Three key policy changes can help: a repeal of the ethanol mandates in the Energy Independence and Security Act of 2007, an elimination of the ethanol subsidy of 45 cents per gallon, and an elimination the tariff on cheaper, more eco-friendly Brazilian ethanol imports. Congress wisely allowed the sub-sidies and the tariff to expire on December 31, 2011. But the most important step—repealing the 2007 ethanol mandates—remains. A repeal would ease pressures on food prices almost immediately. Corn prices would fall and the steady diversion of other crop land to corn production would halt, causing prices of other grains to fall too.
Would these policy changes bankrupt the domestic ethanol industry and send corn prices back to their 2005-2006 levels, causing new hardships for the
farm sector? A return to 2005-2006 prices seems very unlikely. With oil prices at $100 per barrel and an existing infrastructure of ethanol plants, ethanol will remain a necessary oxygenate and attractive additive to conventional gasoline.
Instead of marching blindly ahead to the 2022 mandated target of 36 billion gallons, let’s reassess our ethanol policy. To be sure, we should continue to support R&D for advanced biofuels such as cel-lulosic ethanol. In the interim, we should dismantle the ethanol mandates and trust markets to sort out the proper mix of ethanol in gasoline.