the compression ratio high enough.

    Maybe you can do that. You'd be the first in history, and you'd be proving the laws of physics as we know them to be incorrect.

    You've got magic air. It enables perpetual motion. Where do I get some of that?

  • ||

    McCain is among those bitching about the ethanol extension, but the problem is not just that ethanol subsidies are popular with one group of people, it's that the people who want them are really passionate about them, but the people who don't like them aren't nearly as passionate.

    There are corn and sugar beet and cane sugar farmers who would (and did) vote against McCain because of his stance on subsidies. There were approximately zero people that otherwise agreed with Obama on the war, DADT, health care, but voted for McCain because they just hate ethanol subsidies that much.

  • ola||

    why does mccain care who will or wont vote for him in the future? How many corn and sugar beet and cane sugar farmers are there in arizona?

  • Fatty Bolger||

    The point is that pols who live in corn producing areas face the same situation McCain did in the presidential election. Those who favor subsidies are a smaller group, but they are passionate. The opponents don't really care all that much. So there is a lot to lose and little to gain by coming out against the subsidies.

  • sevo||

    "This is because ethanol has an octane rating of 115 and can accomodate much higher compression ratios"
    Not sure that's possible; ethanol only has some 61% of gasoline's energy content.

  • ||

    Octane rating has nothing to do with the inherent energy content of the fuel. It does have something to do with how efficiently you can extract that energy, though.

    Octane rating is the tendency of a fuel to self-combust under pressure. Spontaneous combustion causes knocking and a loss of power to the engine. The higher the octane rating the more you can compress it without spontaneous combustion.

    Higher octane rating gasoline does exactly nothing to a car not equipped to handle it. These day, most cars that can use higher octane gas have engines that detect knocking and will run at a lower compression ratio if you give them lower octane gas, so that does mean that for those cars, lower octane means lower power (but no knocking).

    I am skeptical that the extra compression ratio possible would provide enough extra efficiency to overcome the inherently lower energy content.

  • sevo||

    John,
    "I am skeptical that the extra compression ratio possible would provide enough extra efficiency to overcome the inherently lower energy content."
    Glad you agree. And yes, the rest of your post is the reason I doubt it is possible.

  • Whappan?||

    Not to nitpick, but knock sensors retard the ignition timing, they don't adjust the compression ratio. Although there are some experimental engines with variable compression ratios, there are no current production engines that use it.

  • Robert||

    Isn't the compression ratio defined per the volume of the cylinder at the time the spark is delivered, rather than its maximum compression during its stroke cycle?

  • Sidd Finch||

    It's defined as the bottom volume divided by the top volume.

  • Corduroy||

    Thieves

  • Michael S. Langston||

    One could say the same about ObamaCare... tons of polls say it sucks, by a large majority, yet the same polls say a majority doesn't want it repealed.

    I blame conflict aversion; a society unwilling to stand up for anything, doesn't.... but really, who knows

    The only known for those willing to view reality is the stupidity of everyone being against X, but you can't point to anyone willing to do anything about it...

  • BenDU99||

    In an ideal world you'd have the other Senators telling Grassley he can go fuck himself for trying to take their constituents' money for his subsidies.

    Instead they just make up their own list of subsidies and get those funded to be bought off.

  • Ted||

    Why is it so hard to get rid of? It goes back to the First Law of Economic Policy:

    Every inefficiency is someone's income.

  • sevo||

    The glazier always votes for broken windows.

  • Anonymous Coward||

    I wish I could come up with a clever and witty response to this utterly depressing piece. So, I'll just leave this.

    A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.

  • Robert||

    But why does it seem to take so lon for them to discover that? See the examples I give below for scenarios that haven't happened, and then try to explain why not.

  • ||

    And so even though policy wonks and activists left, right, and center oppose the subsidies, they’ve so far proven effectively impossible to end.

    Effectively the problem with all sorts of government programs, including Keynesian "counter cyclical" spending.

    Because the programs are effectively impossible to end once in place, reagrdless of their initial wisdom they will be impoosible to get rid of once their usefulness has ended.

    Similarly, it's impossible to implement counter-cyclical spending, since you can never actually cut it during the good times. As a result, the size of government has incrementally inched up in every recession, and barely decreased during boom times.

  • ||

    can accomodate much higher compression ratios (and turbos and superchargers) so they'd be able to improve the thermal efficiency to the point where it makes up for the lower energy content of ethanol.

    Sorry but no, that is simply not a true statement.

    Don't confuse "compression ratio" for "efficiency".

    You could compress the living hell out of lbm of air in an engine cylinder, but it's "efficiency" would be exactly zero. It has no energy content.

    Dear Ebeneezer Scrooge,

    Thank you.

    My experience is practical; I'm not a chemist, but I have been involved in racing much of my adult life.

    The alcohol engines I have been around operate at 16:1 compression ratios or higher, and they simply cannot match a gasoline engine's fuel efficiency at anything like an equivalent power output.

    You can make a lot of power, but only by using a lot of fuel.

  • ||

    It's nice to see our fiscally responsible GOPers like Chuck Grssley are lining up to wage war on the deficit.

    Two years in the wilderness was not nearly enough to teach the Republican party humility or responsibility.

    Keep voting for them, though. You wouldn't want to "waste" your vote on someone who has no chance to win.

  • ||

    And-

    Many (not all) people erroneously believe a higher octane rating is an indicator of more energy in the fuel.

  • Sidd Finch||

    One person erroneously believes fuel efficiency is the same as MPG.

  • Alan Kellogg||

    What will end the ethanol scam? Legal action. People start taking the ethanol industry to court for damage done, then ethanol will become poisonous and the support will fall away.

  • Robert||

    Sadly, policy isn’t really the problem here. Instead, ethanol subsidies live on because corn-state legislators like Chuck Grassley defend them to the hilt. It's a purely political calculation (presumably Grassley is correct in assuming that the support he retains from defending the subsidies is greater than the support he’d get from opposing them). And so even though policy wonks and activists left, right, and center oppose the subsidies, they’ve so far proven effectively impossible to end.


    The answer can't be that simple, for it explains too much that isn't true. If that were the case, then why isn't the time long past that, say, everyone whose last name begins with U, or everyone who owns a red Rambler, or everyone who lives on the even numbered side of streets paved with gravel, organized to get a million bucks each every year from the treasury?

  • Jay B.||

    The ethanol affair is all about money. I doubt it can save the environment somehow. Don´t forget that politician’s campaigns are supported also by corn farmers because they know that until their congressmen are sitting in the Congress they will get the support from the state treasury. The efficiency or any other measurable data are no longer important...

  • ||

    Then what powers my air tools?

    Electricity (unless your compressor runs on gasoline).

    I really don't care if you drive to work in a steam locomotive fueled by potato peelings and dog shit, as long as it is not also burning government subsidies.

  • Michael Wells||

    This is merely the way that capitalism functions. The biggest neoclassical fallacy is a false division between private and public power. There is only social power, and the actors who create and manipulate certain institutions to benefit certain actors. Our system of industrialized agriculture is heavily reliant upon government supports to offset the gross expenditures farmers are forced to make to purchase the necessary technical inputs (think mechanization and agrichemicals) to maintain high productivity. To fully understand why ethanol, simply look at our nation's agricultural policy over the years, which has systematically favored the growth of corn- so much, in fact, that we have had to find uses for the damn stuff. High fructose corn syrup, red 40, maltodextrin, etc. all come from corn. Go to the supermarket and you will find approximately 90% of all products are intimately tied up with corn. The reality is our current agricultural system is horribly inefficient and destructive of the environment and government subsidies are the only reason that a McDonald's cheeseburger is about the same or less than a head of lettuce. The real answer to our agricultural problems lie in localization, polyculture, and bringing the farms back into our communities once again. This system would not be in place but for the corrupt partnership between transnational corporations and a government which is supposed to represent our interests.

  • Michael Wells||

    Let me throw in one correction: I mean that a McDonald's cheeseburger COSTS the same or less than a head of lettuce. I apologize for omitting that crucial word.

  • Robert||

    I suspect you actually mean "is priced".

  • ||

    Politicians love ethanol subsidies since Big Ethanol donates money as a payoff.

    Jeez - I thought everyone new this. Many people have died because corn no longer feeds human beings it feeds our cars.

    50,000+ humans have died because of EPA mileage requirements demanding the laws of thermodynamics be thrown out the window. Internal combustion engines (that big thing in the engine compartment) have not improved for 50 years and so to get better MPG the manufacturers substitute aluminum for steel and plastic for aluminum - a lighter car gets better MPG but is worthless in a crash.

    Government never learns and humans die because of Liberals wanting to feel good about themselves.........

  • ||

    My goodness, now we are claiming that ethanol kills people. There were people starving before ethanol, people will starve after ethanol. Starvation is more a matter of geography and politics.
    I would like for people to consider this. Drop all ethanol subsidies, every one of them. At the same time we are going to drop all the subsidies the oil industry gets that for some reason don't get talked about. The special tax breaks that are available only to big oil. The billions of dollars we spend protecting their wells in the middle east with our military. The thousands of American soldiers that have given their lives. The truth is the only reason we give a damn about the middle east is cheap oil and if we made the oil companies pay for the protection they receive the price of gas at the pump would be significantly higher and ethanol could compete quite nicely, probably be cheaper, with no subsidy and no military protection.

  • ||

    give pres a line item veto, bs like this would die.

  • ||

    Imports of oil to the US are about 741 million barrels. Cost of our Middle East involvement to stabilize world oil prices is about 171 billion dollars per year. That works out to about $1.00 per gallon direct subsidy to big oil. That does not count the many tax breaks that oil gets. Lets look at the subsidy issue honestly.

  • ||

    My math works out to $5.49 per gallon of crude (assuming your figures for oil imports and the cost of our Middle Eastern operations), but your point is well taken.

  • ||

    Also remember that ethanol is only a byproduct of a process that removes starch from corn and leaves a valuable protein that is fed to cattle and chickens. Nobody in this world is staving in this world because we do not have enough starch. They starve because they do not have protein.

  • ||

    Gee. Another part of Algore's schtick that turns out to be wrong. Color me surprised. Ethanol has gone the way of the hockey-stick temperature graph. The only thing driving this Glow-Bull Warming eco-swindle is sheer greed. Science has been co-opted by big government; every statist economic model must be implemented immediately OR THE PLANET WILL DIE! Its sad to note that the Republiclowns are in on this, showing the total bankruptcy of the system. Only a meltdown will solve this problem of an out-of-control legislature that is destroying the country.

  • LifeStrategies||

    I think we're well on the way to meltdown. Am I being pessimistic in seeing that he current mess of Obamacare and the insurance industry all suggest a disaster will soon be here.

    Is it yet time for the Constitutional Convention needed to rein in the central government? Maybe one with limited powers for their delegates?
    http://www.callaconvention.org/
    http://www.upi.com/Top_News/An.....389675780/

  • ||

    Looks like a cavalcade of smoke generators obfuscating the benefits of everything alternate energy while hoping that no one sees the magnificent subsidies given to big oil. Is it any surprise that all alternate fuel subsidies are not in jeopardy (but not those for big oil)?

  • ||

    Can you quantify or even describe the nature of these "big oil subsidies"? When I google "oil industry subsidies" I get links to left wing blogs and thinktanks, nothing non-partisan. Reading some of these, it seems the subsidies are somewhat far fetched. Such things as highway construction, no taxes on emissions, R&D and depreciation tax credits that all industries get, and theoretically too low federal royalties on exploration leases are mentioned. Nothing like the tariffs and direct funding that ethanol gets, or the direct support going to green energy (wind/solar). So, justify your position, but do so honestly and back it up.

  • Nomasir||

    Everybody hates a lot of subsidies and a lot of government spending programs, and we can't seem to get rid of any of them. Politicians are bought-and-paid-for. They either owe it to corporations who got them elected (and write the bills), or to state-dependent groups that deliver votes. Until the citizenry wakes up and sends them all packing, not sure there's anything left to discuss. http://bethsaidafigtree.wordpress.com

  • ||

    I can see Iowa from my house !

  • ||

    One factor never mentioned in the ethanol debate is the tremendous amount of water the process uses. Widespread ethanol manufacturing will soon be at odds with the farmer who wants to irrigate with that same water.

    No irrigation, no corn for the ethanol. It's unsustainable.

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