Government policy uncertainty - the case of ethanol

It has been reported that the EPA may change the requirements for production of ethanol through scaling back its use. The EPA would call for a decline in the use of ethanol gallons in 2014 from 13.8 to 13 billion gallons. This will have a clear impact on RIN's, the Renewable Identification numbers that can be bought and sold to meet the requirement. This is only a proposal but it clearly shows how the government can control an industry. he government almost single-handily started the ethanol industry with its mandates only to now potentially destroy the same industry through changing the rules of the game. 

I will clearly state that ethanol was bad policy from day one. It took corn production that could have been used for cheaper food and converted it to industrial production which now consumes 1/3 of the entire crop. It is also likely that the energy used to created ethanol exceeds the energy produced.That is a laugh. It helped farmers by creating demand, but that has also cost the consumer.

So now we want to take all of the capital used to create the production facilities and have it wasted by changing the ethanol requirements. This is another reason to avoid investments which may be associated with government subsidy. The uncertainty is too great.