EDITORIAL: The Biofuels Mess
October 31, 2011
Federal requirements to boost one kind of fuel or another (see George Will's take on that on the opposite page) are generally ill-advised. A new examination of motor-vehicle fuels convinces us of the bipartisan stupidity of those mandates.
Writing in The Weekly Standard, agricultural market analyst Dave Juday reports some infuriating facts.
Mandated use of ethanol in gasoline was supposed to lessen dependence on imports. Even though quotas of the biofuel mandate imposed by 2007 legislation have not been met, all the subsidized, corn-derived ethanol produced in our country cannot be sold here. Some of the excess has been exported to Europe, which has usage mandates of its own.
Another mandate applies to ethanol produced from wood, for which no economic production method is known. So Congress reduced the 'cellulosic' mandate for 2010 and 2011 by 96 percent - without reducing the overall biofuel requirement.
As a result some U.S. blenders are importing ethanol from Brazil, paying a tariff of 54 cents per gallon, even as Brazil, whose production is falling, has begun to join Europe in importing subsidized U.S. ethanol.
Biodiesel, subject of another mandate, usually has been made by blending soybean oil with ordinary diesel fuel. Blenders through 2009 got a $1 per gallon tax credit, but the fuel was still uncompetitive. Blenders imported soybean oil from South America and exported the blend to Europe to capture European subsidies. In 2008, all U.S. biodiesel production was exported; U.S. consumption was handled by imports.
The $1 credit lapsed for 2010 and production fell to half the mandated level. So Congress restored the credit for 2011 - and retroactively for 2010 production.
This circus probably will continue until some presidential candidate wins without running in the caucuses of corn-rich Iowa.
Source: The Boston Herald
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