Some realism on ethanol

The WSj reports on two government reports on why government subsidies on ethanol are such a rotten idea.

First there is the evidence of what corn-based ethanol does to our grocery bills. Only an economics illiterate would fail to see that subsidizing the growing of corn for fuel would raise the price of other crops.

The Congressional Budget Office reported last month that Americans pay another surcharge for ethanol in higher food prices. CBO estimates that from April 2007 to April 2008 "the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices." Ethanol raises food prices because millions of acres of farmland and three billion bushels of corn were diverted to ethanol from food production. Americans spend about $1.1 trillion a year on food, so in 2007 the ethanol subsidy cost families between $5.5 billion and $8.8 billion in higher grocery bills.

Think of that the next time you pause over buying some ears of corn for summer barbecues.

That might be worth it if using ethanol actually achieved its promised environmental benefits. But the EPA itself casts serious doubt on that claim.

A second study -- by the Environmental Protection Agency's Office of Transportation and Air Quality -- explains that the reduction in CO2 emissions from burning ethanol are minimal and maybe negative. Making ethanol requires new land from clearing forest and grasslands that would otherwise sequester carbon emissions. "As with petroleum based fuels," the report concludes: "GHG [greenhouse gas] emissions are associated with the conversion and combustion of bio-fuels and every year they are produced GHG emissions could be released through time if new acres are needed to produce corn or other crops for biofuels."

The EPA study also explores a series of alternative scenarios over 30 to 100 years. In some cases ethanol leads to a net reduction in carbon relative to using gasoline. But many other long-term scenarios observe a net increase in CO2 relative to burning fossil fuels. Ethanol produced in a "basic natural gas fired dry mill" will over a 30-year horizon produce "a 5% increase in GHG emissions compared to petroleum gasoline." When ethanol is produced with coal burning mills, the process "significantly worsens the lifecycle GHG impact of ethanol" creating 34% more greenhouse gases than gasoline does over 30 years.

Despite the Obama's self-proclaimed respect for applying only research-based policy, the Obama administration is pushing ahead for more government support for corn-based ethanol and for raising the government mandate for ethanol use in gasoline from 10% to 15%. Here's a government expense that forces consumers around the world to pay more for food and for which there is no real evidence that it will do more to reduce CO2 emissions than using gasoline. So what's to like? Well, corn farmers are making out like bandits. And both Republican and Democratic senators from corn-growing states love pleasing those agricultural interests. And environmentalists love the illusion that they're supporting a program that will benefit the environment despite research to the contrary. This is a bipartisan boondoggle, but when has that ever stopped our government?