ryr8828
07-31-2007, 09:42 PM
Ethanol continues to fall short of promises
By E.C. Pasour Jr.and Randal R. Rucker
Hailed as an environmentally friendly alternative to fossil fuels and a means of reducing U.S. dependence on foreign oil, the U.S. ethanol program has mutated into a huge tax-financed boondoggle whose costs far outweigh its benefits.
Like so much else that originates in Washington, the program was sold to the public by overstating its benefits and understating its costs. The myriad unintended consequences - political byproducts that range from higher food prices to environmental damage - were ignored altogether.
President Bush's 2005 energy bill mandated an increase of more than 50 percent over five years in the amount of renewable fuel (mostly corn-based ethanol) added to America's gasoline supply, increasing from 4.7 billion gallons this year to 7.5 billion gallons in 2012. Although the current mandate represents only a tiny percentage of total annual gas consumption, President Bush has proposed increasing the mandate nearly fivefold over the following five years, pushing it up to 35 billion gallons by 2017. This would comprise about 25 percent of current U.S. annual gasoline consumption. If corn alone were used to produce the ethanol, an increase of this magnitude would require more corn than is produced in the U.S.
Even this, however, would do little to reduce petroleum imports or the use of petroleum products in the United States. One reason is the huge amount of petroleum used in growing, harvesting and transporting the corn needed to produce ethanol.
Another is that ethanol has significantly lower energy content than gasoline, as evidenced by Environmental Protection Agency vehicle mileage estimates. The EPA estimates that overall, vehicles using gasoline get about one-third more miles per gallon than vehicles using E85 (a fuel made up of 85 percent ethanol, 15 percent gasoline). Thus, a car or truck using E85 will require more fuel than a vehicle using gasoline to drive the same distance.
Another downside is the cost. Subsidies to corn farmers and small ethanol producers total roughly $1 per gallon. This year alone the subsidies will cost about $5 billion.
Ethanol producers, of course, have a huge stake in the mandate; 78 ethanol plants are under construction in the United States, with 113 already operating. While agribusiness giant Archer-Daniels-Midland is the largest producer, many ethanol plants are relatively small and specialized. These owe their very existence to the subsidies.
Meanwhile, by diverting corn to ethanol production, the mandate is roiling markets for other products. The U.S. Department of Agriculture estimates that the number of acres planted in corn this year will be the largest since 1944. But more corn for ethanol means less corn and less land for other uses, reducing supplies and pushing up prices of soybeans, oats, sorghum, wheat, and barley. It also raises the price of corn used to feed livestock, make breakfast cereal, and sweeten soft drinks. In short, while agricultural landlords and ethanol producers gain, consumers lose.
Government intervention in one market almost always begets further intervention in others. In this instance, subsidies to domestic ethanol markets have been augmented by a 54-cent per gallon tariff on ethanol from Brazil to prevent those imports from undermining the U.S. ethanol industry.
When all is said and done, the ethanol program is just another example of political pork, benefiting the few at the expense of the many.
E.C. Pasour and Randal Rucker, professors at North Carolina State University and Montana State University, respectively, are research fellows at the Independent Institute, 100 Swan Way, Oakland, Calif. 94621. They are co-authors of the book 'Plowshares & Pork Barrels: the Political Economy of Agriculture.'
Published on: Tuesday, July 31, 2007 7:24 AM CDT
http://www.southernillinoisan.com/articles/2007/07/31/opinions/guest_columns/21018976.txt
By E.C. Pasour Jr.and Randal R. Rucker
Hailed as an environmentally friendly alternative to fossil fuels and a means of reducing U.S. dependence on foreign oil, the U.S. ethanol program has mutated into a huge tax-financed boondoggle whose costs far outweigh its benefits.
Like so much else that originates in Washington, the program was sold to the public by overstating its benefits and understating its costs. The myriad unintended consequences - political byproducts that range from higher food prices to environmental damage - were ignored altogether.
President Bush's 2005 energy bill mandated an increase of more than 50 percent over five years in the amount of renewable fuel (mostly corn-based ethanol) added to America's gasoline supply, increasing from 4.7 billion gallons this year to 7.5 billion gallons in 2012. Although the current mandate represents only a tiny percentage of total annual gas consumption, President Bush has proposed increasing the mandate nearly fivefold over the following five years, pushing it up to 35 billion gallons by 2017. This would comprise about 25 percent of current U.S. annual gasoline consumption. If corn alone were used to produce the ethanol, an increase of this magnitude would require more corn than is produced in the U.S.
Even this, however, would do little to reduce petroleum imports or the use of petroleum products in the United States. One reason is the huge amount of petroleum used in growing, harvesting and transporting the corn needed to produce ethanol.
Another is that ethanol has significantly lower energy content than gasoline, as evidenced by Environmental Protection Agency vehicle mileage estimates. The EPA estimates that overall, vehicles using gasoline get about one-third more miles per gallon than vehicles using E85 (a fuel made up of 85 percent ethanol, 15 percent gasoline). Thus, a car or truck using E85 will require more fuel than a vehicle using gasoline to drive the same distance.
Another downside is the cost. Subsidies to corn farmers and small ethanol producers total roughly $1 per gallon. This year alone the subsidies will cost about $5 billion.
Ethanol producers, of course, have a huge stake in the mandate; 78 ethanol plants are under construction in the United States, with 113 already operating. While agribusiness giant Archer-Daniels-Midland is the largest producer, many ethanol plants are relatively small and specialized. These owe their very existence to the subsidies.
Meanwhile, by diverting corn to ethanol production, the mandate is roiling markets for other products. The U.S. Department of Agriculture estimates that the number of acres planted in corn this year will be the largest since 1944. But more corn for ethanol means less corn and less land for other uses, reducing supplies and pushing up prices of soybeans, oats, sorghum, wheat, and barley. It also raises the price of corn used to feed livestock, make breakfast cereal, and sweeten soft drinks. In short, while agricultural landlords and ethanol producers gain, consumers lose.
Government intervention in one market almost always begets further intervention in others. In this instance, subsidies to domestic ethanol markets have been augmented by a 54-cent per gallon tariff on ethanol from Brazil to prevent those imports from undermining the U.S. ethanol industry.
When all is said and done, the ethanol program is just another example of political pork, benefiting the few at the expense of the many.
E.C. Pasour and Randal Rucker, professors at North Carolina State University and Montana State University, respectively, are research fellows at the Independent Institute, 100 Swan Way, Oakland, Calif. 94621. They are co-authors of the book 'Plowshares & Pork Barrels: the Political Economy of Agriculture.'
Published on: Tuesday, July 31, 2007 7:24 AM CDT
http://www.southernillinoisan.com/articles/2007/07/31/opinions/guest_columns/21018976.txt