Don’t Believe the EV Hype—For Ethanol, Stay the Course

Column by Doug Durante, Clean Fuels Development Coalition

Among the issues that have put a scare into the ethanol industry over the past few years, the threat of electric vehicles has received considerable attention. While threats to the RFS, artificial limits on blend volumes and diminishing export markets are real, the EV threat should rank low on the list. In fact, using my personal crystal ball, I don’t think EVs are ever going to approach the volumes the Biden administration is pushing and certainly not remotely within the timeline they predict.

This is supported by political, market and financial factors that are out in the open and hard to refute. Let’s start by acknowledging that EVs are driven by politics, which is problematic right off the bat. Like many environmental initiatives that are presented as a false choice between protecting the environment OR economic prosperity, lines were quickly drawn. If for no other reason than the fact the EV push was a Biden initiative, many Republicans immediately railed against it. But there were plenty of legitimate reasons to question an ill-conceived plan that needed to be completely thought out rather than dumped on the public.

The long and short of the issue is that the Biden administration has set emission standards that practically mandate electric vehicles. Those EVs are falsely assumed to be zero carbon emissions when the reality is that they require carbon energy inputs in their production as well as their charging and operation. So, the foundational argument for these vehicles was flawed from the get go. The higher cost, the lack of recharging infrastructure, the failure to account for the source of battery materials and importantly, the lack of consumer acceptance are just some of the many issues that need to be resolved.

That’s a perfect recipe for political opposition, and it is quite real. Consider that the major presidential candidates on the Republican side all oppose electric vehicles and promise to strike down Biden initiatives and requirements. Marjorie Taylor Green said EVs “emasculate men.” Several states have or are in the process of banning EVs in their states. It is being cast as anti-consumer and anti-choice in an election year. If Republicans win the White House, win the Senate and maintain majority in the House, it is a certainty the tax incentives and government support for EVs will be repealed. Even if we continue with a split in terms of party control, all these artificial supports cannot survive.

A subset political issue is the negative impact on our energy and national security, and the intersection with the economics of EVs. For example, CFDC just submitted comments on the Department of Energy’s recent proposed guidance defining “foreign entity of concern” (FEOC), urging the agency to close loopholes that would allow electric vehicle batteries manufactured in China to continue to reap an up-to-$7,500 tax credit, despite express congressional prohibition. The Inflation Reduction Act excludes from eligibility “any vehicle placed in service after Dec. 31, 2024, with respect to which any of the applicable critical minerals contained in the battery of such vehicle …  were extracted, processed or recycled by a [FEOC]” and “any vehicle placed in service after Dec. 31, 2023, with respect to which any of the components contained in the battery of such vehicle … were manufactured or assembled by a [FEOC].”

I know that’s Washington-talk but as Sen. Joe Manchin noted, “[t]he IRA is first-and-foremost an energy security bill, and the EV tax credits were designed to grow domestic manufacturing and reduce our reliance on foreign supply chains for the critical minerals needed to produce EV batteries.”

This exclusion is important because China is currently a key supplier of 85 percent of the global stock of critical minerals (including rare earths, copper, cobalt, etc.) and the leading manufacturer of battery components. There are two loopholes that may allow Chinese manufactured batteries to still collect credits, the first being that the rule covers materials and batteries made by FEOCs but it does not necessarily cover materials made in FEOCs. Second, shell companies and subsidiaries could further circumvent the FEOC issue. At a time of tension with China, this is both a real and political issue.

Then there is the financial reality. For consumers, EVs are more expensive than comparable gas-powered cars. These tax incentives are complex and limited, in very few instances can the full $7,500 be realized. For those who do not purchase or even support EVs, they are still paying for the infrastructure, tax breaks, increased utility rates and other measures. There are estimates in the trillions of dollars to go down this electric road, with taxpayers footing the bill.

Then there is consumer resistance, due in part to the increased cost but much more because people don’t seem to be all that enamored with EVs. Most of the EVs currently available fail to inspire consumers and don’t meet their transportation needs in either efficiency or style. Add to that the legitimate concern that the resale market for EVs seems to be terrible, repairs are costly, the cold weather problem, the refueling infrastructure is not in place and it doesn’t suggest a high rate of growth.

This is not lost on the people who make cars. GM, Ford, Chrysler, Toyota, Nissan and others are all recanting their earlier pledges to go electric. There were 15.5 million cars sold in the U.S. in 2023, 1.2 million were EVs which is admittedly not bad, but a senior auto executive told me they have come to realize the positive sales of EVs to date were due to early adopters, most of whom were higher income and two-car households. The challenge they now realize is to find the next wave of buyers.

So, the politics of EVs impact the financial viability of EVs which impact the consumer acceptance of EVs which impacts the decisions by automakers to produce these vehicles, all of which in turn continues to feed political resistance.

What all this means for ethanol and agriculture is that we aren’t going anywhere. The internal combustion engine and liquid fuels are going to remain the primary propulsion systems. The 14 million gas-powered cars sold in 2023 alone will operate for a 12- to 15-year lifespan and use gasoline—gasoline that can be augmented with ethanol. Don’t let the hyped-up talk of EVs divert us from demanding access to the fuel market and to not get caught up in the carbon craze of sustainable aviation fuels or other long-term opportunities when we have the opening for high octane low carbon fuels at hand. Hybrids that can use both gasoline and electricity could include blends up to 30 percent ethanol—without all the baggage of EVs.

Tell your elected representatives that waiting for EVs is no excuse for ignoring the benefits of improving today’s gasoline. Pass the Next Generation Fuels Act. Limit toxics as required by the Clean Air Act. Be honest with the American people about EVs.