If Ethanol’s So Great, Let It Compete Without Mandates
By Jerry Jung
June 23, 2019
Ethanol plant operators are fixated on the federal mandate and rules because without significant federal assistance, ethanol makes no economic sense (“Trump Urges More Help for Ethanol,” U.S. News, June 19). Numerous studies as well as common sense conclude that it takes more fossil-fuel energy to make ethanol than it yields. Think of the heat used to distill corn along with energy consumption of agricultural tractors, trucks and chemicals.
Ethanol production’s renewable identification numbers (RINs) act like subsidies. If refineries don’t put 10% ethanol in their gasoline, they must acquire RINs, the price of which varies wildly. When former EPA Administrator Scott Pruitt granted small refineries waivers from this onerous mandate, the price of RINs collapsed. Stable markets are based on the equilibrium of supply and demand. In normal markets prices increase gradually as demand increases. But the market for RINs is all or nothing. If there are adequate RINs they are theoretically worth nothing. If there aren’t enough, they are theoretically priceless. Mandates and markets don’t function well together.