Tags: Ethanol

Demon Alcohol


Americans who don’t try competing for the votes of Iowans every four years have long known that federal support for making ethanol fuel from corn is a costly and inefficient way to help the environment. It may not even be a way to do so at all.

A new investigative report by the Associated Press reveals the extent to which government support for ethanol has driven American farmers to expand their corn production massively across the plains, with huge, unnecessary environmental costs. Ethanol burns slightly cleaner than normal gasoline, but experts have long questioned just how great its overall benefit is, because producing it has so many other environmental costs. Estimates of ethanol’s benefits have grown less and less generous over the years, and now the AP reveals that its costs in the form of pollution and unnecessary land use have been seriously underestimated.

Subsidies for ethanol have been a longstanding feature of U.S. environmental policy (which should tell you something about the quality of U.S. environmental policy). America has had a tariff on ethanol for decades, to prop up domestic production and protect the heartland from competing biofuels, mostly Brazilian. But the favoritism really ramped up in the 2000s: The Bush administration’s attempt at a green industrial policy, motivated by high gasoline prices, national-security concerns, and the demands of rural constituencies, led to a huge tax credit for companies that blend ethanol into transportation fuel. That credit expired in 2012, when conservatives and honest environmentalists pressured Congress to reduce direct support for the industry.

In 2006, a more tortuous and destructive subsidy was created: a mandate that a certain percentage of the transportation fuel produced in the U.S. had to contain ethanol. The Obama administration updated these standards in 2010, and the mandate now steeply increases each year. Just three years after writing the new regulations, the White House is being forced to consider whether to ease the mandate in 2014 because it may not be possible to produce enough ethanol to meet it.

This policy has two obvious effects: The price of ethanol’s key ingredient, corn, will explode, and the price of automotive fuel, which now must contain it, will rise. Forty percent of corn production in the United States now goes to ethanol, making food for people all over the world more expensive. The costs to American consumers alone have amounted to tens of billions of dollars per year.

But the secondary effects of these distortions have not been as obvious or well examined. The AP report explains that in writing the 2010 regulations, the EPA essentially pretended that corn prices would remain constant. The agency’s rules require that biofuels be 20 percent more efficient, measured by carbon emissions, than standard fuels in order to qualify for favorable regulatory treatment. To hit this metric, the Obama administration assumed that a straitjacket mandate would hardly affect corn prices, meaning little more land development. In reality, prices have almost doubled since the 2010 mandate was written.

And higher corn prices have meant much greater demand for farmland in the Midwest — including conservation land, which higher crop yields have allowed farmers to leave fallow, as well as virgin, undeveloped land. A 2008 study in Science concluded that no ethanol policy would reduce carbon emissions if it caused farmers to carve up such land. Since President Obama took office, more than 5 million acres of conservation land have been lost. Meanwhile, nitrogen-based fertilizers have flowed from the overworked Great Plains into the Gulf of Mexico, creating a “dead zone” the size of Connecticut on the sea floor.

Public policy inevitably will not be guided by science, but by political interests. That’s part of the reason those concerned with greenhouse gases and pollution ignore solutions less georgic than corn farming, such as nuclear power and fracking. Obama’s secretary of agriculture, Tom Vilsack, more or less admitted that to the AP: “I don’t know whether I can make the environmental argument, or the economic argument. To me, it’s an opportunity argument.” There are better ways, we are sure, to provide opportunity to the inhabitants of the Great Plains than demanding that vast swathes of their land be devoted to producing an unnecessary fuel.

Some conservatives have spoken out against our decades-old, destructive ethanol policies. Senator Tom Coburn of Oklahoma has criticized the programs for years; Richard Mourdock, in his 2012 primary campaign against Indiana senator Dick Lugar, railed against the system and Lugar’s support for it.

With more exposure of the environmental effects of the program, perhaps politicians who claim to prize the environment will recognize that a lot of green — in more sense than one — is being wasted on ethanol.

Tags: Ethanol

Obama’s Tax Cut for Rich Oil Companies


Tom Vilsack, secretary of agriculture, came out Thursday with an announcement sure to warm the cockles of progressive hearts all across the fruited plains: The Obama administration backs the indefinite extension of massive tax cuts for multinational oil corporations and protectionist trade measures to enrich U.S. corporate giants such as Archer Daniels Midland, Monsanto, and ConAgra.

Ethanol: Is there anything it can’t do? It won’t save the environment, slow global warming, or achieve the phantom of U.S. “energy independence,” but it has made the Obama administration come out in favor of tax cuts for the rich and politically connected oil companies. It’s sort of magical that way.

Critics of the massive corporate-welfare program known as U.S. ethanol policy have jokingly referred to Archer Daniels Midland as the “Exxon of ethanol.” But you know who the real Exxon of ethanol is? Exxon. Just as BP gets subsidized to the tune of some $600 million a year through the ethanol tax credit, Exxon and the other oil giants collect millions of dollars in taxpayer subsidies: 45 cents for every gallon of ethanol they blend into their gasoline. “It’s not just a reduction in somebody’s tax rate — it’s an actual check that’s made out to these oil companies,” says Marlo Lewis, who keeps an eye on ethanol shenanigans for the Competitive Enterprise Institute. “They get a check from the general fund of the Treasury — from us, the taxpayers.”

It’s a big stack of money, to be sure, but even Exxon does not think the program is a great idea. Exxon would just as soon forgo the subsidy, provided that its competitors didn’t collect it, either.

So, if even the suits at Big Oil are a little bit ashamed of a program that dumps hundreds of millions of dollars a year into their lap, who is in favor? “It’s the makers and the corn growers who are screaming that we have to keep doing this,” Mr. Lewis says. Only the blenders actually receive the refund checks, but corn growers and ethanol processors benefit because the demand for their products increases.

Vilsack said Thursday that the administration is in favor of a temporary and “fiscally responsible” continuation of the ethanol tax credit and the associated tariffs that keep cheaper, sugarcane-based ethanol off the market in the United States. When pressed by a reporter to define “temporary,” Vilsack demurred. When pressed by the same reporter to define “fiscally responsible,” he again declined to answer. Meaning: status quo ad infinitum. Vilsack, as Mr. Lewis points out, has been talking that same temporary-and-fiscally-responsible jive since he was a governor. (Either that, or he literally does not know what “fiscally responsible” means, which is possible.)

Two bills were floated in the last Congress to extend the tax credit and the tariff: one introduced by Sen. Chuck Grassley and one introduced by Rep. Earl Pomeroy. Neither made much progress. The danger is that while those bills have foundered, their essential provisions — extending the tariff and the tax credit — could be sneaked into a tax or energy bill during the lame-duck session. Look for some green-jobs camouflage to be attached to it, but keep in mind: If it quacks like corporate welfare, it’s corporate welfare.

But this is federal spending we’re talking about, so it could always be worse. “The good news,” Mr. Lewis says, “is that Vilsack did not call for a Marshall Plan for biofuels or a Manhattan Project for biofuels. And that’s what the ethanol lobby has been pushing for.” There’s a split in the ethanol lobby at the moment, with one camp focused on protecting the current basket of goodies and another arguing for a massive new federally subsidized infrastructure project, with 200,000 new ethanol pumps serving up E85, a sprawling new pipeline system to keep those pumps pumping, and a mandate that automakers deliver 120 million flex-fuel vehicles a year to the U.S. market. That’s not on the agenda — for now.

Keep ethanol in mind when Obama, Al Gore, and the Wall Street guys who are positioned to benefit from “green energy” programs talk about “temporary” measures to protect a fledgling start-up industry. The day never comes when these industries can stand on their own — because they never were economically viable in the first place. They’re selling a product nobody wants at a price nobody wants to pay. “We’re still waiting for Godot here,” Mr. Lewis says. “Ethanol will always be an ‘infant industry,’ no matter how big it gets. The U.S. industry is the biggest in the world by far — twice as big as Brazil’s. If it had to compete, it might actually become innovative. But it’s easier to have entitlements.”

The Obama administration is dead-set on raising the taxes of thousands of small-business owners, the so-called rich who benefited from the Bush tax cuts. And, at the same time, his administration is arguing for a massive tax cut for some of the most profitable multinational corporations in the world, some of which don’t even want it. Which is what you get when a president brought to you by Goldman Sachs promises to take on the fat cats.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Corporate Welfare , Debt , Deficits , Democrats , Despair , Ethanol , Fiscal Armageddon , General Shenanigans

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