Trump Pushes the Ethanol Blend Wall

By Merrill Matthews

President Donald Trump intends to hand out $12 billion to various farmers to offset the financial losses they are facing due to his trade war. That’s his attempt at directly padding his supporters’ pockets. He announced his plan to indirectly help farmers during a recent visit to Iowa, saying he may issue a “12-month E15 waiver.”

The president was referring to standards for ethanol, a mostly corn-based fuel blended into gasoline. The waiver would allow the sale of gasoline that contains 15 percent ethanol year-round. E15 blends are usually prohibited during the hot months due to smog concerns. Unfortunately, E15 is less environmentally friendly than previously thought and harms American gas tanks.

Ethanol standards can be traced back to the mid-1970s. U.S. crude oil production began to decline and Middle Eastern countries began restricting their oil exports to punish the U.S. for its pro-Israel policies. In response, Congress began looking for ways to reduce U.S. dependence on imported oil while creating a more environmentally friendly alternative to gasoline. So the government began subsidizing ethanol.

Then in 2005 Congress passed the Energy Policy Act, which created the renewable fuel standard, or RFS. Instead of subsidizing ethanol, the new law mandated that 4 billion gallons of ethanol be mixed into gasoline beginning in 2006.

However, the Great Recession led to a downturn in economic activity and gasoline usage leveled off for years, even as innovative drilling techniques dramatically increased our supply of crude oil. But static gasoline demand created a problem: The RFS envisioned the country using more gasoline and thus ethanol every year.

As a result, the Environmental Protection Agency began scaling back the amount of ethanol to be blended into gasoline in order to keep the gasoline-ethanol “blend wall” at about 10%Even so, ethanol producers wanted to put even more ethanol in our gas tanks because that increases the demand for, and therefore the price of, corn. So they began asking to increase the blend wall to 15%.

Carmakers have pushed back against E15 arguing that it would harm many older engines. The Renewable Fuels Association says that nearly 90% of 2018 models are approved for E15. But the association concedes, “RFA estimates that approximately 34 percent of the estimated 235 million cars, trucks, and SUVs on the road today are clearly approved by the automaker to use E15 (including FFVs).”

That means that two-thirds of the cars in service right now might be harmed.

There’s more. Environmental groups are increasingly concerned that corn-based ethanol may not be the clean energy option they once thought. Farmers use energy to run the machinery that clears fields and plants, harvests and transports corn to a processing plant. Is that fuel-consuming process “cleaner” than just putting that gasoline in our cars?

Iowa produces more corn-based ethanol than any other state—nearly twice as much as second place Nebraska—and since it is the first state up in the quadrennial presidential primaries, nearly every presidential candidate, Republican or Democrat, promises to keep Iowa corn flowing into our gas tanks.

President Trump supported ethanol from the get-go. And now he sees it as a means of smoothing the rough patches created by China’s retaliatory tariffs on many U.S. farm products. Increasing the blend wall to E15 means more demand for corn, which means higher prices and more money in farmers’ pockets—or maybe it just offsets some of their tariff-related loses.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas.