New CRS Report: How Corn Ethanol Mandates Have Hurt Indiana’s Environment and Economy11/13/2015
Indianapolis, Indiana – A new report released today by the Center for Regulatory Solutions (CRS), a project of the Small Business and Entrepreneurship Council (SBE Council), reveals the corrosive impact the national corn ethanol mandate has on the economic welfare of Hoosier state residents and their environment. Specifically, the CRS analysis determined that the Renewable Fuel Standard (RFS) could cost Indianans $7.8 billion in higher fuel costs alone over the next ten years. The CRS analysis also found that the RFS could kill roughly 4,100 Indiana jobs every year through 2024, continue to place cost pressures on small businesses, while raising the prices of meat and other consumer goods.
The report also includes the findings of a recent survey that captured the views and attitudes of Indiana voters towards ethanol. The poll finds that more than 40% of Indiana voters are opposed to the RFS and expanded ethanol mandates before they are given any information about the negative environmental and economic impacts of ethanol. Once they are introduced to the scientific data on ethanol’s environmental performance, nearly 9 in 10 respondents said they would be less likely to support the RFS and the corn ethanol mandate knowing that ethanol production and consumption contributed to an increase in greenhouse gases.
The report is the third in a series, following reports on Ohio and New England, detailing the environmental and economic harm caused by ethanol. The report is being released at the same time a series of new television ads spotlighting the failures of the RFS are running across the state during the month of November. The ad, called “Inconvenient Fact,” can be viewed here.
“This report lays bare the failures of Washington’s corn ethanol mandate for Indiana,” said Karen Kerrigan, President of CRS and SBE Council. “We were promised environmental improvements and economic gains from adding corn to our fuel supply. A decade later, those promises have been broken, with corn ethanol causing greater damage to the environment and engines than conventional gasoline, and all of the economic benefits going to the sector producing this crop. This comes at the expense of the rest of the economy. The RFS represents a lose-lose situation for our nation’s small businesses and the environment. When environmentalists like Al Gore begin calling the corn ethanol mandate a mistake, it’s time for Washington to take a new look at why this costly and counter-productive experiment needs to be repealed.”
Some public officials and advocacy organizations that typically disagree over policy have come together to denounce the RFS as a bad deal for Indiana. Some 184 bipartisan members of the U.S. House sent a letter to the Environmental Protection Agency on November 4, urging a revision to the RFS. Noting the impact that a past drought was having on corn prices, U.S. Reps. Todd Rokita (R) and Todd Young (R) signed a bipartisan letter in 2012, which urged the EPA to lower the RFS mandates and warned that the higher prices would mean “literally billions of dollars in increased costs for livestock and poultry producers, and food manufacturers.” Such unintended consequences continue to this day.
The Dean of Indiana University’s School of Public and Environmental Affairs, Dr. John D. Graham, testified before Congress, saying: “Unfortunately, the renewable fuels mandate has proven to be quite costly, and has produced some pernicious side effects…The net energy balance of corn-based ethanol is not very good, which reduces its environmental advantages.”
In July 2005, Congress passed and President George Bush signed the bipartisan Energy Policy Act, which established the RFS. The RFS created a set of mandates – known as Renewable Volume Obligations (RVOs) – that require ever-increasing volumes of ethanol to be added to the nation’s fuel supply. In May 2015, EPA again announced new proposed volumes to increase the amount of ethanol used in vehicles, creating new concern amongst a wide variety of bipartisan stakeholders.
Supporters of the ethanol mandate promised a cleaner environment, enhanced energy security, and greater economic support for domestic farmers and rural communities across the country. However, the targets set by Congress, which included a mandate for consumption of cellulosic ethanol, have proved elusive because converting cellulosic feedstock into usable energy is much more challenging than starch-based crops, like corn. Despite this setback, EPA administrator Gina McCarthy – whose agency is responsible for implementing the RFS – is pledging to get the RFS mandate “back on track” and eventually align its targets with congressional mandates.
The CRS report spotlights research from the scientific community which has warned about the environmental impacts of corn ethanol since the mandate’s inception. In fact, these findings led the EPA’s Inspector General to announce on Oct. 15 that it would conduct an investigation into EPA’s calculation of the lifecycle environmental impacts of the RFS. The investigation follows years of media scrutiny of the RFS, which raised serious concerns about the impact of corn-ethanol mandates. In 2013, the Associated Press reported that the rush to plant corn “wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies.” In 2008, TIME magazine concluded that ethanol “increases global warming, destroys forests and inflates food prices.”
Key Findings of the Report
- The lower energy content of ethanol relative to gasoline (ethanol has roughly two-thirds of the energy content of gasoline) cost Indiana’s motorists roughly $2.7 billion from 2005 to 2014. Moving forward, if the mandate remains intact, Indianans will pay more than $10.5 billion through 2024 in additional fuel costs thanks to corn ethanol.
- CRS’s analysis shows these unnecessary energy expenditures could result in $5.95 billion in lost GDP opportunity, $3.3 billion in lower labor income, and the equivalent of 4,100 lost jobs in Indiana per year between 2005 and 2024.
- Livestock farmers have also been forced to spend more than they would have otherwise needed to feed their animals. Hog farmers have shelled out $100 million more than they would have absent the RFS, poultry farmers have spent $74 million more, and dairy farmers have spent $44 million more in 2012 alone.
- Corn ethanol production and consumption have added nearly 2.4 million metric tons of CO2-equivalent (CO2e) emissions in Indiana from 2005 to 2014 – equivalent to the emissions of over 504,000 cars in a single year, or 8.3 percent of all cars registered in the state.
- Corn ethanol production and consumption in Indiana have generated an additional 6,100 tons of volatile organic compounds (VOCs) and 42,000 tons of nitrogen oxides (NOx) from 2005 to 2014. Both VOCs and NOx are precursor emissions that contribute to the production of ground-level ozone.
- The lifecycle water demands of producing corn ethanol in Indiana averaged more than 4 billion gallons per year from 2008 to 2014, or the equivalent of the yearly water consumption of nearly 86,500 households.
- More than 11,000 tons of cumulative soil erosion has been recorded in Indiana between 2005 and 2014 as a result of mandates that encouraged additional volumes of corn to be grown.
- Indiana farmers have consumed an additional 159 million tons of fertilizer and 171 million tons of chemicals (two agricultural products which are a known cause of ground and surface water pollution) over what they would have consumed between 2005 and 2014 had the RFS not existed.
The Center for Regulatory Solutions is a project of the Small Business and Entrepreneurship Council, a 501c(4) advocacy, research, education and networking organization dedicated to protecting small business and promoting entrepreneurship. For twenty-three years, SBE Council has worked to educate elected officials, policymakers, business leaders and the public about policies that enable business start-up and growth.