Ethanol’s death is greatly exaggerated

A recent article in the Gazette reported on a study commissioned by the Iowa Renewable Fuels Association purporting to show that the Iowa ethanol industry would die if the proposed carbon dioxide pipelines are not constructed. A close reading of that study, however, reveals flaws in its argument.

The general conclusion of the study is that if Iowa ethanol plants cannot capture carbon and pipe it to North Dakota or Illinois, ethanol plants in other states surrounding Iowa will gain an advantage at the expense of Iowa’s ethanol industry. Of course, this conclusion relies on several assumptions that do not hold up under scrutiny.

The first assumption is that the Iowa ethanol industry is in a precarious position financially. But that assumption is at odds with the facts. The Iowa Renewable Fuels Association recently issued a press release saying that 2022 was the industry’s best year ever financially, and that the future looks even brighter. And as the report itself says, Iowa has the best access to corn for ethanol production and significant demand for the distiller’s grains for feed and for other co-products of ethanol plants. Those benefits to the industry are always going to be there.

Another assumption in the study is that federal tax credits for carbon capture will be necessary to keep the ethanol industry going. There are two kinds of tax credits. 45Q credits are based on the tons of carbon captured and sequestered underground. Those are the credits the pipeline companies have been basing their arguments on. 45Z tax credits are based on a carbon intensity score for allegedly clean fuels. The ethanol with carbon dioxide removed from the manufacturing process would be sold to states like California that have clean fuel standards. The study focuses on 45Z credits, not 45Q credits, so the study is irrelevant to the Iowa pipeline proposals. An ethanol plant cannot double dip and claim both credits. It has to use one or the other. So sequestration of the carbon dioxide as planned by the proposed pipelines would qualify for 45Q credits, and would not be eligible for the 45Z credit. Since the pipelines are relying on 45Q, the study’s claim that a pipeline would enable an ethanol plant to claim the 45Z credit is not based on the facts.

A third assumption in the study is that surrounding states (Illinois, Minnesota, Nebraska, and South Dakota) will permit pipelines and advantage their ethanol industries at the expense of Iowa’s, if pipelines are not built in Iowa. But there is no basis for assuming pipelines will be built in those other states. In fact, there is tremendous grassroots resistance to carbon dioxide pipelines in those states. So those other states may not be willing to host a pipeline. The study is simply engaging in fearmongering.

And even if pipelines were built in Iowa and more ethanol plants were built, would that benefit corn farmers? Would, or could, Iowa farmers grow more corn than they are now to supply the additional ethanol plants? Or is the carbon capture proposal just a scheme to make more money for the ethanol industry with no additional benefit to farmers? Is this another example of corporate welfare, since the tax credits are essentially taking money from taxpayers? The ethanol industry has been subsidized by the government – by us- in one way or another since at least 2005. In a free-market economy, an industry should be able to stand on its own after that many years and should not continue to depend on taxpayers.

It is important to remember that the study was paid for by the Iowa Renewable Fuels Association to support the Association’s argument for the carbon dioxide pipelines, so the ethanol industry can get the tax credits. I hope that Iowans, and especially the Iowa Legislature, will be skeptical of the unsupported conclusions in the report.

Wally Taylor of Marion is an executive committee member for the Sierra Club Iowa chapter.