Background

Certain political and opinion leaders would have the public believe that domestic ethanol cannot compete on the free market, and that without subsidies and tax credits, ethanol could not survive as an industry.

In fact, ethanol has yet to reach its full potential precisely because it has been blocked from the market. What government support has been provided to ethanol is in the form of making it available to Americans – but even that is capped at no more than 10 percent of blended gasoline, essentially meaning the U.S. has a policy that mandates that 90 percent of all transportation fuel be gasoline refined from oil.

The truth is that American consumers do not choose their fuel. Their fuel is chosen for them, both through Big Oil, which controls the infrastructure that moves fuel to the market, and by regulation that gives oil a huge advantage in the marketplace.

If American consumers were able to choose their fuel, most would choose the fuel that helps create U.S. jobs, reduces carbon emissions and helps strengthen national security. And that fuel is domestic ethanol, America’s renewable, homegrown fuel.

In a fair and open market – one in which ethanol is an option for consumers – ethanol will succeed.

Why Americans have not been given an option?
There are three fundamental reasons that Americans have not been given the opportunity to choose their fuel in a free market:

Access to America’s automobile fuel market is tightly controlled by the oil industry, which maintains complete management of the infrastructure for distribution of fuel – from the oil wells to the fuel pump. And while the oil companies (blenders) have been incented to include ethanol blends, it is only based on the economics of receiving a “blender credit” which incents them to blend ethanol to their financial gain. There is no other reason for blenders to provide delivery mechanisms for ethanol – a product which competes directly with their own product.
Automakers have not been making all vehicles flex-fuel compatible, despite the clear advantages of making every model flex-fuel. Why? Because most Americans don’t have an option of pumping higher blends of flex fuel – only a fraction of fueling stations offer blender pumps, which are designed to allow the consumer to choose the amount of ethanol blended in their fuel. Automakers have singled out the lack of blender pumps available in many U.S. markets as a hurdle that must be resolved in order to see more ethanol used in transportation fuel.
As a fledgling industry competing with deeply entrenched and heavily-subsidized fossil fuels, domestic ethanol did require assistance to gain some market share, develop new technologies and grow to meet the goals of the Renewable Fuel Standard. Based on this, a course of growth was determined, and in honesty, the industry became comfortable with this track. However, producing ethanol is no longer the problem; the problem is access to the markets.

How do we create the option?
Growth Energy proposes a transformational change in America’s national fuel policy – and how that policy addresses domestic ethanol. Specifically, Growth Energy proposes a path that leads to a genuinely free market – an open market, not based on government supports. We propose an ambitious, but realistic and achievable plan to open the automotive fuel market to competition. Not competition between oil/gasoline brands, but competition between fuels. Growth Energy’s position is that this plan – and broader use of domestic ethanol – will ultimately save the taxpayers of America billions of dollars.

The “Fueling Freedom” Plan
The “Fueling Freedom” plan calls for eliminating government support for ethanol over time in exchange for a level playing field. The plan would redirect a portion of the existing value of the VEETC to support for building out the infrastructure of distributing ethanol.

The primary elements of the plan include:

Funds currently going to VEETC (the incentive for oil companies to blend ethanol) would be redirected to provide backing for the build out the distribution infrastructure for ethanol – such as tax credits for retailers to install 200,000 blender pumps and federal backing of ethanol pipelines. This will provide Americans the access to choose ethanol in an open and free market, and would allow for the elimination of the tax supports over time in exchange for that level playing field.
Require that all automobiles sold in the U.S. be flex-fuel vehicles—as many as 120 million. This requires no additional cost to taxpayers and a minimal cost (about $120 per vehicle) to vehicle manufacturers.

Who Benefits?
There is no question that our plan will benefit the American taxpayer, and every American over time, because of ethanol’s economic, environmental and political benefits. Growth Energy’s Fueling Freedom plan requires no additional demand on America – and in fact would phase out subsidies over a specified time period – but delivers a vast improvement: The opportunity to have a fair and open market for automotive fuel, and greater consumer choice. This is something that has never been seen in our automotive history.