Will ethanol get a boost from the 2016 election?
It’s election season, and the ethanol lobby is back in the spotlight as candidates scrabble for votes in the run-up to Iowa’s first-in-the-nation presidential caucus.
The 2016 race comes at a crucial time for Iowa’s $5 billion biofuels business, which is facing efforts from the Obama administration to dial down ethanol blending mandates, along with a bipartisan legislative push to repeal the sector’s Renewable Fuel Standard (RFS) subsidies. That’s led industry advocates to launch a dedicated pressure group to keep ethanol on voters’ minds. “We are designing it to look like a presidential campaign, but the RFS is our candidate,” says campaign organizer Eric Branstad, the son of Iowa Gov. Terry Branstad.
Such efforts have led many of the 2016 candidates to start walking back their past opposition to ethanol subsidies. New Jersey Gov. Chris Christie told attendees at this spring's Ag Summit, hosted by ethanol mogul Bruce Rastetter, that he “absolutely”supported the Renewable Fuel Standard. Gov. Scott Walker of Wisconsin also took the opportunity to temper his past opposition to ethanol subsidies.
Other GOP hopefuls took more nuanced positions. Former Florida Gov. Jeb Bush emphasized his biofuels advocacy, while downplaying his support for second-generation fuels derived from non-food sources. Sen. Rand Paul, meanwhile, criticized ethanol subsidies, but simultaneously proposed legislation to allow more ethanol to be blended into conventional fuels.
Of the GOP candidates, only Sen. Ted Cruz and former HP chief Carly Fiorina have spoken out decisively against ethanol subsidies. “People are pretty fed up with politicians that run around and tell one group one thing and tell another group another thing,” Cruz told the Ag Summit. Ohio Gov. John Kasich, meanwhile, criticized subsidies in general terms last month, and said he’d prefer to see a gradual transition to an unsubsidized biofuels sector.
Democratic frontrunner Hillary Clinton has been similarly reluctant to take a stand against ethanol subsidies: during the 2008 cycle she backtracked on her previous opposition to subsidies, and appears set to follow the same course this time around. This spring, she held meetings with top ethanol representatives this spring, and penned an op-ed signaling her support for the Iowa biofuels sector; last week, she also pointedly used Iowa as the launch-pad for a climate policy based on “more wind, more solar, more advanced biofuels [and] more energy efficiency.” That could offer ammunition to her principal Democratic challenger, Sen. Bernie Sanders, who in the past has forged unlikely alliances with conservatives to oppose ethanol subsidies.
Still, while few candidates are speaking out against biofuels, there are some signs that opposing subsidies is no longer the political third rail it once was. Recent polling suggests that nationally, Republican primary voters are now more likely to support candidates who oppose ethanol subsidies. The industry has also faced continued criticism both from the petroleum industry, which argues that blending ethanol into gasoline is bad for consumers, and from environmentalists who believe biofuel subsidies could be more productively channeled into other renewable energy technologies. Increased domestic oil and gas production, combined with the rising influence of Tea Party-affiliated fiscal hawks, meanwhile, have somewhat weakened the ethanol industry’s lockdown on Iowa politics.
A case in point: conservative firebrand Joni Ernst won last year's Iowa Senate race despite opposing ethanol subsidies, after framing her views as a principled stand against subsidies of any kind, and pledging only to support cuts to ethanol subsidies if other US energy industries also lost their handouts.
That strategy won’t be easy for other candidates to emulate, says political scientist Steffen Schmidt. "Each candidate has to do a 'Full Joni Ernst' on this issue, which means say exactly what she did during her campaign,” Schmidt says. That requires a “perfect political balancing act” that few candidates could pull off, he says.
Companies to watch
* The country’s top ethanol producer, Archer Daniels Midland (NYSE:ADM), saw its corn-processing earnings slump by $124 million in the first quarter. Squeezed margins and uncertainty over biofuels policy could lead to “some rationalization of capacity” across the industry, says the company’s CEO, Juan Luciano.
* Both Dupont (NYSE:DD) and S.D. ethanol giant POET last year cut the ribbon on new Iowa-based cellulosic ethanol plants. The projects could flounder without government support: cellulosic ethanol would only be independently viable if oil prices rose above $120 a barrel, says economist Wallace Tyner.
* Koch Industries affiliate Flint Hills Resources has been buying up ethanol plants around the country, including several in Iowa, in recent years, and now controls about 6.2% of the US market. The Koch brothers, whose businesses include fossil fuel holdings, remain notable opponents of clean-energy subsidies.
Ben Whitford is the US correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications.