For the first time since the United States government began subsidizing ethanol, its defenders are on the run. World hunger is chipping away at the image of one of America’s most-outrageous subsidies, even sympathetic politicians are being forced to admit that the biofuel industry has gone too far this time.

“I’ve supported ethanol from the beginning,” Sen. Dick Durbin said (D., lll.) last week. Durbin represents the nation’s second-largest corn-producing state. “But we have to understand it’s had an impact on food prices. Even in the Corn Belt, we’d better be honest about it.”

The use of corn as a substitute for oil — made possible only by government subsidies — is now consuming more than one-quarter of America’s 13-billion-bushel corn crop. It has also caused corn prices to follow the skyrocketing price of oil. The price of corn, and the prices for every food product for which corn is an input (meat and dairy) or substitute (all other grains), have increased dramatically as well.

Ford Runge and Benjamin Senauer wrote last year in Foreign Affairs that biofuels are starving the world’s poor:

[I]f, all other things being equal, the prices of staple foods increased because of demand for biofuels . . . the number of food-insecure people in the world would rise by over 16 million for every percentage increase in the real prices of staple foods. That means that 1.2 billion people could be chronically hungry by 2025 — 600 million more than previously predicted.

Even if their estimate doubles the real damage, such an increase in world hunger would still be staggering and unconscionable. Anecdotal evidence suggests that it is happening already.

Some, including President Bush and Sen. Chuck Grassley (R., Iowa), continue to defend ethanol, offering other reasons for the increase in food prices. But even if there is more than one factor contributing to today’s high grain prices, ethanol is a huge part of the problem — and the only part that Congress can fix overnight.

A History of Subsidy

Corn ethanol would not exist at all without Uncle Sam. The handouts began with ethanol tax credits in the Energy Tax Act of 1978. It was an attempt to solve two problems at once: our vulnerability to oil shortages and corn prices that had been depressed by our agricultural subsidies. In 1980, a punitive tariff of 50 cents per gallon was laid against ethanol imports (the rate today is 2.5 percent plus 54 cents). This and government sugar-price supports and tariffs guaranteed that American corn would be the only cost-effective feedstock for ethanol. Ethanol producers also became eligible in 1980 for government-guaranteed loans for up to 90 percent of their construction costs. (By 1988, the government had lost $352 million in defaults.) The government provided other assistance as well — R&D funding, for example.

Government help was a windfall for ethanol: Production shot upward from 20 million gallons in 1979 to 750 million gallons by 1986. In 1990, a tax credit of ten cents per gallon was created for small-capacity ethanol producers. In the same year, Congress mandated the use of oxygenated gasoline. The subsequent downfall of MTBE boosted demand for ethanol, a rival but less cost-effective oxygenate, so that production surged to 3.6 billion gallons by 2004.

Our ethanol policy always made food slightly more expensive by increasing demand and reducing supply. But 2005 was the year that Congress went all-in. Just before the oxygenate mandate disappeared in 2006, Congress guaranteed that ethanol use would expand dramatically no matter what. The Energy Policy Act of 2005 mandated the use of 4 billion gallons of ethanol in 2006, increasing each year toward an annual consumption of 7.5 billion gallons of ethanol by 2012. This immediately brought about increased ethanol investment and production — and much higher demand for corn, leading to higher prices. By 2007, when ethanol production had already reached 6.5 billion gallons, the new energy bill upped the mandate to 15 billion gallons of corn ethanol by 2015.

Two Days of Gasoline

What exactly do we get from ethanol? Environmentalists have given up on ethanol as a reducer of carbon emissions because of the changes it causes in land-use and the increasing reliance on coal in the refining process. Advocates of ethanol still claim that its subsidies are a vital tool for attaining energy independence.

It takes only a bit of simple math to disprove this claim. According to a 2006 paper in the Proceedings of the National Academy of Sciences, ethanol contains about 25 percent more energy than is consumed by the process of making it (a generous estimate compared to some others). This means that the farming, distilling, and shipping required to bring five gallons of corn ethanol to market consumes the energy equivalent of four gallons of ethanol.

Each gallon contains 76,000 British Thermal Units (BTUs) of energy but requires 60,800 BTUs for production. The net energy gain from ethanol is therefore approximately 15,200 BTUs per gallon, which translates to 99 trillion BTUs for the 6.5 billion gallons we produced last year. That’s the energy equivalent of 868 million gallons of gasoline — slightly more than what Americans consume in two days.

Such a minor gain in energy independence hardly seems worth the $6.3 billion to $8.7 billion in annual direct and indirect federal and state ethanol subsidies estimated by biofuels expert Doug Koplow of Earth Track. The lower estimate is already more than the entire industry spent on corn last year. By the higher estimate, we could simply give $44,000 a year to each and every one of the 195,682 people who worked in the ethanol industry in 2007 — including farmers, truckers, and office staff, in addition to actual ethanol workers. And that is to say nothing about the costs associated with how ethanol exacerbates world hunger.

Congress should not be satisfied with merely reducing the ethanol mandate, but repeal it and end this inherently wasteful policy. There has never been a better opportunity to end federal support of ethanol — to drive the stake through this monster’s heart, once and for all.

– David Freddoso is an NRO staff reporter.