Only in the upside-down world of government bureaucracy could you have a situation where you pay one group 51-cents a gallon to grow crops for fuel (instead of, you know, to eat) all in the name of environmental goodness, yet turn around and charge another group a 54-cents a gallon penalty for wanting to bring U.S customers the very same product.
It doesn't take a genius to figure out the end result. Higher food prices for everyone, more deficit spending and a willing supplier (Brazil) that can't enter the market because of this stupidity.
But, always more a product of taxpayer handouts and an archaic presidential election calendar than any actual environmental savings or reduced carbon footprint, the great purported energy savior, corn ethanol, might actually be on the ropes.
With food prices rising and more and more crop fields being planted strictly for ethanol production (not for environmental altruism mind you, but for the above-mentioned subsidy), support for this political boondoggle may finally be waning. While we'd like to say it is coming to an end, when has any government subsidy actually subsided?
If Congress is finally ready to do something about ethanol, then they need to look at what really is fleecing American taxpayers on numerous fronts -- tariffs.
For decades the government has gifted domestic sugar farmers with steep tariffs on imports that have artificially inflated the cost to U.S. consumers. And with sugar-derived ethanol being far more efficient than corn, eliminating import barriers would allow the industry to switch its prime ingredient.
And as long as we're dropping trade barriers, let's eliminate that 54-cent penalty and start importing Brazilian ethanol. If it truly is about cleaner air, lower fuel costs and lessening dependence on foreign oil (which, unfortunately, is mostly found in unstable political regions) then this really is a no-brainer.
But if it's more because one small Midwestern state is first every couple years in picking a President, then maybe this can be one more reason to dump Iowa from its perch.
The ethanol backlash:
Coalition presses Congress over ethanol -- Financial Times
Backing for ethanol boost evaporates -- The Globe and Mail
Lawmakers turn up the heat on ethanol in response to rising food prices -- L.A. Times
Rethinking Ethanol -- New York Times
Market Spotlight: Once-trendy ethanol struggles -- CNN/Money
The Many Myths of Ethanol -- John Stossel
The Clean Energy Scam -- Time
How Biofuels Could Starve the Poor -- CFR
Monday, May 12, 2008
Ethanol Hype Finally Waning, We Hope
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2 comments:
Corn ethanol is still only 1% of the food price increase in the U.S. and about 3% worldwide. Ethanol is not starving people, oil prices and the rapid upmarket growth of China and India are starving people. Moreover, grain stocks are paradoxically low, probably because farmers see the writing on the wall: when the corn ethanol subsidies start to die, there's going to be oversupply in the grain markets.
The green credentials of Brazilian ethanol are still suspect, because it may be accelerating deforestation (thus wiping out much of whatever carbon-neutrality it boasted). Also, the U.S. has never had good ag trade relations with Brazil (see: orange juice).
You're right, there are a lot of factors driving the cost of food up (e.g., fuel costs, more population and a growing meat-eating middle class in China and India). But when you divert food crops for fuel crops solely because of a political subsidy based on what is now considered bad science (at, least the environmental efficiency of corn ethanol), something is wrong.
In some areas, though, I think the result is a little more than 3%. In Mexico the price of tortillas have almost doubled and the blame is more on corn being diverted to fuel.
Brazil isn't an eco-saint, like you said. The Time magazine article specifically points out the clear-cutting of forests so soybeans and sugar cane can be grown for biofuel.
So it seems for every positive there is an equal, or more than equal, negative when it comes to current biofuels.
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