By on January 8, 2009

So we complain quite a bit about ethanol around here, but you might be thinking, what does it really cost me? Well, according to an analysis by the Environmental Working Group, US taxpayers shelled out over $3b in ethanol subsidies in 2007 alone. As if that weren’t outrageous enough, ethanol slurped up two-thirds of all government assistance to renewable energy producers that year. The so-called E10 “blender’s credit” (51 cents credit for every gallon of gas blended with ethanol) racked up $2.9b of the bill, with the Alcohol Fuel Tax Credit adding another $50m. In addition to countless state-funded subsidies for ethanol producers, distributers and refiners. If this is starting to sound like more money than it’s worth, don’t worry. It’s only going to get worse. Ethanol blending mandates were set at 4.7b gallons in 2007, climbed to 9b gallons in 2008 and will reach 12b gallons in 2011. Regardless of whether consumers want it or not. Unscientifically projecting those numbers forward, blender’s credit claims for 2008 could easily top $5b after the IRS adds it all up. Oh yeah, and the Ethanol industry is already asking for $1.5b in “emergency” loan guarantees and short-term credit facilities. And an expansion of blending mandates to E15 and beyond. How great is that?

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11 Comments on “E85 Boondoggle Of The Day: Ethanol Dominates Renewable Energy Subsidies...”


  • avatar
    PabloKoh

    Your data on the ethanol credits is wrong. The credit of 51 cents per gallon is for every gallon of ethanol added to gasoline.
    An Iowa State University study shows blending ethanol to 10% saves motorists up to 40cents per gallon by increasing the total amount of motor fuel by 10%. I think it is a good trade “regardless if consumers want it or not.” Which most would agree paying 10 dollars in taxes to save 40cents per gallon makes sense. If you use more than 25 gallons per year you save money from the blenders credits.

  • avatar
    JT

    …blending ethanol to 10% saves motorists up to 40cents per gallon by increasing the total amount of motor fuel by 10%.

    If the goal is to squeeze efficiency from fuel, it must be done within the vehicle using the fuel, not by adding a flammable version of Hamburger Helper (known to be one-third less efficient) and then asking the consumer to pay for the privilege of receiving it.

    That the study originated in a state known for its corn crop doesn’t lend any credibility either.

  • avatar
    Engineer

    Nice one, PabloKoh!
    Iowa State, eh? About as objective as the Detroit press? Or perhaps even less so (assuming that it is even possible)?

    The 10% increase in motor fuel is absolute, the number of interest would be net increase. Of course, at this point there appears to be no objective sources out there – you’re either highly in favor of ethanol (nice weather this winter in the Midwest?) or completely against, with both groups arguing that they are the objective source.

    Forget trying to figure out who is right. Look at it this way: even if the most optimistic estimate is right, ethanol nets about 30% of the energy required to produce it. As in: you put 1 gal in and you get 1.3 gal (equivalent) out. So, under the most optimistic estimate, the net benefit from ethanol is 2.3% (=0.3/1.3 x 10). Which means @4.00/gal (those were they days) ethanol potentially saves 9.2 c/gal.

    Now, let’s play with some (more) numbers: in 2007 there were about 139.3 million filers (you know who you are). The total tax receipts were a staggering $2.4 trillion, out of which ethanol sucked fully 0.125%! The price of freedom? If only…

    (Of course, the budgeted spending was slightly higher, at $2.8 trillion. And if you think your elected officitutes restricted themselves to spend only that much… well, you just don’t understand the urgency of the needs out there…)

    The average filer therefore payed $17,230 in all forms of federal taxes, out of which $21.46 went directly to ethanol. At 9.2 c/gal, you need to purchase 233 gal to break even.

    Let me repeat: that’s the optimistic estimate. I’ll leave the realistic estimate for homework, provided you have some alcohol and NO sharp objects on hand…

  • avatar
    dzwax

    Corn is a horribly inefficient way to capture and hold solar energy. A lot of energy falls on all those corn fields, and only a small portion of it is fixed into carbon-carbon bonds.

    A lot of energy falls on all those corn fields.
    Do the calcs.

  • avatar
    BMW325I

    The only reason why is because it hurts the consumer vehicles fuel economy generating more funds for the govt by filling up more often.

  • avatar

    In what may be the original bailout, the federal government has spent $177 billion on farm subsidies over the past 12 years. Most of that money went to a small percentage of “farmers”. Right now we’re spending over $13 billion a year, most of that in commodity price supports on grain (including corn), and milk.

    Unlike the automotive bailout, I don’t hear people complain at the grocery store that they’ve already paid for the food.

  • avatar
    psarhjinian

    Unlike the automotive bailout, I don’t hear people complain at the grocery store that they’ve already paid for the food.

    Because a) people actually want to buy food, as opposed to domestic automobiles and b) the marketing of farm subsidies is ironclad (“Don’t hurt the American Farmer!”), while the auto bailout’s marketing has been terrible.

  • avatar

    Because a) people actually want to buy food, as opposed to domestic automobiles

    A)People actually have to buy food. It’s not a want, it’s a need.
    B)The domestics’ share last month was 47-48%.

  • avatar
    bluecon

    And 6 billion for manmade global warming research.

    Wde are lucky to have such a wealthy government.

  • avatar
    Lumbergh21

    An Iowa State University study shows blending ethanol to 10% saves motorists up to 40cents per gallon by increasing the total amount of motor fuel by 10%.

    An unintended consequence of my almost anal attentiveness to tracking my gas mileage has lead me to discover that ethanol costs me money in the form of reduced gas mileage. When I have the opportunity to use 100% petrol (an increasingly rare event), I see an increase of approximately 10% in fuel economy. Last may when vacationing in Yellowstone Park was my last opportunity to fill-up with pure petrol. Even driving around the park, versus the highway driving at a constant 75 from Boise to Idaho Falls, I got better gas mileage from straight petrol than from the ethanol blend I filled up on in Boise. Coming back from Yellowstone I got over 10% better gas mileage on pure petrol driving the exact same route in reverse that I drove using an ethanol blend going there. People who dispute that ethanol blends significantly hurt gas mileage, fall under the category of “who do you believe, me or your lieing eyes?”. I will never accept that an engine designed to run on petrol will operate as efficiently on an ethanol blend. To make efficient use of ethanol, you need to operate at much higher pressures than are used for petrol engines.


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