Tuesday, May 21, 2024
Hawai'i Free Press

Current Articles | Archives

Wednesday, January 11, 2012
The Renewable Fuels Disaster
By NCPA @ 10:24 AM :: 4726 Views :: National News, Ethics


Deficit hawks, environmentalists and food processors are celebrating the expiration of the ethanol tax credit. This corporate handout gave $0.45 to ethanol producers for every gallon they produced and cost taxpayers $6 billion in 2011. However, the continuation of the Renewable Fuel Standard (RFS), which creates government-guaranteed demand for corn, will limit the effectiveness of the tax break expiration and continue to distort the market for corn, says Aaron Smith, an associate professor at the University of California, Davis.

  • The RFS mandates that at least 37 percent of 2011-2012 corn crops be converted to ethanol and blended with the gasoline.
  • The RFS has artificially stimulated the ethanol market for years, such that only a year after its introduction, 1.8 billion gallons of additional ethanol capacity was under construction.

The demand created by the RFS drives up the price of corn and related goods by diverting the use of corn toward non-food ends. While the specific market distortion is debated, careful estimation can offer insight:

  • In the 2005-2006 crop year (before the implementation of the RFS), 1.6 billion bushels of corn were used to produce ethanol; in 2010-2011 5.0 billion bushels were used, suggesting that 3.4 billion bushels are diverted to ethanol by the RFS.
  • Because one-third of the caloric value of the corn is retained and redirected after ethanol production, only 2.3 billion of this 3.4 billion is moved away from food consumption (16 percent of total corn production).
  • Estimates suggest that the market can absorb 5 percent more corn for every 10 percent price reduction, and this implies that the loss of 2.3 billion bushels of demand would drive down prices by 32 percent.
  • It is also estimated that this price reduction would decrease the price of other commodities such as soybeans, wheat and rice by 20 percent as well.

The true cost of this price increase is not born by domestic grocery shoppers, but by international consumers of commodities; namely, the world's impoverished. Final estimates suggest price increases from 2005-2008 forced 105 million people below the extreme poverty line ($1.25 per day). Thus, while the retirement of the ethanol tax breaks is a success, true relief lies in the elimination of the RFS.

Source: Aaron Smith, "Children of the Corn: The Renewable Fuels Disaster," The American, January 4, 2012.


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute


Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii Military History

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Together


Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

July 4 in Hawaii

Land and Power in Hawaii

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii


Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii


National Parents Org Hawaii

NFIB Hawaii News

NRA-ILA Hawaii


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

School Choice in Hawaii


Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns


West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii