Timothy Duggan

February 2, 2007

In his recent State of the Union Address, President Bush once again noted that the United States is "dependant on foreign oil." In addition to his usual rhetoric, President Bush offered some specifics as to how his plan would make the country less oil-dependent. He set a goal of reducing gasoline usage by twenty percent in the next ten years. To achieve this goal, the president stated, in part, "[W]e must increase the supply of alternative fuels, by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017."

This goal of 35 billion gallons builds on the Renewable Fuel Program, which began a year and a half ago with the passage of the Energy Policy Act of 2005, in which Congress required that gasoline sold in the United States contain a certain amount of renewable fuel each year. That amount is set at 4 billion gallons, increasing to 7.5 billion gallons by 2012. Thus, President Bush's plan advocates for a fivefold increase in renewable fuels by 2017.

Thus far, and indeed for the foreseeable future, the dominant renewable fuel used to satisfy the new federal requirements is corn-based ethanol. Indeed a 2006 industry report notes that domestic ethanol production (almost exclusively derived from corn) amounted to 4.3 billion gallons, with 2 billion gallons more in capacity under construction. Despite President Bush's hopeful remarks about cellulosic ethanol—which can be derived from such things as wood chips, grasses, and agricultural wastes—his plan hitches the nation's energy wagon to Midwestern agricultural interests. One need only have watched the jubilant reaction of Iowa Senator Charles Grassley to Bush's goal to see how interested the agriculture lobby is in the proposed renewable fuel standard.

Although this plan sounds ambitious, it has distinct pitfalls, one of which is that as demand for corn increases with each newly constructed ethanol plant, the price of ethanol too rises. Ethanol is also propped up by a 51-cent tax break on every gallon and a 54-cent tariff on imported ethanol. Additionally, a gallon of ethanol yields only about seventy percent of the energy a gallon of oil yields. Finally, ethanol does little to curb ever-increasing greenhouse gas emissions.

Acknowledgement by the White House that something should be done about our dependence on oil is refreshing. Serious thought should be given, however, to a renewable fuel standard centered on corn-based ethanol.

For More Information:

President George W. Bush, State of the Union 2007 (Jan. 23, 2007), available at http://www.whitehouse.gov/news/releases/2007/01/20070123-2.html.

Energy Policy Act of 2005, Pub. L. No. 109-58 § 1501, 42 U.S.C. § 7545(o) (2005).

Renewable Fuels Association, From Niche to Nation: Ethanol Industry Outlook 2006.

Marianne Stigset & Bruce Blythe, Bush's Ethanol Plan Getting Cold Shoulder, Globe and Mail, Jan. 30, 2007, available at http://www.theglobeandmail.com/servlet/story/LAC.20070130.RETHANOL30/TPStory/Business.