Charles Lane: The ethanol mandate's coming car wreck
Hence, too, we have elaborate government mandates and subsidies for blending ethanol into gasoline, which cause farmers to divert land, water and capital into growing corn and other crops for fuel rather than food.
But a 2007 federal law mandating ever-greater ethanol consumption remains on the books, and it is starting to create the economic equivalent of a multi-car freeway pileup.
Alas, like many previous attempts at central planning, the RFS has run afoul of changing realities in the marketplace — specifically, a seemingly permanent leveling-off of motor-fuel consumption because of changing driving habits, the sluggish U.S. economy and CAFE standards, among other factors.
Formerly a few cents per gallon, the price of a RIN recently reached $1.40 as businesses covered by the RFS — and speculators — snapped them up in anticipation of the "blend wall."
This is the sort of argument between rent-seekers that occurs when government tries to meet public-policy objectives through complex subsidies and mandates — rather than by setting broad incentives and letting market participants respond to them.
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