Get Rid of the Ethanol Mandate!

In America, 40% of grain is not grown to be ultimately eaten by humans, but for fuel. The Renewable Fuel Standard required that, starting in 2005, a certain percentage of transportation fuel sold in America be renewable, and not require extraction from the earth. What people thought was going to happen was that we would be able to make ethanol from cellulose, and so it would stimulate new technology that would enable us to decompose the stalks and leaves of plants into usable fuel. This did not happen. Instead, the only thing we are able to reliably make is corn ethanol from the nutritive parts of corn, which is then blended into gasoline.

As a consequence, the Renewable Fuels Mandate has not been able to be efficient at reducing emissions, and may not have even done so. The study which takes into account land conversion for the production of ethanol, Lark et al (2022), finds that it actually increased emissions. Meanwhile, by diverting agricultural products – somewhere on the order of 5% of the world’s total calories, mind you!! – into inefficient gasoline production, we raise food prices both for ourselves and elsewhere. Chakraborty, Hubert, and Ural Marchand (2019) estimate that the Renewable Fuel Standard increases global food prices by 8-16%, and puts 25 million people into poverty in India alone. In the 2000s, the price of commodities increased considerably, and Wright (2014) argues that it was biofuels which did it.

But how do we estimate the price effects?