Going Head-to-Head-to-Head on Ethanol with Chris Edwards

by Marc J. Rauch (The Auto Channel) ... Several weeks ago I had the opportunity to write to Chris (Edewards) regarding an anti-ethanol editorial he wrote for the Cato Institute website titled "Time to repeal ethanol subsidies." I didn't have the time to publicly share my correspondence at that time, but because of a new anti-ethanol editorial published yesterday by Chris' colleague Nicolas Loris on The Daily Caller website, I've decided to do so now. The connection between Chris and Nick will become apparent shortly. I intend to separately reply to Nick's editorial. To do so I feel that I should set the stage for that reply, so that's the reason for publishing the correspondence with Chris Edwards now.

Regarding the two points you address: There are no ethanol subsidies, and none existed when you wrote the 2017 article. The subsidy that did exist, that many people purposely try to claim is an ethanol subsidy, wasn't a subsidy that went to either ethanol-crop farmers or to distillers, it went to oil industry blenders to "compensate" them for losing profit because they had to substitute ethanol for a small portion of gasoline in every gallon. The funny part of the end to this subsidy a few years before your article is that it was brought about because the oil industry "bit their nose to spite their face" in the hope that the removal of the blenders subsidy would cause ethanol-gasoline prices to rise and that consumers would rebel. Prices at the pump didn't increase, and there wasn't any consumer rebellion. Blenders lost money on the deal.

To the biofuel mandate, based upon what I imagine was your take from Nick Loris' article, you wrote "Individuals and markets can make more efficient and environmentally sound decisions regarding biofuels without subsidies and mandates." It's a nice high-sounding comment, but it's not based on any reality. Except for the very brief periods in which burdensome taxes and outright alcohol prohibition didn't keep individuals from using ethanol, there was no open opportunity for individuals and markets to make more efficient and environmentally sound decisions about the fuels. Gasoline, with it's many additional poisonous additives, was shoved down our throats. Today, while it may be said that consumers now have a choice, it's still not true because there are restrictions on blend levels, phony warranty warnings, and consumers are faced with the vestiges of the old lies told to denigrate ethanol. When combined with new prevarications about ethanol (such as those in Loris' article), people continued to be frightened away from using ethanol and ethanol-gasoline blends.

Nick and I use the word subsidies broadly to include mandates or regulations. You can design a regulation and a cash subsidy to have the same (distortionary) impacts on a market. Another example is the solar power mandates in states such as California. These are effectively a giveaway to solar power producers, which or not actual cash is handed out.

If you think that gasoline has poisonous additives, it would seem you should be making an environment case about tougher emission controls, which are certainly reasonable above certain thresholds.

I agree that the word "subsidy" can broadly include any and all types of allowances, credits, inducements, refunds, exemptions, and cash payments. However, the problem is that when combined with words and phrases such as "Time to repeal ethanol subsidies" and "let consumers decide whether they want ethanol or not," as you have in your original editorial and then in the responses to me, it makes people think that there is some special subsidy that is being given to the ethanol producers/farmers that is not available to the petroleum oil industry; and that this special subsidy somehow tips the scales in favor of ethanol...and to the direct financial detriment of the consumer.

However, as I'm sure you must know, the oil industry receives far more allowances, credits, inducements, refunds, exemptions, and cash payments than the ethanol industry, and that some of these oil industry subsidies have been in existence for 100 years and more.

Personally, I'm of the opinion that all "subsidies" should be stopped, to every industry.

Consequently, if we are to seriously consider a statement like "remove the subsidies and let consumers decide," I believe that consumers will choose ethanol over gasoline and petroleum diesel fuel because the true retail price of gasoline and diesel would be 2, 3, 4 times that of ethanol. I especially believe this if the oil industry was cut off from using the U.S. Military as its own personal security force (in addition to removing all the other subsidies) and had to pay for the security themselves.

In my writings, I don't deny that there are general subsidies that are allowed to individuals and entities engaged in farming; but I explain that these subsidies are available to farmers (for example) regardless of the crops they grow - and that they may even grow corn, but that the corn they grow is specifically for human consumption and not for ethanol fuel. I would like the same consideration when an ethanol opponent tries to single out ethanol producers.

By the way, I hope you know that there was a time when the Federal Trade Commission would not allow producers of non-leaded gasoline to advertise the dangers of TEL in the gasoline sold by Standard Oil and its licensees - I'm not talking about inventing dangers of leaded gasoline, I'm talking about factual dangers related to the use of leaded gasoline. The financial power of the leaded gasoline companies was so strong that they could buy the FTC's assistance.

So, I'm okay with the idea of allowing the public to decide, as long as the public is given the facts and doesn't have to continue wading through a river of one-sided lies, exaggerations, and political protection that has coddled the oil industry for the past century and a half. READ MORE