As a relatively pragmatic person who generally chooses the imperfect-yet-achievable path rather than agonizing over the perfect-but-unattainable goal, this chart [from a fascinating Boston Consulting report, in PDF here]  frustrates me. I understand why Americans choose hybrid-electric cars as their most favored “green car” technology, but from their it gets fairly crazy. EVs are fantastic on paper, but in the real world they’re still far too expensive, their batteries degrade, they have limited range, oh and did I mention that they’re freaking expensive? Biofuels, America’s third-favorite “green” transportation technology can be fantastic in certain limited applications, but the ongoing ethanol boondoggle proves that it will never be a true “gasoline alternative.” Finally, at the bottom of the list, Americans grudgingly accept only relatively slight interest in the two most promising short-term technologies: diesel and CNG. Neither of these choices is radically more expensive than, say, a hybrid drivetrain and both are considerably less expensive and compromised than EVs at this point. So why are we so dismissive of them?

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Cracks continued to in the ethanol industry’s once-impregnable political vanguard, as the San Francisco Chronicle reports that the Senate has voted to roll back the Volumetric Ethanol Excise Tax Credit (VEETC) as well as import tariffs on foreign-produced ethanol. This rollback of multi-billion-dollar ethanol credits failed earlier in the week, when the Detroit News reports automakers came out in opposition of a bill that would have required that 95% of all cars built in the US be capable of running 85% ethanol by 2017. The Senate did fail to pass a repeal of a government ethanol blending mandate that underpins the VEETC, however, and funding is moving forward for ethanol blending pumps. Still, the Senate’s repeal of VEETC alone means taxpayers could save over $5b per year on subsidies, and as one expert puts it

“Looks like we’re going to be relying on the biofuels mandates to make sure blenders use biofuels, rather than bribing them to use it with $6 billion,” [Bruce Babcock, professor of economics and the director of the Center for Agricultural and Rural Development at Iowa State University] said.

In fact, Babcock thinks killing the subsidy could help ethanol because it would come out from the stigma of being a subsidized industry. And removing the subsidy may strengthen support for the mandate, and the tariff on imports.

Over to you, House of Representatives…

TTAC has paid close attention to the fortunes of ethanol in the United States, where grossly wasteful subsidies have forced the corn-derived fuel into the fuel supply in growing percentages, drawing backlash from small but vocal portions of the population. But much of the ethanol ire is directed at higher blends like the recently-approved E15 and the increasingly-unpopular E85 mixtures. Meanwhile, most Americans regularly fill up their tanks with E10, which has become standard at pumps across the nation. But in Germany, where E10 was only just introduced, people are rejecting the low-ethanol blend that even the most vocal American ethanol opponents use every day. Initially, the biofuel industry in Germany blamed a lack of education for suspicion of E10, but according to Autobild, some 75 percent of German drivers now know whether their vehicle takes E10 (and most do)… but still, only 17 percent actually chose E10 for their last fill-up. And only 39 percent who know for a fact that their car can take E10 have ever used the ten-percent ethanol fuel. Why? Despite the high level of education, 52 percent of respondents still feared motor damage from the ethanol. Another 50 are opposed to “filling up with food.” Sometimes the more you know about something, the less you like it.

Yesterday evening I directed some ire at President Obama’s continued reliance on ethanol as a major plank of his do-nothing transportation/energy agenda, noting

That extra money for 10,000 E15-capable pumps? That’s because no gas station owner will pay to install a pump for a kind of fuel that only cars built since 2001 can use… and which the auto industry has tried to ban. And why E15 in the first place? Because blenders can’t sell enough E10 to blend the government-mandated amount of ethanol and collect their $6b this year in “blender’s credits” to do so. A subsidy to support a subsidy which in turn props up yet another subsidy (I may have missed a subsidy in there somewhere). You can’t make this stuff up.

The “cornerstone” subsidy that all other ethanol subsidies support is the Volumetric Ethanol Excise Tax Credit, or VEETC, or “blender’s credit,” a $6b per year subsidy that directs 45 cents to refiners for every gallon of ethanol they blend with gasoline. The VEETC nearly died in December’s lame duck session, only to be revived as a way to buy votes for the President’s tax policy. Now, however, The State Column reports that a bipartisan Senate bill has been introduced that would eliminate both the VEETC and import tariffs on foreign-made ethanol. And with a rash of bad news coming out about ethanol, this could just be the opportunity to kill this wasteful government subsidy with fire.

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President Obama devoted his weekly address to energy and transportation policy this week, speaking to the nation from an Allison hybrid bus transmission plant in Indiana. A White House blog post accompanying video of the President’s speech included a large infographic on “The Obama Energy Agenda And Gas Prices,” the transportation-oriented section I’ve excerpted above. This one section is actually a fairly good representation of Obama’s auto-related energy policy preferences, and illustrates why I often find myself criticizing the president here at TTAC.

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A massive study by the Government Accountability Office into “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has turned up an interesting finding. It seems that the government’s desire to buy more “alternative fuel vehicles” (AFVs) may actually increase the amount of gasoline used by government fleets. Why? Because agencies largely buy E85 ethanol-powered vehicles to fulfill their AFV requirements, and there aren’t enough E85 pumps to actually fuel the fleet, forcing agencies to obtain waivers to buy regular gasoline. Hit the jump for the report’s full findings on this, the latest unintended consequence of America’s ongoing ethanol-subsidy boondoggle.

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How things change in a few years! Just a few short orbits of the sun ago, automakers like GM were some of the biggest boosters of ethanol subsidies. Now, the Detroit News reports

The Alliance of Automobile Manufacturers – the trade association representing General Motors Co., Ford Motor Co., Chrysler Group LLC, Toyota Motor Corp. and eight others – opposes a bill sponsored by Sen. Tom Harkin, D-Iowa, that would require 90 percent of all vehicles to run on E85 – a blend of 85 percent ethanol – by the 2016 model year.

Shane Karr, vice president for government affairs, said the mandate “would cost consumers more than $2 billion per year” for flex fuel vehicles if automakers passed on the full cost “even though consumers will have little or no access to alternative fuels. Therefore, such a mandate is essentially a tax with little consumer benefit.”

In the face of this new opposition, the Renewable Fuels Association has even taken to employing the rhetoric of market economics to justify market-manipulating ethanol subsidies. And it doesn’t seem to be convincing anyone. If anything, Harkin’s bill may just hasten the death of existing subsidies, which are under pressure as both Democrats and Republicans seek to trim the federal budget.

The EPA’s decision to allow E15 ethanol in public pumps has been something of a lesson in the way politics can trump common sense. The decision was motivated by intense pressure brought to bear by the ethanol industry, which is facing a serious problem in the form of a “blend wall.” The industry first tried to get the EPA to approve the 15-percent ethanol blend before research was complete, and the agency’s approvals came first for 2007 model-year and later vehicles, and was expanded shortly thereafter to 2001 and later models. In the meantime, a number of industries have come out against E15, suing the EPA to stop the approval and calling for congressional hearings. Now, with few reasons left to support E15 outside of propping up the staggering farm-state ethanol industry and huge portions of the economy coming out against it, the House has voted “overwhelmingly” to ban E15 from America’s gas pumps.

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Nothing makes this bloggers day like finding a story that highlights how the world of cars interacts with every facet of our national life… and few stories illustrate the universal impact of cars and fuels like the Atlantic’s recent piece on one man’s attempt to turn Afghanistan’s opium poppy crop into biodiesel. The plan was to help Afghanistan’s poorest farmers use poppy seeds to create biodiesel, but along the way the plan ran into the challenges of diplomacy, bureaucracy, foreign occupation, environmental issues and cultural conflict. In fact, all of the complexity and struggle involved with the military occupation of a foreign country come out in this fascinating piece, which begins:

Back in the fall of 2008, Michael Bester and a business partner, both Army veterans doing contract work in Afghanistan, hit on the equivalent of the counterinsurgency’s trifecta: a way to improve the lives of ordinary Afghans, eliminate the illegal opium trade, and take the Taliban’s money. “We had been in villages where children were dying because they didn’t have proper medicine, because they didn’t have refrigerators,” Bester told me. Light up the villages, and perhaps you could empower Afghans to resist the Taliban. And the fuel? Most any feedstock would work, but one compelling option was the ubiquitous poppies that stoke the Taliban’s lucrative drug trade. Why not turn them into biodiesel instead?

Make diesel, not drugs! Read the whole thing here.

The EPA has followed up its ruling allowing E15 ethanol blends (15% ethanol, 85% gasoline) to be pumped to vehicles built for the 2007 model-year and later, now allowing the corn juice-enhanced gasoline to be distributed to any vehicle built after 2001. EPA Administrator Lisa Jackson announced the decision to Bloomberg arguing

Wherever sound science and the law support steps to allow more home-grown fuels in America’s vehicles, this administration takes those steps

But, as is the case with most ethanol-related decisions, this has more to do with politics than science. After nearly ending the boondoggle known as the “Blender’s Credit,” which pays blenders for every gallon of ethanol they mix into America’s fuel supply, congress relented to lobbyist pressure and extended the $6b per year giveaway for another year. And with that financial incentive in place (along with a “renewable fuel mandate”) but little to no consumer demand to support it, blenders need to find ways to slip ever more ethanol into American gasoline. But, as a recent study proves, even E15 won’t beat the so-called “blend wall”: at best E15 gives the ethanol industry four years of taxpayer-fattened profits before it will be forced to come back and ask the government to yet again increase the amount of ethanol allowed in the gas supply.

Meanwhile, the auto industry that once saw ethanol as a prime opportunity for low-cost greenwashing has made an about-face and is suing to stop the spread of E15, arguing that its effects on engine life haven’t been adequately studied. And because ethanol offers little to no benefits relative to gasoline in terms of environmental or efficiency impacts, the fact that the EPA may be endangering automobile engines in order to keep an oversubsidized industry on (expensive) life support is beyond galling. It’s clear that, with the legislative and executive branches of government held in sway by ethanol-friendly farm states, motorists are now dependent on the court system to do the right thing and end government’s senseless love affair with ethanol.

Recently the ethanol industry has “suffered” from a problem that epitomizes the problematic nature of government subsidies. Known as the “blend wall” this obstacle was created not by negligence on the part of the industry, but by the fact that its lobbying efforts have been far more effective than its marketing efforts. The problem, in a nutshell, is that the 2007 Renewable Fuel Standard mandates a steady increase in the amount of ethanol blended into the national fuel supply, from 9 billion gallons per year (BGY) in 2008 to 36 BGY in 2022… but with gasoline consumption falling and with standard pump gasoline capped at a maximum of ten percent ethanol (recently raised to 15% for vehicles built after 2007), the industry that’s supposed to get America off gas needs more gas to blend its ethanol into. As a study in the American Journal of Agricultural Economics puts it

Total national consumption of gasoline in the United States has been about 140 billion gallons in 2010 and is expected to fall over time due to increasing fuel economy standards. Thus, at present, if every drop of gasoline were blended as E10, the maximum ethanol that could be absorbed would be 14 billion gallons. In reality, 10% cannot be blended in all regions and seasons. Most experts consider an average blend of 9% to be the effective maximum, which amounts to about 12.6 billion gallons. U.S. ethanol production capacity already exceeds this level. Thus, our ability to consume ethanol has reached a limit called the blend wall.

The solution: well, the EPA’s ruling allowing 15% ethanol blends was supposed to fix the problem, but according to this report, that “fix” would only buy some four years before the industry is back to bumping against the blend wall. The solution?

With ethanol as the primary biofuel and either blend limit (E10 or E15), a substantial increase in E85 would be required to fulfill the mandate.

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When oil and food industry groups sued to roll back the EPA’s ruling allowing E15 ethanol blends in 2007 and later model-year cars, we concluded

the political tail has wagged the scientific dog on ethanol ever since the farm lobby realized that ethanol could be the next corn syrup. With any luck, this lawsuit could just be the point at which science re-asserts itself.

The missing link: the automakers. Though auto manufacturers have been slowly climbing on board the anti-ethanol bandwagon, in no small part because large domestic OEMs like GM were once closely allied with the ethanol industry, it seems that the coalition to stop E15 is now complete. A new group known as the Engine Products Group, comprised of the Alliance of Automobile Manufacturers, The Association of International Automobile Manufacturers, the National Marine Manufacturers Association, and the Outdoor Power Equipment Institute, has filed a new petition to block the EPA’s E15 ruling.

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Senate Democrats confirm that an extension of the full 45 cents/gal tax credit and 54 cents/gal import duty has been included in the Senate version of a Bush Tax Credit extension, prompting an angry response from the Brazilian sugar cane ethanol lobby. With Brazilian subsidies set to drop by nine cents per gallon, the Brazilian Sugarcane Industry Association (UNICA) claims that the American subsidy is no longer an “offset” but a full-fledged barrier to trade. UNICA’s President Marcos Jank tells brighterenergy.com

It is clear that the United States is not committed to open and fair trade in clean energy, particularly ethanol. We will have exhausted all options to resolve our differences through informal dialogue and the U.S. legislative process. It will then be time for the WTO to resolve this matter in accordance with applicable international rights and obligations.

Previously it was reported that the ethanol Blender’s Credit would be extended at a lower rate of 36 cents/gal, but with the tax credit extension debate snowballing into a lame duck slugfest, it seems that the subsidy extension was included to bring farm-state legislators on board. In addition to pissing off the Brazilians and possibly sparking a WTO battle, a full five-year extension of ethanol subsidies and tariffs at the current rate will cost the government no less than $31b. But don’t start planting corn yet… House Democrats seem set on scuppering the Senate’s tax credit extension deal (even though they support the ethanol extension). If they keep anything from passing during the lame duck session, the subsidies will expire completely, forcing the industry to champion new legislation. The battle rages on…

It is not a good policy to have these massive subsidies for first generation ethanol. First generation ethanol I think was a mistake. The energy conversion ratios are at best very small… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president

Al Gore reveals [via MSNBC] that politics, not science, made an ethanol believer out of him. More than anything else, the admission underlines how badly ethanol can lose the war of ideas and still be heavily subsidized without fear of political attack. After all, what Presidential hopeful (read:every member of Congress) wants to shut down the biggest pork trough in Iowa, a state that just happens to be the first primary of the race for the White House? Heck, Al Gore probably had to lose his favorite weedwhacker to ethanol gum before he came out against the stuff. But just because your representative won’t vote against ethanol, doesn’t mean you can’t… surf over to pure-gas.org for a list of ethanol-free gas pumps near you.

We’ve been tracking mounting opposition to E15 ethanol for some time now, and when the EPA approved the 15-percent corn juice blend for vehicles made in 2007 or later, we saw the opposition begin to crystalize. Now, the Detroit News reports that a number of oil, food and other interest groups have filed suit in a D.C. Circuit appeals court, seeking to halt the EPA’s approval of E15. According to the DetN

The petitioners argue that under the Clean Air Act, the EPA administrator may only grant a waiver for a new fuel additive if it “will not cause or contribute to a failure of any emission control device or system.”

They believe the “EPA has unlawfully interpreted the statute to achieve a particular outcome,” but EPA administrator Lisa Jackson said it was based on “sound science.”

Considering the approval was apparently based on study results from a mere 14 vehicles, it sounds like the industry groups might have a solid point here. Especially when you realize that a major motivation for E15 approval is from the fact that blenders couldn’t sell enough E10 to meet government mandates. As the video above (from June of this year) proves, the political tail has wagged the scientific dog on ethanol ever since the farm lobby realized that ethanol could be the next corn syrup. With any luck, this lawsuit could just be the point at which science re-asserts itself.