If the EPA and Congress set ethanol mandates for 2014 at levels that can be easily met, they will send the wrong signal to investors, write Iowa State University economist Bruce Babcock and graduate assistant Wei Zhou in a new study entitled, Impact on Corn Prices for Reduced Biofuel Markets.
Such a decision would send a signal to automakers to reduce production of flex fuel vehicles. It would also dissuade investors from supporting retail fuel station blender pumps and advanced biofuel production plants. Here’s another sobering conclusion from these economists, “A reduction in public policy support for ethanol would only increase the perceived risk that in the future EPA would also reduce its support for other biofuels.”
Whether the ethanol mandates are reduced or increased, the price of corn will rise only marginally, the economists note.
What is needed (and has been sorely needed for decades) is for Washington to stick its neck out and develop a long-term energy policy. It’s in our best national security, environmental and economic interests.