A couple days ago, Collin Carter and Henry Miller opined in the New York Times that, “a stroke of a pen can quickly undo the ravages of nature.” The “ravages of nature” in question is the current drought, which is “ravaging” corn in the Midwest. And the pen stroke? That’s a little more complicated, but the bottom line is: they are wrong.
Carter and Miller are concerned that under current law ‘corn for ethanol’ takes precedence over ‘corn for people.’ That’s because the Renewable Fuel Standard (RFS) mandates the production and blending of 13.6 billion gallons of ethanol this year, which is roughly equivalent to 4.9 billion bushels of corn. Considering that some folks think the drought has caused farmers to lose 2 billion bushels of corn, Carter and Miller suggest that simply loosening the mandate by 20%–that’s the ‘pen stroke’–will undo half of the damage caused by the drought. But their suggestion is totally superfluous.
To understand ethanol policy, one has to delve deeper than the pages of the New York Times. Those who really understand ethanol policy (like my colleague Nick Paulson) know that currently there is a built-in safety valve that accomplishes what Carter and Miller propose, without stroking any pens. The current law gives blenders ‘credits’ (called Renewable Information Numbers (RINs)) when they exceed the mandate. These credits can be carried forward and cashed in during years when they don’t meet their quota. Because the ethanol industry has been producing like gangbusters the past couple years, blenders currently have about a billion gallons-worth of RINs–roughly equivalent to the 20% easing Carter and Miller call for.
So, their op-ed should have said, “thankfully, since we produced so much ethanol the past few years, we won’t have to worry about ethanol competing with food for corn this year.” Or more to the point, “thankfully, our ethanol policy undoes the ravages of nature.” But I guess that doesn’t sell newspapers.