Go Green: Burn Gasoline

Posted by & filed under CGR Staff.

Perhaps we have the Iowa voters to thank for the foolishness of the latest energy bill. It significantly increases incentives to produce ethanol from corn.

Am I unaware of the urgent threat of global warming, unwilling to pay a few cents more for fuel and Fritos to end our servitude to sheiks and demagogues? Have I not seen Al Gore in An Inconvenient Truth (or one of the sequels playing in an auditorium near you)?

Here’s the problem: Ethanol from corn just doesn’t make sense economically or environmentally. Many studies conclude that the corn-to-fuel process consumes more fossil fuel that it displaces. A recent study from the Organization for Economic Cooperation and Development dubbed corn from ethanol as “a cure [for oil dependence] that is worse than the disease.”

Corn has always been hard on the land—heavily fertilized and thirsty, corn depletes aquifers and degrades the water that remains. The National Academy of Sciences (NAS) warns that ethanol-stimulated expansion of corn cultivation is likely to harm water quality and threaten water supplies. While most of the water is used for irrigation, the process of manufacturing ethanol from corn is also pretty thirsty—the NAS study reports that a biorefinery producing 100 million gallon per day of ethanol uses as much water as a community of 5,000. Land planted to corn is also subject to erosion.

The fabulous diversion of corn to ethanol production has also forced up food prices worldwide. Corn prices hovered around $2 per bushel through 2005. In 2007 the price had risen to $3.40, an increase of 65%—despite an increase in the harvest of 25%. In recent weeks the price soared to near $5 per bushel Not only is corn a major input for beef and dairy farmers, the increase in corn cultivation has displaced land for other crops. The price of wheat hit historic peaks in 2007, averaging over $5 per bushel for the year—almost $2 per bushel more than in 2005.

Yet in the face of overwhelming evidence that our ethanol policy is deeply misguided, we continue to expand the use of public dollars to enrich the investors, corporations and, yes, farmers, involved in the ethanol business, while driving up the cost of food for us all, including the world’s poor. The Economist reports that ethanol benefits from 200 different kinds of subsidies, about $7 billion in federal spending alone ($1.90 per gallon). And the law passed by Congress and signed by the President just a few weeks ago (The Energy Independence & Security Act of 2007) doubles the ethanol target from that set in the 2005 energy bill.

The industry is eager to help. The Renewable Fuels Association reports that current capacity is 7.6 billion gallons per day (gpd) in 137 operating plants. Another 70 plants are either under construction or being expanded, increasing another 5.6 billion gpd. And New York—largely with imported corn—is just getting into the act. Western New York Energy in Orleans County started production in a 50 million gpd facility. And still more plants—here and elsewhere—are on the drawing board, attracted by these rich public subsidies. Northern Ethanol of Toronto announced last month that is plans to build a 108 million gpd plant in Niagara Falls.

Our elected officials have given in to the easy hype on ethanol. The Economist asserts that both Hillary Clinton and John Edwards became true believers only in the run-up to the Iowa caucuses. Nor has the environmental lobby—surely a natural opponent to expanded ethanol production—held a consistent position. Eager to gain the support of members of Congress from farm states for other parts of the energy bill, they’ve held off criticizing the ethanol boondoggle.

The vote on the Energy Independence and Security Act came just days before Iowans gathered to offer their opinions on the candidates. Neither the candidates nor their supporters in Congress wanted to risk offending farmers or farm state corporate interests like powerful Archer Daniels Midland.

Members of Congress may have rationalized their votes by pointing out provisions in the law that encourage more efficient corn ethanol production and technology producing ethanol from more environmentally-friendly sources, like switch grass and organic waste. But you can’t put lipstick on a pig. Once again, Congress thinks it can choose the best solution to our energy problem. Few have the courage to fight the farm lobby and risk the wrath of drivers by simply taxing the use of fossil fuels. Government should discourage what we don’t want and let the most effective technologies rise or fall on their merits.

Maybe there is hope, however. While the Iowa caucuses urge candidates to kowtow to the ethanol lobby, the general election will be won by appealing to average voters, the “Joe Six Packs” of Middle America. And what better to get their attention than the price of that six pack? Yes, hops and barley also compete for land with newly-profitable corn, driving the price of hops up 45% and malting barley by 78% from December 2005 to December 2007. Hmm–“Barack for Beer in 2008”? Or “Get Hoppy, Vote Hillary”? Whaddya think?