I’m in favor of dropping ethanol subsidies, but I think the 40% number is overstated. Biodiesel is a good example, even with the $1/gallon subsidy farmers can get more money selling their soybeans for food than for fuel, thus more half of the soy biodiesel plants are idle. That’s the way it should work - let the market decide (without gov’t intervention). Yet the gov’t HAS intervened, in setting Renewable Fuel Standards - mandating how much fuel must come from renewable sources.
And here is the rest of the story. Current engines can burn a 10% mixture - E10 ethanol - and even if every gallon of fuel sold were E10, that means we’d need 12.6 billion gallons of ethanol per year. Guess what? We’ve already got that much plant capacity. The “blend wall” is a limiting factor. See this article for more details:
http://arstechnica.com/science/news/2011/01/renewable-fuel-mandates-cant-be-met-by-ethanol.ars
I don't know if you'd accept "Forbes" as a source and I can't even give you a link but it's on page 14 of the April 25 th print edition - 40%.
I've had the April 25th issue for about a week now, I don't know why they date them so far ahead.