San Francisco billionaire Tom Steyer and other national political figures have sold out California’s economy by supporting a federal mandate that forces billions of gallons of corn ethanol to be mixed into gasoline every year. The mandate, also known as the Renewable Fuel Standard (RFS), has already imposed $13.1 billion in higher fuel costs on Golden State consumers since 2005, with another $28.8 billion to come over the next 10 years. That’s the core finding of a new report from the Center for Regulatory Solutions (CRS), a project of the Small Business & Entrepreneurship Council, where I serve as president and CEO.
The RFS is effectively imposing a $42 billion “ethanol tax” on California consumers, and the vast majority of the proceeds are going to out-of-state ethanol producers in the Corn Belt of the Midwest, according to an economic analysis commissioned by CRS. The ripple effects of this huge wealth transfer include $31.6 billion in lost GDP growth in California by 2024, more than 17,000 lost jobs per year, and hundreds of millions of dollars in higher costs for dairy and poultry farmers, because rising demand for corn ethanol has increased the cost of corn-based animal feed. The CRS analysis also found that instead of cutting emissions – as RFS supporters have promised – California’s consumption of corn ethanol has actually generated an extra 6.3 million metric tons of carbon dioxide-equivalent since 2005 – roughly the same as putting 1.3 million cars on the road for one year – and more than 100,000 tons of additional smog-forming emissions.
Small businesses across the Golden State are wondering when the federal government will finally put an end to this disaster of a policy. There is no justification for it. But the RFS hangs on because of the power of the corn ethanol lobby in Congress, and because of the central role that Iowa – a corn-growing state – plays in presidential politics. For example, six Republicans and all three Democrats currently running for president have shown “strong and consistent support for the RFS,” according to the ethanol lobby. Even billionaire environmental activists like Steyer have learned to toe the line. Five years ago, when Steyer was focused on California politics and defending the state’s global warming laws, he openly mocked former vice president Al Gore for once supporting ethanol. But when Steyer became more involved in national politics, he changed his tune. Steyer’s campaign arm, NextGen Climate, now calls the RFS “an important program” and describes ethanol as “clean energy.”
It is stunning to think that a billionaire environmental activist like Tom Steyer would drop his misgivings about corn ethanol and throw the economy of his home state under the bus. But he’s no different than many other political figures with national ambitions, who choose to get ahead by siding with the ethanol lobby over consumers and small businesses.
In Steyer’s case, he’s ignoring years of warnings from his home state. As detailed in the CRS report, U.S. Sen. Dianne Feinstein (D-Calif.) is one of the leaders of the RFS reform movement in Washington. “The federal mandate for corn ethanol is both unwise and unworkable,” Feinstein says. On the other side of the political aisle, U.S. Rep. David Valadao (R-Calif.) has highlighted “the negative impact of Renewable Fuel Standard Mandates that are largely fulfilled by corn” on California’s dairy farmers. In 2013, Democrats and Republicans in the state legislature united behind a joint resolution urging Congress to overhaul the RFS and “transition away from biofuel sources that compete with food production.”
San Francisco-based environmental group Sierra Club opposes the corn ethanol mandate because of the fuel’s “extremely dubious net carbon benefits and its unresolved direct and indirect environmental impacts,” concerns that have been echoed by California environmental regulators. And for years, a diverse mix of newspaper editorial boards have warned about the corn ethanol mandate, including the San Francisco Chronicle, San Jose Mercury-News, Orange County Register, and San Diego Union-Tribune.
California is not alone. Across the country, there is a broad and growing bipartisan coalition that opposes the RFS corn ethanol mandate. It spans all the way from limited-government groups like Americans for Tax Reform to environmental activists like Bill McKibben. It’s time for Steyer and other national political players to stand up to the corn ethanol lobby and demand major reforms to the RFS before California and the rest of the country suffers any further from this misguided and failed national policy.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.