Trump’s ethanol waiver reversal won’t save Iowa’s troubled industry

Submitting to bipartisan pressure from Midwesterners, President Donald Trump is finally making good on one of his commitments to the U.S. agriculture community.

The Renewable Fuel Standard - a Bush-era policy that requires transportation fuel to contain minimum levels of biofuels, such as ethanol produced with Iowa corn - has been a top concern for business and political leaders in farming states over the past three years. The Trump administration drastically increased the number of refinery waivers, allowing oil producers to forego biofuel blending, thereby hampering demand for ethanol.

This week, the administration rejected more than 50 requests for retroactive waivers. That's a score for Iowa - and for the Republican politicians who have vehemently supported Trump in hopes of currying favor for their policy priorities - but it's not a grand slam. Perils for the ethanol industry and Iowa's farm economy still loom.

The Trump administration has left open the possibility of offering some other financial relief to the refiners whose waiver applications were rejected. And there is no assurance that, if re-elected, the president would not renege or seek to blow up the Renewable Fuel Standard altogether. It would not be the first time he said one thing about biofuels but did another.

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It's not obvious that Trump's waivers are the main problem for ethanol demand. American fuel sales peaked in mid-2018 and started a slow decline, Iowa economist Dave Swenson pointed out in a Twitter thread this week.

Even before Trump took office, the nation was producing more ethanol than it could use, according to figures from the U.S. Department of Energy. Thanks to Trump's international trade restrictions, it's been harder to sell the excess fuel elsewhere.

Then the coronavirus hit, slashing demand for transportation fuel as business and personal activity declined. Since the state and federal governments mismanaged the pandemic and failed to control the virus's spread, fuel sales remain poor six months into the crisis.

It's unlikely that ethanol will be a permanent fixture of the U.S. energy portfolio or the Iowa economy. While Iowa Democrats fiercely defend the program, there's growing skepticism in the environmentalist community about corn ethanol's net benefits, and progressives nationally are pushing for a transition to 100 percent electric vehicles.

The Trump administration was wrong to grant so many biofuel waivers and right to reverse course, but that bureaucratic interference pales in comparison to long-term political and market forces. The Iowa ethanol industry's problems are not solved.

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