The New
York Times
E.P.A. Declines to Reduce the Quota for Ethanol in Cars
By MATTHEW L. WALD
The agency’s administrator,
Stephen L. Johnson, said the mandate was “strengthening our nation’s energy
security and supporting American farming communities,” and that the mandate was
not causing “severe harm to the economy or the environment.”
The effect of the decision on fuel
and food markets is hard to predict. Farmers argued that the jump in corn
prices was driven not so much by the demand for ethanol as by growing demand
for grain-fed meat around the world and by their own higher costs for diesel fuel.
Recently, high oil prices have led
to even more ethanol production than the quota required. On the other hand,
rising corn prices made some ethanol operations unprofitable, especially as oil
prices started to fall.
The E.P.A. said in its decision
that a change in the quota would probably have no effect on production in the
next 12 months. If it did reduce ethanol production, the most likely effect, it
said, was that the price of corn, recently trading at a little over $5 a
bushel, would drop about 30 cents a bushel, and that gasoline would cost
another penny a gallon.
But food producers said that high
prices for feed had already increased the price of meat, and that they were
cutting the size of herds and flocks, meaning that supplies would soon be lower,
and prices higher.
“The food inflation that you’ve
seen now, at least in the meat and poultry sector,
probably is mild compared to what may be coming in the future,” said Joel Brandenberger, president of the National Turkey Federation.
Food inflation is now about 8.1 percent a year.
He and others said they would go
to Congress to try to seek a reduction in the tax break for ethanol and a cut
in tariffs on ethanol imports.
Legislators from farm states
applauded the ruling.
The debate over the quotas is a
sign of unease over government intervention in energy and food markets and
technologies and the unintended consequences that might ensue.
The request to cut the quota had
come from Gov. Rick Perry of
E.P.A. was supposed to respond in
three months, but the agency said it had delayed its decision to evaluate more
than 15,000 comments it received.
The rules that the E.P.A.
reconsidered on Thursday set a floor for ethanol use, not a ceiling. The floor
was not a firm one, because the E.P.A. could issue a waiver if the requirement
became “onerous.”
Renewable fuel use in 2004 was 3.5
billion gallons, according to the agency — mostly ethanol, which is a form of
alcohol, but also some biodiesel, which contains oil
from crops. The goal for this year had been 5.4 billion gallons but last
December, with the price of oil zooming up, Congress raised the renewables quota to 9 billion gallons for this year. It
also laid out a schedule of annual increases that would bring it to 11.1
billion gallons in 2009 and 36 billion gallons in 2022.
The agency has not completed an
analysis of the future effect of the mandate, but livestock producers are
concerned about what happens as the goals triple. Barack
Obama, the presumptive Democratic presidential
nominee, has called for even higher goals.
The existing target requires not
only more ethanol but also new cars and new filling station equipment.
The long-term hope, backed with
generous government incentives, is to make motor fuel from cellulosic,
or nonfood, sources. Private companies are feverishly pursuing technologies for
using wood chips, wheat straw, waste plastic and even municipal garbage to make
ethanol and other liquid vehicle fuels. But none of these is commercially
practical now.