Bush’s Alternative-fuel Boondoggle

A CBSnews.com column explains how huge ethanol subsidies enrich special interests like Archer Daniels Midland:

Ironically, the president’s call echoes a more severe proposal by his 2004 campaign opponent John Kerry — a recommendation that a National Center for Policy Analysis study found would not “reduce future U.S. dependence on foreign oil.” The president’s plan also proposes an expansion of the so-called Renewable Fuels Standard (RFS), which currently mandates that refineries produce 7.5 billion gallons of ethanol per year by 2012.

But, as Heritage Foundation energy analyst Ben Lieberman points out, “if ethanol were a viable fuel, you wouldn’t have to mandate it in the first place.” Indeed, ethanol — whether made from corn or trendy cellulosic sources like switchgrass — is simply not viable as an alternative for the fundamental reason that a gallon of ethanol only goes 75 percent as far as a gallon of gas.

…For the farm lobby, the renewable mandate is easier to understand. It means money. Lots of money. To make ethanol price-competitive, the federal government subsidizes its production to the tune of 51 cents a gallon, costing U.S. taxpayers $4.1 billion a year.

Fueled by the RFS, Big Ethanol producer Archer Daniels Midland rang up record 2006 profits that would make Big Oil blush. Now Bush is proposing to increase the mandate to a fanciful 35 billion gallons by 2017 (whether consumers buy it or not). And as the federal honey pot grows, it is naturally attracting more flies.

Meanwhile, a Wall Street Journal column notes how the ethanol subsidy has a big negative impact on other users of corn, and even causes harm in other nations:

What we have here is a classic political stampede rooted more in hope and self-interest than science or logic.

…[F]ederal and state subsidies for ethanol ran to about $6 billion last year, equivalent to roughly half its wholesale market price. Ethanol gets a 51-cent a gallon domestic subsidy, and there’s another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it — despite recent high oil prices.

That’s also why the percentage of the U.S. corn crop devoted to ethanol has risen to 20% from 3% in just five years, or about 8.6 million acres of farmland. Reaching the President’s target of 35 billion gallons of renewable and alternative fuels by 2017 would, at present corn yields, require the entire U.S. corn harvest.

No wonder, then, that the price of corn rose nearly 80% in 2006 alone. Corn growers and their Congressmen love this, and naturally they are planting as much as they can.

…[F]or those of us who like our corn flakes in the morning, the higher price isn’t such good news. It’s even worse for cattle, poultry and hog farmers trying to adjust to suddenly exorbitant prices for feed corn — to pick just one industry example.

The price of corn is making America’s meat-packing industries, which are major exporters, less competitive. In Mexico, the price of corn tortillas — the dietary staple of the country’s poorest — has risen by about 30% in recent months, leading to widespread protests and price controls. …Thus is a Beltway fad translated into Third World woes.

…The scientific literature is also divided about whether the energy inputs required to produce ethanol actually exceed its energy output. It takes fertilizer to grow the corn, and fuel to ship and process it, and so forth. Even the most optimistic estimate says ethanol’s net energy output is a marginal improvement of only 1.3 to one. For purposes of comparison, energy outputs from gasoline exceed inputs by an estimated 10 to one.

And because corn-based ethanol is less efficient than ordinary gasoline, using it to fuel cars means you need more [fuel] to drive the same number of miles. This is not exactly a route to “independence” from Mideast, Venezuelan or any other tainted source of oil.

…If cellulose is going to be an energy miracle — an agricultural cold fusion — far better to let the market figure that out. Not that any of these facts are likely to make much difference in the current Washington debate. The corn and sugar lobbies have their roots deep in both parties, and now they have the mantra of “energy independence” to invoke, however illusory it is. If anything, Congress may add to Mr. Bush’s ethanol mandate requests.