Why We Should Repeal the Ethanol Mandate and Replace it With a Carbon Tax

During the debate over the Obama administration’s health care policy, Republicans came up with the catchy phrase “repeal and replace.” I’ll get back to health care in another post, but for now, I’d like to filch the phrase for the increasingly lively debate over the federal ethanol mandate, or Renewable Fuels Standard (RFS), as it is formally known. “Repeal and replace” is the right approach when a problem is real and existing policy addresses it in so a clumsy a way as to make it worse.

With every passing day of drought in the American Midwest, the outcry against the RFS grows louder. The latest to weigh in is Jose Graziano da Silva, Director-General of the Food and Agricultural Organization of the United Nations. Writing in the Financial Times, he urges the U.S. government to suspend the ethanol mandate, which is expected to consume up to 40 percent of the reduced 2012 corn crop. Otherwise, he fears, the world will approach a tipping point where further supply shocks could cause a global food crisis.

Worries about corn state votes have so far kept both major party presidential candidates on the side of ethanol, but opponents of the RFS also have significant support in Washington. Backed by livestock interests, among others, more than 150 members of Congress have urged the EPA to suspend the ethanol mandate for the duration of the drought. Some livestock producers are hoping that emergency drought-relief legislation will include a clause forcing the EPA to act.

Suspending the RFS for the duration of the drought is not enough, however. The ethanol mandate is bad policy that should be scrapped permanently. It should be replaced with a policy that directly addresses the problem of overconsumption of carbon-based fuels. A carbon tax on transportation fuels—or better, on all forms of energy—would be an excellent choice. >>>Read more