Colin Barr

Following the money in banking, economics, and Washington

EPA boosts ethanol blend

October 13, 2010: 1:51 PM ET

The government cleared the use of ethanol-rich gasoline in late-model cars and trucks.

The Environmental Protection Agency approved the sale of so-called E15 fuel – comprising 85% gasoline and 15% ethanol, which is made in this country largely from corn – for use in cars and trucks made since the 2007 model year.

Fuel gets grainier

The EPA said the decision clears the first step toward full-scale commercialization of E15 blends. Until now, ethanol content in gasoline was limited to 10%.

The EPA said it made the decision after deciding the more ethanol-rich blend doesn't hurt emissions control equipment in recent automobiles.

"Wherever sound science and the law support steps to allow more home-grown fuels in America's vehicles, this administration takes those steps," EPA administrator Lisa Jackson said.

The ethanol industry has been pushing for higher ethanol content in fuel and for the new rules to apply to more vehicles. The EPA said it expects to complete a study next month that will determine whether the E15 fuel can be used in cars made between 2001 and 2006.

But the EPA says older cars won't be able to use the ethanol-rich blend.

"No waiver is being granted this year for E15 use in model year 2000 and older cars and light trucks – or in any motorcycles, heavy-duty vehicles, or non-road engines – because currently there is not testing data to support such a waiver," the EPA said.

The ethanol lobby contends alcohol-based fuels such as ethanol are environmentally friendly because they burn more cleanly than gasoline. The lobby carries considerable political weight thanks to its support in Midwestern farm states.

But skeptics question the billions taxpayers spend every year subsidizing the production of corn fuels. They note that ethanol is inefficient, since it is less energy-dense than gasoline, and say the conversion of millions of acres of corn to ethanol production will only add to the intense upward pressure on corn prices.

A recent surge in the corn price had raised speculation that the EPA might hold back on an increase in the allowable ethanol content, but Wednesday's decision says railing against our addiction to foreign oil takes precedence.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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