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On the consumption side, ethanol producers claim that their product cuts GHG emissions by 62 per cent compared to gasoline. This is an almost impossible optimistic upper bound based on, among other things, using 100-per-cent ethanol. By contrast, Natural Resources Canada (NRCan) says a 10-per-cent corn-ethanol blend only cuts GHG emissions by three to four per cent.

Also according to NRCan, burning a litre of gasoline releases about 2.3 kilograms of carbon dioxide. A four-per-cent reduction is 0.09 kilogram per litre (0.00009 tonnes). At a value of $20 per tonne of carbon ($5.45 per tonne of carbon dioxide), the current social benefit of the emission reduction works out to five one-hundredths of a cent per litre.

$8 million is the number that needs to be compared against the costs of increased fuel and food prices

In 2016, Ontarians used 16 billion litres of gasoline, so the GHG emission reductions from blending ethanol are worth, optimistically, about $8 million annually.

This is the number that needs to be compared against the social costs of increased fuel and food prices. As a point of comparison, one of the two Ontario ethanol plants has already spent $200 million to expand its production capabilities in anticipation of the new blending rule, indicating that it expects to take at least that much out of consumer pockets in the coming years. The other plant is also spending money to expand, and once we add in the increased food costs and the costs for refineries to accommodate the new rules we will likely find, as we did previously, that the costs are several times larger than the benefits.

The federal government is apparently also considering a higher national ethanol blending mandate. We hope that it will assess the costs and benefits more carefully than Queen’s Park did. If it does, it will find that such a move would be unjustified in the absence of its carbon-pricing policy, and completely irrational under it.

Ross McKitrick is a professor of economics at the University of Guelph and a senior fellow of the Fraser Institute. Douglas Auld is an adjunct professor of economics at the University of Guelph.