GM’s ethanol play


In an audacious move Sunday, General Motors demanded that the federal government step in and create a national ethanol fuel station infrastructure at the same time the company announced that it has invested in Coskata, a cellulosic ethanol startup company.

Coming on the heels of federal legislation that set national mandates for ethanol production, GM’s strategy amounts to federal guarantees for its investment in the ethanol industry.

“We need to grow E85 (ethanol) stations,” said GM CEO Rick Wagoner at a Detroit Auto Show news conference. “It is time for the U.S. government to do it through regulation.”

“This is a game changer,” said David Cole of the Center for Automotive Research. It also amounts to a massive government subsidy for General Motors and its unprecedented move into industries that fuels automobiles – the equivalent of auto companies owning oil companies.

Coskata, which aims to produce 100 million gallons of ethanol a year produced from weeds, has been financed by Vinod Khosla, a controversial venture capitalist and rent-seeker who has long advocated government market guarantees for alternative energy. An ally of Al Gore who warns we are in a planetary emergency due to global warming, Khosla has worked with Kleiner Perkins, the California venture firm Gore joined last year.


Saying he was pleased “to participate in this historic event,” Khosla joined Wagnoner on stage Sunday.

“The problem is that these technologies remain speculative,” a Wall Street Journal editorial commented of cellulosic technology in December. “Essentially (government) is legislating the creation of a new industry from scratch. No doubt Vinod Khosla and the other California venture ‘capitalists’ are happy to join Big Corn at the federal subsidy trough.”

Khosla successfully lobbied for an increase in federally-mandated ethanol to 36 billion gallons of ethanol annually by 2022 – up from 7.5 billion currently – in the recent energy bill.


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