Ethanol Mandates & Subsidies
If you believe ethanol advocates, ethanol is the savior of our rural economy and environment and
is a vanguard in the war on terror. However, a hard look at the facts shows that the purported
benefits of ethanol are an illusion. It’s not cost-effective, requires massive subsidies, has
negligible environmental and economic impacts, and doesn’t enhance energy security. When it all
comes down to it, ethanol amounts to nothing more than “subsidized food burning” as Cornell
University’s David Pimentel puts it.
The Taxpayers League of Minnesota strongly OPPOSES ethanol mandates and subsidies on the
following grounds:

Not Cost-Effective. Ethanol is not cost-effective and requires large government subsidies
and mandates. A gallon of ethanol costs $2.24 to produce compared to 63 cents per
gallon for gasoline. $1.4 billion in government subsidies and mandates are needed to fill
this gap.1

Uses More Energy Than It Generates. Research by Cornell University scientist David
Pimentel shows that 29 percent more energy is required to produce ethanol than the
energy that actually is contained in ethanol. For each gallon of ethanol, there is a net
energy loss of 22,000 BTU (British Thermal Units).2

Negligible Environmental Impacts. Ethanol has a host of negative environmental
impacts that wipe out any positive impacts. Studies by the California Air Resources
Board show that blending ethanol with gasoline increases nitrogen oxide (NOx) and other
smog-forming emissions.3

Voids Car Warranties. New car warranties won’t cover engine problems that result
from using fuel blended with more than 10% ethanol.

Lowers Gas Mileage. Ethanol-blended gasoline decreases gas mileage by 3 to 5 percent
at 10 percent ethanol blend and 6 to 10 percent less with a 20 percent ethanol blend –
increasing costs to consumers.

Hurts Livestock & Poultry Farmers. A study by the GAO4 concluded that higher corn
prices generated by ethanol hurts livestock and poultry producers because the cost of feed
stock increases (70% of corn grain is fed to livestock and poultry in the U.S.). The
David Pimentel, “Ethanol Fuels: Energy Balance, Economics, and Environmental Impacts are Negative,”
Natural Resources Research (June 2003)
2
ibid
3
State of California Air Resources Board, “Comparison of the Effects on a Fully-Complying Gasoline
Blend on Exhaust and Evaporative Emissions” (November 1998)
4
General Accounting Office, “Effects of the Alcohol Fuels Tax Incentives,” Report to the Chairman,
Committee on Ways and Means, House of Representatives (March 1997):
http://www.gao.gov/archive/1997/gg97041.pdf
1
National Center for Policy Analysis estimates that ethanol production adds $1 billion
annually to the cost of beef production.5

Increases Food Prices. By increasing the cost of feed stock for livestock and poultry
producers, ethanol production increases the price to consumers for meat, milk and eggs.

Doesn’t Create Net New Jobs. The employment effects of ethanol are a wash because,
as shown by economist Ralph Brown6, ethanol production lowers gas tax receipts –
reducing jobs in highway construction and maintenance and in sectors adversely affected
by higher corn prices. Ethanol doesn’t create net new employment, it simply shifts
employment from one sector to another.

Won’t Improve Energy Security. The notion that more ethanol use will promote energy
independence and security is a fantasy. Ethanol can never realistically become a large
enough share of our energy to make a difference. Even if we increased ethanol
production by 1000 percent it would only account for one percent of total energy
consumption in the U.S. according to University of South Dakota agricultural economist
Ralph Brown. If all cars in the U.S. were fueled with 100 percent ethanol, corn
production would cover 97 percent of U.S. land area.7 In addition, reducing our oil
imports will not reduce our vulnerability to oil price swings because oil prices are set in
the world market, not domestically.
And the list goes on and on. The more you read about ethanol, the more you can agree with the
statement by the president of the Agribusiness Council, Nicholas Hollis, that “Ethanol is the
largest scam in our nation’s history.”8
5
National Center for Policy Analysis, Ethanol Subsidies: Idea House (September 2002):
http://www.ncpa.org/pd/ag/ag6.html
6
Ralph Brown, “OPEC vs Ethanol,” PowerPoint presentation: http://www.usd.edu/~rbrown/ethanol.ppt
7
ibid
8
Nicholas Hollis, “Ethanol is the Largest Scam in Our Nation’s History,” Agribusiness Examiner (June
2003): http://www.mindfully.org/Air/2003/Ethanol-Largest-Scam6jun03.htm