Ethanol: Fails a Cost-Benefit Test
Ethanol production in the United States has been steadily growing and is expected to continue growing. Many politicians see increased ethanol use as a way to promote environmental goals, such as reducing greenhouse gas emissions, and energy security goals. This paper provides the first thorough benefit-cost analysis of increasing ethanol use beyond four billion gallons a year, and finds that the costs of increased production are likely to exceed the benefits by about three billion dollars annually. It also suggests that earlier attempts aimed at promoting ethanol would have likely failed a benefit-cost test, and that Congress should consider repealing the ethanol tariff and the ethanol tax credit.
Abstract of a new research paper "The Benefits and Costs of Ethanol," by Robert W. Hahn and Caroline Cecot, both of the AEI-Brookings Joint Center for Regulatory Studies.From Robert W. Hahn's editorial in yesterday's WSJ:
To hear the candidates tell it -- especially those on the stump in Iowa -- ethanol is the answer to America's energy-security woes. And back in Washington, politicians since 1978 have been putting your money where their mouths are: Ethanol is currently subsidized to the tune of 51 cents per gallon when blended with gasoline.To make sure foreigners don't share the ride on the ethanol gravy train, moreover, Congress has imposed a 54-cent tariff on imported ethanol.