Ted and Trump Take Different Tracks on Ethanol

Published January 26, 2016

Terry Branstad was first elected governor of Iowa in 1982. His six terms in office have made him the longest serving governor in American history and the most influential politician in the state. He rarely takes sides in the Republican caucuses and hasn’t endorsed a primary presidential candidate since 1996.

But the 2016 election is different in so many ways.

On Tuesday, January 19, at the Iowa Renewable Fuels Summit, Branstad jumped into the fray by attempting to influence the outcome of the February 1 caucus—not with an endorsement, but with a denouncement: “I don’t think that Ted Cruz is the right one for Iowans to support in the caucus.”

Branstad slammed Cruz because, as he told reporters: “He’s opposed to the wind energy tax credit. He’s opposed to ethanol and biodiesel”—which are the very positions that make Cruz an attractive candidate to limited-government, free-market Republicans.

Cruz has had the integrity to hold to his position of eliminating all subsidies on energy—even in Iowa where the winner of every caucus in both parties, since the Renewable Fuel Standard (RFS) became law, as a part of the Energy Policy Act, in 2005, has “strongly backed federal subsidies or mandates for the corn–grown fuel,” reports John Fund.

In his first year in office, Cruz co-sponsored legislation to repeal the RFS—which requires ever-increasing amounts of ethanol be blended into the nation’s fuel supply. In 2014, he took a different bite at the same issue and introduced a bill that would overhaul several energy policies, including phasing out the ethanol mandate in five years. Early in the campaign season, at the 2015 Ag Summit, March 7, Cruz was the only GOP candidate who didn’t support the RFS.

Since then, several GOP candidates have supported its phase-out. However, of all the presidential candidates, from both parties, only Cruz and Rand Paul received a “bad” rating on the American Renewable Future’s (ARF) “Final presidential report card on the Renewable Fuel Standard“—which means they demonstrated consistent opposition to the RFS.

While both Hillary Clinton and Donald Trump received a “good” rating, Clinton didn’t actually earn it, as her support for the RFS hasn’t been “consistent.” Fund writes: “Hillary Clinton voted against ethanol a total of 17 times in the U.S. Senate, saying she found it ‘impossible to understand why any pro-consumer, pro-health, pro-environment, anti-government member’ could vote for ethanol mandates. In 2007, as she announced for president, she took a sharp turn on the Road to Des Moines and embraced ethanol. This year, she calls ethanol ‘a success for Iowa and much of rural America.'”

Trump, however, likely earned his ARF “good” rating as he does not have a history of opposition to burdening “working Americans with hidden taxes,”—which is one of several derogatory phrases USA Today used to describe the RFS. In 2011, the Los Angeles Times reported that Trump “has relied on tax breaks and federal funding to build his real estate empire.”

It shouldn’t be surprising, then, that Trump told hundreds of attendees at the January 19 Summit: “I am there with you 100%.” The Wall Street Journal (WSJ) reports that Trump has met with ARF three times since April and has his staff stay in touch with the ethanol-lobbying group led by Branstad’s son Eric. Trump also said he was opposed to changing any part of the RFS—which means, as The Hill explains, “Trump calls for higher ethanol mandate.”

Trump’s ethanol position puts him at odds with most in his party—and even many democrats and environmentalists—as outside of Iowa, ethanol has few friends. In short, the RFS requires ever-increasing amounts of ethanol be blended into gasoline. When it was passed, it was assumed that Americans would consume more and more gasoline (not the less-and-less that is present reality), so rather than make the ethanol mandate be a percentage, lawmakers required specific volumes of ethanol. Corn growers have increased production to meet the demand. U.S. News states: “about half of Iowa corn goes to ethanol production for use in gasoline.” However, the higher ethanol levels have been proven to damage engines, reduce fuel efficiency, and even raise the cost of food. Plus, the RFS was established during a totally different energy era, a time when scarcity, not a global fuel glut, was the concern. Today, as U.S. News says, “the ethanol mandate makes no sense economically or environmentally.” The WSJ calls it: “one of America’s worst corporate-welfare cases.”

Cruz and Trump are making different political calculations. In a matter of days, we’ll know which one was wiser: Cruz who stuck to his principles, believing that people of Iowa “will respect his honesty,” or Trump, whose embrace of the “top-down government mandate,” as The Atlantic calls it, “speaks to just how much he wants to win Iowa.”

The Atlantic concludes: “If Cruz manages to win Iowa without siding with the state’s high-profile lawmakers and a powerful industry, it could send a message to future candidates that they don’t need to support the mandate to emerge victorious in Iowa.”

The scales may tip in Cruz’s favor as polling indicates that support for the RFS doesn’t have the political pull it once did. A recent Des Moines Register poll showed close margins on those who agreed and disagreed with Cruz’s position: 37 percent agree, 42 percent disagree. Polling released on January 22 found that RFS support is not a top priority for 95 percent of Iowa’s voters—with half of respondents saying they either “do not care much, or do not care at all, about the RFS and federal corn ethanol mandates.”

Regardless of who actually wins in Iowa, if Cruz comes out ahead of Trump, it could pave the way for a Republican president, whomever he or she might be, to finally repeal the outdated and unworkable RFS—which, oddly enough, could help Iowa’s corn producers. Refiners would still use ethanol. It has a place in the free market. As I’ve previously addressed, ethanol is the most cost-effective octane booster. But the RFS requires more-and-more unavailable advanced biofuels and less-and-less corn ethanol. When the Environmental Protection Agency announced the 2016 blending rule, it required higher advanced biofuel levels.

Soon we will know if Iowa has caught up with the rest of America in realizing that the RFS is ripe for repeal.