Inflation Reduction Act Is Latest Win for Ethanol Industry

CWashington has provided a lot good news for orn farmers, and other ethanol producers over the recent months. Inflation Reduction Act – $500 Million for infrastructure. This will help fuel stations sell higher-ethanol-content gasoline. Industry allies in Congress want to capitalise on this momentum and push for sweeping rules changes to ensure that ethanol production continues to grow over the next decade.

However, ethanol supporters have promoted the fuel as an option to lower gas prices. Many scientists and environmentalists disagree. Instead of locking corn prices down and making things worse for the environment, these measures will only increase the price of corn.

Rising fuel costs this spring due to Russia’s invasion of Ukraine, pandemic-spurred supply chain challenges, increased demand, and other market factors were a boon to ethanol proponents, who point to increased biofuel production as a way to lower gas prices. “They do feel emboldened given those factors,” says David DeGennaro, a policy analyst at the National Wildlife Federation. “[They] see that as a way to push for what they’ve been pushing for for a while now.” In April, President Joe Biden allowed gas stations to blend up to 15% ethanol into fuel they sell year round (up from the standard 10%)—a move intended to cut overall gasoline demand and lower the price at the pump. However, the actual price impact of this policy is likely to be very small as only 2% of U.S. gasoline stations have the ability to sell 15% ethanol gasoline.

In June, U.S. Department of Agriculture revealed that $700 Million dollars had been paid from 2020 CARES Act funds. This money was to aid ethanol producers and others affected by the pandemic. The Inflation Reduction Act—which is heading to President Joe Biden’s desk to sign after passing both the Senate and House—adds yet another boost to the industry.

Both parties have been trying to maintain this support wave for farm state lawmakers. A piece of legislation known as the Next Generation Fuels Act of 2030 has been gaining momentum among senators in recent weeks. Cheri Bustos from Illinois, a Democrat, presented the bill to the House in 2017. It proposes major federal changes which will make it mandatory for automakers that all gasoline-powered vehicles be able to burn much more ethanol. New rules are also proposed to increase the sales of ethanol at gas stations nationwide.

Representative Chuck Grassley (R. Iowa), who brought the legislation to the Senate last week, is one of the proponents. He claims that it will reduce carbon emissions as a result of high fuel prices. And while there’s a consensus among green transition planners that electrification, not alternative fuels, is the way forward for decarbonizing passenger vehicles, the ethanol industry says that batteries and ethanol are not necessarily at odds. “EVs are going to be a part of the strategy to achieve carbon neutrality,” says Geoff Cooper, president of the Renewable Fuels Association. “We’re simply arguing that ethanol and other renewable fuels should be another important part of that approach and the two should work together.”

20 years ago environmentalists would have supported the push in 2000s to replace gasoline with ethanol. But today, there aren’t many in the movement who think conventional ethanol—mostly made from corn—has much to offer in terms of emissions reductions. When you consider corn ethanol compared to gasoline, some emissions models suggest that there are around 40% reductions in lifecycle CO2 emissions. Many studies also point out the unintended consequences of decades of wide-scale corn ethanol production. According to an article published in February by the Journal of Environmental Research, the fuel is just as harmful, or worse than, gasoline because it causes land use changes. Proceedings of the National Academy of Sciences. That’s because laws encouraging ethanol consumption cause farmers to use more land for growing corn. They release carbon dioxide into the soil when they prepare new fields for planting.

“We have this industry that’s already built out, producing 14 billion gallons [of ethanol a year],” says Tyler Lark, a co-author on the study. “If that stays constant, there’s not as much of a cascade of impacts. Whereas, if this were to translate into expanding overall national corn demand, then we would be concerned that it could lead to higher crop prices, greater land use changes, and greater greenhouse gas emissions.”

It wasn’t supposed to be this way. Ethanol made from fermented maize was used as a bridge fuel in order to develop cellulosic biofuels that could turn whole plants into fuel. This would result in far less waste and lower emissions. However, these processes failed to scale up, so American corn kernels remain the only source of ethanol.

Corn growing trade groups have strongly supported the Next Generation Fuels Act, which sets required emissions reductions at such a level that they can still be met by using corn ethanol as opposed to more stringent requirements that would force a shift to more environmentally-friendly biofuels. “There’s still people working in [cellulosic biofuels],” says Aaron Smith, a professor of Agricultural Economics at the University of California Davis. “If we get a lot of that stuff, then, yeah, ethanol is good. But taking it from corn is not going to save us.”

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