PRESS EDITORIAL: Ethanol: costly ammunition in a trade war

Farmers are in a rough patch.

Dairy farmers are being punished by market forces driven by oversupply and underdemand.         

But almost all other farmers, from those trying to survive with the small family agribusinesses so familiar in Wisconsin to those invested in corporate farming empires, are being punished too—by politics.

The political punishment comes courtesy of the Trump trade wars. The tariffs imposed by the president who famously said “trade wars are easy to win” have provoked retaliatory duties on American agriculture products that are scoring direct hits on farmers. It’s bad now, and it could get much worse.

If Trump carries through with last week’s threat to impose tariffs of up to 25% on imports from Mexico, retaliation by the Mexican government is predicted to devastate one of the most important markets for American farm products.

Farmers will suffer, but all Americans will feel their pain, thanks to the Trump decree to end the Environmental Protection Agency ban on the summertime sale of gasoline blended with 15% ethanol.

The presidential order, which is a boon to the agriculture business that will drive up the price of corn and other crops used to make ethanol, was a bone tossed in an attempt to feed the political support of farmers that was seen wavering as the consequences of the trade wars became evident. Some farmers will benefit, but American consumers will pay dearly.

The price of the ethanol decision will be paid directly by the owners of vehicles that run on gasoline through higher fuel prices, lower fuel efficiency and reduced longevity of car and truck engines.

But that is just the beginning—the unpalatable frosting on an inedible cake. The cost will rise as higher food prices and the toll in environmental damage are added to it.

The federal mandate that biofuel be mixed into gasoline has been a burden on Americans for more than a decade, and it has just been made a lot worse by requiring refiners to add 15% ethanol to gasoline sold in warm months.

The EPA had banned the sale of the blend known as E15 gasoline during some months because it produces harmful levels of ground layer ozone, known as smog, when burned in warmer weather.

This adds to the already damaging environmental impact of ethanol in gas, even the 10% variety that has been common in this area. When the ethanol mandate was enacted in 2005, well-meaning advocates said it would help reduce the emission of greenhouse gases. As a law, it has had the opposite effect.

Research has shown that the process of growing crops for ethanol and producing the fuel increase the carbon emitted into the atmosphere. A landmark University of Wisconsin-Madison study found that the conversion of millions of acres of land into cornfields for ethanol production caused a massive release of carbon—the equivalent of the exhaust of 20 million additional motor vehicles on the roads.

A study by the National Wildlife Federation found that more than 7 million acres of natural habitat have been destroyed to produce corn ethanol.

Ethanol is more expensive to produce than gasoline and increases the per-gallon gas price at the pump. Because it produces substantially less energy than fossil fuel, vehicles using ethanol-blended gas get fewer miles per gallon. According to a number of studies, drivers pay at least $10 billion more per year for gas due to the ethanol mandate.

Ethanol increases prices at grocery stores too. Nearly three-fourths of all food products contain corn, and carry prices that rise with the cost of corn.

The United States, now the world’s largest producer of petroleum, doesn’t need ethanol to limit dependence on foreign oil. There is no market demand for ethanol. The ethanol industry exists only because it is propped up by government mandate and government subsidies that come directly from the pockets of taxpayers.

The country would be better off if the Trump administration just sent farmers the cash equivalent of the financial benefits of the ethanol move.

The administration certainly knows how to do that; it is already paying farmers $16 billion in funds from the U.S. treasury to offset losses from previous tariffs.

It turns out trade wars are not easy to win, and they sure are expensive.