U.S. Ethanol Policy: The Unintended Consequences

By James M. Griffin and Mauricio Cifuentes Soto 

WHAT’S THE TAKEAWAY?

• Corn-based ethanol has had only small price, energy security, and environmental benefits
• Yet, the unintended consequences on food prices have been large and negative
• Rich consumers can substitute away from higher-priced foods, but the world’s poor have no such options
• Repealing EISA would bring food prices down, while keeping market incentives for ethanol use intact

The Energy Independence and Security Act of 2007 (EISA) mandated a steep rise in domestic ethanol production. The goals were to ease dependency on imported petroleum and to cut greenhouse gas emissions. A new blend of ethanol and conventional gasoline was to cost motorists less. EISA mandated ethanol production to grow from 4.9 billion gallons in 2006, to 36 billion by 2022. Today, at 14 billion gallons, we’re not even halfway there. EISA envisioned that cellulosic ethanol would provide the future growth, but reasonable production costs remain elusive. The unintended consequences of the policy, especially those influencing world food prices, are negative and far outweigh the positives.

Read more: http://www.energytribune.com//articles.cfm/9973/US-Ethanol-Policy-The-Unintended-Consequences