The Economic Impact of the Missouri E-10 Ethanol Mandate

Missouri is one of only three states that require a 10-percent minimum ethanol blend (E-10) for retail gasoline sold within the state. The Missouri Corn Merchandising Council (MCMC) recently released a study purporting to demonstrate the positive economic benefits of the state’s ethanol mandate for Missouri consumers. The study claimed that Missourians will save more than $285 million through ethanol-induced fuel cost reductions in 2008 and nearly $2 billion in present value during the following decade. The MCMC study ignores important effects of the E-10 mandate, however, most notably the documented decrease in fuel efficiency of E-10 blended fuel and the taxpayer cost of ethanol subsidies. We find that accounting for these costs significantly impacts the MCMC savings projections and would result in a net loss to Missouri consumers of almost $1 billion during the next decade. If one were to consider the additional impact of the E-10 mandate on higher food prices and CO₂ gas emissions, these costs would be even higher.

[NOTE: An earlier draft of this case study incorrectly referred to the Missouri Corn Merchandising Council (MCMC) as the Missouri Corn Merchandising Association (MCMA). The Missouri Corn Growers Association and the Missouri Corn Merchandising Council were both mentioned in the press release that announced the council’s recently commissioned study of ethanol costs, and our error involved inadvertently combining the names of both organizations, which share the same website. We have corrected all instances of this error within the case study, and are confident that the data used therein is accurate.]

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