If there is one form of corporate cronyism that both parties can agree to its the Renewable Fuel Standard – the government’s mandate requiring fuel sold in the U.S. to be mixed with a minimum volume of renewable fuels.
For corn growers and their representatives in Congress, the mandate is great politics. For everyone else, namely consumers and taxpayers, it's a poisonous mix of bad policy and corporate cronyism.
[sharequote align="center"]For corn growers and their representatives in Congress, the mandate is great politics.[/sharequote]
The Renewable Fuels Standard sets an annual volume requirement for the amount of biofuel that refiners must add to the total fuel sold in the United States. That primarily means ethanol, but there is strong evidence that mixing corn or other biofuels into gasoline is destructive for engines, the family budget, and even the environment.
Yet politicians from the "corn belt" are now pressing for expansion of the program, with Sen. Chuck Grassley (R-Iowa) leading the effort to not only defend the existing program from growing criticism, but to expand it by adding provisions into the tax code that would benefit corn growers.
The Standard may help major agribusiness but it is destructive to the American family.
First and foremost, government intervention has caused the price of corn to skyrocket. The growing cost of corn has forced chicken, hog, turkey and egg farmers to pay billions more for their feed than they would have absent the mandate. That translates into higher costs in the supermarket, making it more difficult for the poor and middle class to put quality food on their plates. Consumers also pay more at the pump because ethanol contains only about two-thirds the energy of an equivalent amount of gasoline. The higher the blend, the worse the gas mileage.
In addition to saddling consumers with higher food and gas costs, the government's mandated blend damages engines.
Of special concern is the so-called “blend wall.” That's the maximum ethanol blend most engines can tolerate, but if the Environmental Protection Agency sets its target too high it can force the blend well beyond that threshold. That's what was going to happen in 2014 until the EPA ignored its statutory requirements and dithered under pressure from various lobbying groups for years before recently moving to retroactively finalize the targets for 2014 and 2015. Now the mandate is again projected to exceed the blend wall in 2016.
This July 11, 2012, handout photo provided by the Renewable Fuels Association shows a Lawrence, Kansas, fueling station pump with various grades of fuel, including E15, which contains 5 percent more ethanol than the current 10 percent norm sold at most U.S. gas stations. (Photo: AP/Renewable Fuels Association, Robert White)
According to automobile experts, that will mean corrosion of critical parts like fuel lines, pumps, and injectors, and manufacturers won't cover the damages. The EPA has even acknowledged that ethanol in gasoline increases exhaust temperatures, indirectly causing component failures.
Not even environmentalists are fully convinced of the benefits of the fuel requirements.
Craig Cox of the Environmental Working Group has described the mandate as "an ecological disaster," as former virgin land is plowed over to grow corn in the search for subsidies. An Associated Press investigation found that, “the ethanol era has proven far more damaging to the environment than politicians promised and much worse than the government admits today.”
Faced with the reality that the mandate is coming under greater scrutiny, politicians from both parties have banded together to protect the taxpayer giveaway. During the last election campaign, the group VoteVets dumped hundreds of thousands of dollars into Iowa to elect Rep. Bruce Braley (D) in his losing campaign against incumbent Sen. Joni Ernst (R). But that didn't stop Ernst from recently joining hands with the progressive VoteVets group to claim that the renewable fuels standard is about the "national security" of the nation.
Even retired Gen. Wesley Clark, a Democrat and former candidate for president who sits on the board of VoteVets, traveled to Iowa to hold a press conference with the conservative Ernst. The trip made great headlines in Iowa, including, "Ernst welcomes generals' support for renewable fuels." What was never mentioned is that Clark is neck deep in green investments and profits from the Renewable Fuel Standard. Clark is also a co-chair for Growth Energy, an advocacy group run by the ethanol industry, and a senior advisor with Blackstone, which had investments in biofuel producers like Costaka.
Clearly nothing brings together politicians from across the political aisle quite like cronyism. The Iowa corn lobby is a tiny fraction of the American public, but it wields disproportionate political power that leaves the majority of taxpayers and consumers to suffer. The Renewable Fuel Standard has failed to deliver environmental benefits, but it has enriched special interests and the politicians they support, who are fighting desperately to defend their corporate handouts. It needs to be repealed, not expanded.
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