Ethanol . . . a good idea turning into bad public policy

Ethanol is rapidly moving deep into the realm of "politically untouchable" in this country. The problem is, it's a solution that's only marginally better than the alternatives it is in theory to replace says Paul Krugman (and plenty of others) . . .

There is a place for ethanol in the world’s energy future — but that place is in the tropics. Brazil has managed to replace a lot of its gasoline consumption with ethanol. But Brazil’s ethanol comes from sugar cane.

In the United States, ethanol comes overwhelmingly from corn, a much less suitable raw material. In fact, corn is such a poor source of ethanol that researchers at the University of Minnesota estimate that converting the entire U.S. corn crop — the sum of all our ears — into ethanol would replace only 12 percent of our gasoline consumption.

What's the problem?

The Congressional Budget Office estimates that reducing gasoline consumption 10 percent through an increase in fuel economy standards would cost producers and consumers about $3.6 billion a year. Achieving the same result by expanding ethanol production would cost taxpayers at least $10 billion a year, based on the subsidies ethanol already receives — and probably much more, because expanding production would require higher subsidies.

What’s more, ethanol production has hidden costs. Even the Department of Energy, which is relatively optimistic, says that the net energy savings from replacing a gallon of gasoline with ethanol are only the equivalent of about a quarter of a gallon, because of the energy used to grow corn, transport it, run ethanol plants, and so on. And these energy inputs come almost entirely from fossil fuels, so it’s not clear whether promoting ethanol does anything to reduce carbon dioxide emissions.

Unfortunately, it's bad public policy with broad bipartisan appeal for these reasons . . .

• It's backed by politically potent farmers and corn growers, and especially by uber politically savvy Archer Daniels Midland. These guys have been playing big time politics for generations, write big checks, and periodically send post cards to executives serving time for breaking laws related to same.
• Quick quiz, where's the first primary? Iowa, and most of the presidential hopefuls are tripping over themselves to say farmer friendly things (and there's nothing friendlier than a national energy policy that promises to permanently jack up the price of corn) in order to to appeal to the real power brokers in electoral politics: the people in Iowa who come out to caucus, all of whom could probably fit in a decent sized football stadium.

So ethanol from corn it is. And another boondoggle is born.

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