The Environmental Protection Agency (EPA) is suffering policy schizophrenia. On the one hand, it has ordered automakers to increase fuel efficiency to save the planet from global warming. On the other hand, it is setting higher quotas of ethanol in gasoline, which will decrease fuel efficiency and increase emissions of the greenhouse gases that the EPA claims cause global warming.

Both actions will cost consumers and the economy a bundle.

The stricter fuel-efficiency standards require automakers to attain a fleet-wide average fuel economy level of 34.1 mpg by model year 2016 for passenger cars, light-duty trucks, and medium-duty passenger vehicles. The rules—running some 300 pages—dictate fuel efficiency standards by model type, weighted by sales volume. The re-engineering required for compliance will add $1,000 or more to the sticker price of passenger cars.

Meanwhile, the agency is expanding the allowable proportion of ethanol in gasoline from 10 percent to 15 percent. Because ethanol contains less energy per gallon than gasoline, the higher quota will reduce fuel efficiency by an estimated 5 percent to 30 percent per gallon, depending upon the vehicle model. It will also increase the billions of dollars in taxpayer subsidies to producers of the fuel and dramatically hike demand for corn, which will raise the prices of corn sweeteners, starches, syrup, oil, and livestock feed. The resulting spike in food prices will increase government spending on food stamps and child nutrition programs—by $1 billion a year, according to the Congressional Budget Office.

There are significant environmental costs as well, according to some researchers. For example, two studies published in 2008 by the journal Science reported that the cultivation of corn for ethanol and other biofuel feedstocks substantially increases emissions of the greenhouse gases that are supposedly causing climate change. One of the studies calculated that corn-based ethanol, instead of producing a 20-percent reduction, nearly doubles greenhouse gas emissions over 30 years. The excess emissions result from land conversions that are driven by demand for corn and other crops used to produce “renewable” fuels. According to the researchers, soil and plants together store 2.7 times more carbon than is present in the atmosphere. Thus, burning and plowing grasslands, rain forest, savannas and peat land for crop cultivation releases huge amounts of carbon dioxide into the atmosphere. Moreover, the loss of plants and soil reduces the absorption of carbon dioxide from the atmosphere that otherwise would occur.

Lower fuel efficiency, higher food prices, more corporate welfare and environmental degradation—your EPA at work.