EPA has an audacious plan. Racing past the Biden administration’s goal to make half of all new vehicles sold in 2030 “zero-emissions” vehicles—i.e., electric cars and trucks—the agency has recently proposed new vehicle emissions standards that would effectively require 60 percent of new light-duty vehicles to be battery electric by 2030 and 67 percent by 2032. This electrification mandate is nominally in service of reducing greenhouse-gas emissions from the transportation sector. But EPA has chosen a staggeringly cost-ineffective way to achieve this end. By the agency’s own math, the proposed rule would reduce CO2 emissions at a cost of roughly $370 per ton of CO2.
What makes this even more puzzling is that EPA has other options. As the agency itself acknowledges, when ethanol is blended into gasoline, the carbon intensity of the fuel decreases and the fuel’s octane increases. The agency has the authority to permit or require high-octane, low carbon fuels with higher blends of domestic ethanol. A 95 RON E20 fuel would unlock a 5–10% efficiency boost in all new cars while cutting greenhouse gas emissions by around 40 percent and saving American drivers more than 25 cents per gallon at the pump.
If EPA continues to ignore common-sense solutions like higher ethanol blends in favor of an all-electric future, the results will be catastrophic. As we explained in detailed regulatory comments, the agency’s cost analysis is flawed in at least a dozen ways: it underestimates battery costs, it ignores the cost of new electrical infrastructure, and it writes off tax-payer subsidies, to name just a few. But the most egregious error EPA makes is in its estimates of current and future electric vehicle costs. The proposal assumes—without any explanation, and scarcely a mention—that electric vehicles cost about as much to make, relative to their price, as their conventional counterparts. That is simply not true. There is overwhelming evidence that the manufacturing costs for electric vehicles far exceed their current list prices. Ford, for example, lost about $60,000 per electric vehicle it sold. The company only remained profitable by raising prices on conventional vehicles to offset those losses.
This sort of cross subsidization is only possible when conventional vehicle sales far outnumber electric vehicle sales. If electric vehicles grow from 6 percent to 67 percent of sales, automakers will no longer be able to offset large electric losses with small increases across conventional vehicle prices. In EPA’s proposed fleet, Ford vehicle prices could be expected to rise from around $36,000 today to $92,000 in 2032. Like all Ponzi schemes, EPA’s plan will inevitably hit a wall.
These high costs are the main reason that—no matter what EPA requires—we won’t see an all-electric vehicle fleet anytime soon. But the attempt to mandate this pipe dream will nevertheless be destructive. The burden will fall disproportionately on rural Americans. Demand for biofuels will shrink while transportation will get more expensive, a double whammy against American agriculture. Collectively, the top five corn-producing states could stand to lose well over $100 billion in farmland value from corn acreage alone. These losses would cascade into local communities and supporting industries, and would have profound implications for the financial viability of Midwestern farming operations, for the nation’s food supply, and for rural Americans.
The Supreme Court just last year warned EPA that it does not have authority to reshape the American economy like this. In West Virginia v. EPA, the Supreme Court held that the “Clean Power Plan” exceeded the agency’s legal authority. There, EPA attempted to force a shift from coal-fired plants to gas-, wind-, and solar-powered plants. The Court explained that an agency can’t just to “announc[e] what the market share of coal, natural gas, wind, and solar must be, and then requir[e] plants to reduce operations or subsidize their competitors to get there.” Deciding that sort of “major question” is Congress’s job. So too here.
Of course, rapid electrification would be as much of a failure if undertaken by Congress as by EPA. But Congress hasn’t done so. And Congress has other—and better—options for reducing vehicle emissions. Currently pending before the Senate is the bipartisan Next Generation Fuels Act. The Act would establish high-octane (95 and 98 RON) certification test fuels containing 20 to 30 percent ethanol, while requiring automobile manufacturers to design and warrant their vehicles to allow these fuels beginning in model year 2026. The CO2 emissions savings from these improved fuels would add up to more 600 million tons over ten years—nearly three times what electrification could save—while saving consumers money on fuel. This more sustainable approach would be much better for the environment, for consumers, for farmers, and for the rule of law.
Bradley Schad is the CEO of the Missouri Corn Growers Association.