Abandon the Renewable Fuel Standard
Much like any special interest group, the ethanol lobby will take a mile if you give it an inch. The only reason why people put fermented corn ethanol into their gas tanks is because the government forces them to. Finally, some of the biggest ethanol-producers are getting away from relying on government mandates to make money and are entering the free market.
Some are backing away from a market that is wholly reliant on the federal government ordering consumers to use the product. Bloomberg News reported on August 7, 2020 that "American ethanol makers have for years been reliant on a government policy that mandates biofuel use. But industry stalwart Green Plains Inc. wants to break away from that dependence and instead is investing in everything from high-quality proteins to fish feed and alcohol for disinfectants." The report indicates that they are worried that the Trump administration is not using the power of government to give the industry enough support, so they are branching out into an actual free marketplace.
The ethanol lobby is not happy because the Trump Environmental Protection Agency (EPA) is allowing some small oil refineries to abandon blending requirements. The Trump administration is trying to save these small refineries from bankruptcy as a result of the economic slowdown caused by the coronavirus pandemic. This has angered Big Ethanol, and the lobby is also concerned that China is not purchasing American manufactured ethanol thanks to the current trade war.
Todd Becker, the CEO of Green Plains Inc., based in Nebraska, has given up on ethanol as a substitute for gasoline, and his company has pivoted toward private markets. According to Bloomberg, the "U.S. ethanol industry was born out of government support. In the 1970s, President Jimmy Carter asked agribusiness leaders to make biofuels to reduce petroleum dependence, with Archer-Daniels-Midland Co. starting production in 1978. The industry got another boost in 2007, when the Renewable Fuels Standard expanded the mandate to blend ethanol into gasoline." The industry is learning that relying on the government to regulate and mandate a pathway to profitability is a dangerous game to play.
The Big Ethanol lobby has bitten the hand that feeds it, because President Donald J. Trump in 2015 lifted curbs on higher ethanol blends of gasoline, as Reuters reported. The report indicated that the Trump EPA's "announcement will allow gasoline stations to sell blends containing up to 15 percent corn-based ethanol, called E15, year-round, ending a summertime ban that President Barack Obama's Environmental Protection Agency imposed in 2011 to reduce smog pollution." No good deed goes unpunished, because that was not enough for Big Ethanol to be happy.
Despite President Trump increasing mandated volumes, and high blend rates, one of the big ethanol producers is taking action that will politically hurt President Trump. This may be an attempt to use a P.R. strategy of announcing this politically embarrassing development for President Trump in the swing state of Iowa, that also is conducting an important Senate race for the seat of Sen. Joni Ernst (R-Iowa), rather than this company getting religion on the fact that it should make products that people actually want.
It is not lost that Becker admits he is reliant on government policies, yet he is aware that when margins increase, the industry is thrown into turmoil. While Big Ethanol trashes the Trump EPA that has bent over backwards for it, the lobby politically slaps the president and the Republican Party for not doing more. You can never satisfy this lobby, and this is a great case study in how a lobbying interest wholly reliant on government policies is doomed to failure.
It is time for the Trump administration to consider that it cannot compromise enough with the Big Ethanol lobby to ever please the latter. A better idea would be to abolish the Renewable Fuels Standard and send the rest of the ethanol producers into other markets where they can make money through competition, not government edict. And it would be great to see the ethanol lobbyists in the D.C. Swamp have to go find work where they are not bilking the taxpayer for a special interest client.
Norm Singleton is president of Campaign for Liberty.
Image: Tony Webster.