EPA Gives Ethanol the Green Light

EPA Gives Ethanol the Green Light

In a boon to the U.S. biofuel industry, the Environmental Protection Agency declined to reduce the 9 billion gallons of ethanol that will enter the gasoline supply this year.

The EPA denied a waiver from the State of Texas calling for cutting the Renewable Fuels Standard (RFS) in half amid fears that biofuels are driving up food prices and hurting the economy. The RFS calls for the addition of 9 billion gallons of ethanol this year, and 11.1 billion gallons in 2009.

Ethanol, once hailed as the answer to weaning America off foreign oil, has met sharp criticism in recent years. Texas argued the surge in ethanol production is raising the price of corn -- ethanol's dominant feedstock -- and severely impacting the economy, consumers and food industry.

"Denying Texas’ request is a mistake that will only increase the already heavy financial burden on families while doing even more harm to the livestock industry," said Texas Gov. Rick Perry in a statement. “Good intentions and laudable goals are small compensation to the families, farmers and ranchers who are being hurt by the federal government’s efforts to trade food for fuel. Any government mandate that artificially props-up a single industry to the detriment of millions of Americans is bad public policy.”

The EPA made its decision using narrow parameters: Ananlysis showed the mandate would not cause severe economic harm, but that doesn’t mean it won’t contribute to it.

The decision was based strictly on ecomonics, not environmental factors. Many have questioned whether ethanol is a valid substitute for fossil fuels when environmental issues, such as water and energy consumption, are considered.

The decision quickly drew praise and criticism from business interests.

"Diverting a third of our corn crop to ethanol production has driven corn and all feed prices up to levels that are severely impacting U.S. meat and poultry producers as well as consumers," Jesse Sevcik, vice president for legislative affairs for the American Meat Institute, said in a statement. “Our industry has already seen a contraction in production, resulting in smaller herd sizes and higher meat prices for consumers.”

The Brazilian Sugarcane Industry applauded the move, but hopes for more.

"The next step -- and one that Congress has yet to take -- is to reduce the distortive tariff on imported ethanol," said Joel Velasco, the Brazilian Sugarcane Industry Association’s U.S. representative. "This one-of-a-kind tax on a clean energy alternative serves only to punish American drivers by artificially inflating the price of gasoline at the pump."