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Less ethanol mandate coercion by the government has led to a lack of demand — which is hitting biofuel companies hard

Could ethanol even survive in the free market without a mandate?

Mark Wilson/Getty Images

One of the biggest arguments against corn-based ethanol car fuel — as with other forms of "green" energy — is that it wouldn't survive in a market environment without the help of government mandates and subsidies. A recent story of an ethanol refinery in Iowa lends the criticism some credence.

Biodiesel company W2 Fuel announced on Tuesday that it will be closing down its 10-million gallon plant in Crawfordsville, Iowa — as well as a plant in Michigan — and laying off 50 total workers, the Des Moines Register reported. The reason for the shutdown, the report said, is a decreased demand in biofuel due to renewable fuel mandate waivers from the Trump administration.

Under the federal Renewable Fuel Standard, oil refineries have to mix in a certain amount of biofuels — such as ethanol — into gasoline. The Environmental Protection Agency, however, can give out waivers to refineries that demonstrate economic difficulties. The Register story said that the Trump administration has given out a total of 85 waivers since taking office, which has exempted gasoline many producers from having to mix in 4 billion gallons of biofuel and 1.4 million bushels of corn. This year, President Trump's EPA issued 31 waivers.

And W2 isn't the only biofuel manufacturer that's been hit by the waiver-driven demand decrease. Earlier this month, Siouxland Energy's board of directors "decided to halt production" at the cooperative's plant in Sioux Center, Iowa. Plymouth Energy in Merrill, Iowa, halted production last month.

Critics of the ethanol mandate say that it's not only unnecessary given American energy production, but that it also increases engine corrosion and distorts the price of beef due to the increased scarcity of cattle feed. Nevertheless, the fuel mandate is big business in states that produce a lot of corn or biofuel, and therefore enjoys a lot of political support in those states.

Iowa's Senior senator, Chuck Grassley (R), has spoken out forcefully about this year's mandate waivers, saying, "They screwed us," on a local television appearance in his home state last month. Grassley and Iowa Gov. Kim Reynolds (R) have been working with the Trump administration on a deal to address the waiver issue, but said last week that they're waiting to see details "in writing."

One last thing…
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