Ethanol Mandates: A Total Clusterharvest
The Show-Me Institute will soon release a counter-response to a Missouri Corn Merchandising Council study that claims Missouri consumers will save nearly $2 billion during the next 10 years as a result of the state’s recent E-10 fuel mandate, which requires all unleaded fuel sold within the state to contain a 10-percent ethanol blend.
While I’ll leave the details of our case study to the release, suffice it to say that the MCMC study ignores important E-10 cost factors, such as the EPA-documented decrease in fuel efficiency and the cost of taxpayer subsidies. When David Stokes and I recomputed the numbers with these costs in mind, we found that the E-10 mandate will actually cost Missourians nearly $1 billion during the next decade instead of saving them $2 billion.
But today’s agricultural news highlights an even more important point about ethanol usage. Today, corn futures prices surpassed their all-time high in trading on the Chicago Board of Trade. Bloomberg lists the causes for this increase in food prices (emphasis added):
[Agricultural prices] have gained 60 percent in a year, fueled by [demand], market speculation and the push to grow corn for ethanol.
Indeed. It’s not just higher grocery store prices that Missourians can look forward to, though, but a higher tax bill as well. The governor recently released his 2008 fiscal year budget summary, which despite the governor’s conviction to implement “a balanced budget that does not rely on excessive, job-killing revenues” contains the following important line item:
$6.4 million increased funding to support an expected seven ethanol plants and $28.5 million to support an estimated nine biodiesel plants. Total funding for Missouri ethanol producers will be $15 million and total funding for Missouri biodiesel producers will be $33.8 million.
Well, right there is an easy $50 million we could save each year in order to sustain the governor’s commitment to a budget that "does not rely on excessive, job-killing revenues.” Oh, and this doesn’t include the $0.51-per-gallon federal ethanol subsidy, either.
Take a look at the personal income figures reported in the governor’s own budget summary, comparing Missouri income growth to that of the United States as a whole during the past three years:
|Personal Income Growth||2006||2007||2008|
Why is Missouri income growth below the national average? Could it be that excessive taxes and wasteful spending are hurting Missourians more than the government admits? Is the E-10 mandate really going to “save” Missourians money? Or is this just another example of corporate welfare, redistributing wealth from one taxpayer to another?
My bet’s on the latter.