ethanol industry

Last Call for Ethanol: Biofuel Lobby Out in Full Force

by Brian McGraw on November 17, 2010

in Energy, Ethanol

With 2011 a month and a half away, the ethanol industry is pushing full steam ahead for a renewal of the tax credit and tariff provided to support the industry. There seems to be ample opportunity to push this legislation, as it could be attached to either any energy or tax legislation that makes it way through Congress. Rent-seeking lobbyists and politicians are out in full force hoping the river of cash doesn’t run dry:

A group of senators have pressed Harry Reid over concerns that the expansion of ethanol is being constrained by “marketplace limitations.” It also implies that eventually the ethanol industry will be ready to leave the government teat, though we must ensure this isn’t done prematurely and that there is ample time for “broader discussions” on how to address the limitations facing biofuels (hint: they aren’t cost competitive).

The ethanol lobby is also out in full force, attempting to scare politicians over potential job losses. Should they get much attention to their cause, the U.S. will be seeing increased amounts of flex-fuel vehicles and billions of dollars wasted to fund ethanol pipelines and pumps around the country.

Finally, Senator Harkin (D-Iowa) threatened to oppose electric vehicles if his colleagues don’t support biofuel policies. Politics at its best. Let’s hope they can’t come to an agreement and stop the subsidies for both.

Need another reason to oppose ethanol subsidies? We are now subsidizing European drivers because our ethanol producers are receiving tax credits for ethanol exported to the EU.

Image credit: Rascaille Rabbit’s flickr photostream.

Confessions of a Gasoline Call Girl

by Brian McGraw on November 10, 2010 · 3 comments

in Energy, Ethanol

Marc J. Rauch, Executive Vice President/Co-Publisher of The Auto Channel, posted a lengthy diatribe on the American Petroleum Institute’s recent lawsuit on the EPA’s approval of E15 blends in newer vehicles. Read it here, and note the title: “Gasoline Whores File Frivolous Lawsuit in Attempt to Derail American Energy Independence.” He is mad.

The lawsuit itself is not all that interesting. What is interesting, I think, is how willfully blind the author is to a number of realities that put the successes of the ethanol industry into perspective. He addresses a number of organizations that provided public comments on the EPA decision:

Grocery Manufacturers Association Vice President for Federal Affairs Scott Faber said: “We were disappointed in the Administration’s decision to allow more ethanol in gasoline before truly sustainable advanced biofuels are commercially available.

…

The Auto Channel’s response: Truly sustainable advanced biofuels? Humans have been making alcohol for thousands of years from nearly any plant they could find, what’s more sustainable than that. Advanced biofuels? That’s okay, too, once they’re ready, but why wait for cheaper fuel prices, oil independence and a cleaner environment when we have perfectly good truly sustainable biofuels right now – of which ethanol is only one alternative. By the way Mr. Faber, I challenge you to name what projected biofuels you’re referring to. I think you don’t know. I think you are reading/writing off a prepared script.

TAC is correct when he says that humans have been making biofuels for hundreds of years. Cellulosic ethanol was first developed in 1898. But the ability to create biofuels in a laboratory is different than being able to produce them in an economically and commercially viable manner. Despite 30 years of federal subsidies, corn ethanol has been unable to compete in a serious way with petroleum. The same is true (and even more true) of cellulosic ethanol. There just isn’t a whole lot of energy in plants, and it requires a lot of energy to extract them and make them usable. It’s possible that some technological breakthrough will change this, but it is by no means guaranteed. Congress can’t mandate a cure for cancer, yet when it comes to biofuels they seem to believe they can bend reality.

National Council of Chain Restaurants Vice President Scott Vinson said:“This challenge to the EPA’s decision is necessary to reduce the strain that ethanol production from corn has placed on U.S. agriculture. The EPA’s decision will lead to an ever higher proportion of the nation’s corn crop being diverted to fuel use, raising prices for participants in the food chain and consumers. Already supported by market-distorting mandates, tax credits and import tariffs, ethanol demand for corn has been singled out as the preferred use for U.S agricultural production long enough. Corn is an extremely important commodity used in feeding the world, and it’s about time we reverse the trend of burning more and more of it as fuel.”

TACH’s reply: Mr. Vinson, what script are you reading from? Why don’t you question the government subsidies and allotments that the oil/gasoline industry has been receiving for more than 100 years? Why don’t you question the billions of dollars of our money that is spent to protect enemy regimes and their oil? Oh, by the way, the world isn’t fed by eating corn; wheat is your huckleberry. Wake up and smell the grease, buddy.

Do the oil and gas industries receive subsidies? This is a “yes, but” moment. They receive certain tax breaks – an example is the oil depletion allowance that allow them to pay less tax (relative to other industries) based off of the way in which capital investment is deducted from the net amount of income they generate. This seems to infuriate the average American. But what few realize is that as a percentage of profits, the oil industry still pays significantly more tax than other industries in the United States. As the Tax Foundation explains:
In addition to income taxes, the table below shows that Exxon paid or remitted $20 billion in various sales taxes, excise taxes, severance taxes, and property taxes. This brings the total amount of taxes the company paid or remitted to $29.3 billion, nearly three times the net profits it earned for shareholders.

The oil industry certainly pays its “fair” share of taxes, where fair is defined as a much larger percentage of income than other industries.

National Turkey Federation President Joel Brandenberger said: “In trying so hard to rush out an E15 rule before Election Day, EPA completely disregarded the legitimate scientific concerns surrounding E15 and the potentially disastrous impact of diverting even more corn from food and feed to fuel. We believe the agency ignored the law as well, and we are confident the court will agree.”

TACH’s response: There are no legitimate scientific concerns regarding the use of ethanol. Ethanol is a proven engine fuel used around the world. It has been so used since the earliest automobiles in the mid 1800′s. Until lies such as the ones that you spout about ethanol were created by gasoline interests, ethanol was the preferred fuel of choice by people in the know. Contemporary studies and research continually prove that ethanol hasn’t suddenly become bad: It’s as good and safe as it always was.

Ah yes, it was those evil conniving gasoline interests of the 19th century that ruined ethanol’s chance at becoming the preferred fuel of the “people in the know.” I’m going to assume “people in the know” were people who liked walking everywhere. I’m sure the fact that petroleum was incredibly easy to produce in mass quantities compared to ethanol didn’t have anything to do with petroleum’s adoption. The bolded sentence above alone pretty much shows you how detached from reality Rauch is.

Snack Food Association President and CEO Jim McCarthy said: “In addition to failing to follow the spirit of the Clean Air Act, the EPA has made a decision that will adversely impact our food supply and ultimately cost American consumers greatly.”

TACH’s response: Hey, we love a candy bar and potato chips as much as the next person. But now some guy who represents an industry that might just be the biggest demon in the world is telling us about the environment and product costs! If there’s only 6 cents worth of corn in a $4.00 box of corn flakes, I shudder to think of how much we are getting ripped off on a $4.00 bag of tortilla chips.

But, the number one reason why the lawsuit and entire opposition to e15 is so off base: We don’t need corn to make ethanol, there are plenty of other agricultural products and by-products that can be used, and many of them do not require chemical fertilization or the use of “valuable” farm land. The whole issue of corn’s use for ethanol is irrelevant.

There really aren’t very many products available right now that are (1) scalable and (2) can compete with gasoline at its current prices. Corn ethanol is kind of close, but there are still problems with market penetration – automobile manufacturers aren’t going to produce E85 vehicles unless there is significant long term (non government mandated) demand for it, and with oil prices where they are now there isn’t significant demand for it.

Furthermore, imagine the amount of farmland required to produce 210 billion gallons of ethanol (about 17 times what was produced in 2009), which is the equivalent of the ~140 billion gallons of gasoline the U.S. uses each year. This would have significant negative effects on agricultural markets

You can wave all of these problems away if you don’t care about people taking you seriously, but to produce 210 billion gallons of ethanol from anything will require a lot of “valuable” farmland. Note also how he puts “valuable” in quotations as if the idea that farmland has value (and that value is taken away from it when it’s being put towards less productive use) is some sort of conspiracy concocted by gasoline-interest to keep ethanol down.

Finally, he ends with a good\evil list, where rent-seekers are all placed into the “hero” category and the “evil villain” category ranges from API to Hugo Chavez. He placed himself in the hero category — is Marc Rauch a serious person?

The evil villains:
American Petroleum Institute
National Petrochemical & Refiners Association
OPEC
All gasoline companies
EnergyTribune.com
FollowtheScience.com
Prism Public Affairs
Jerry Taylor and the CATO Institute
David Fridley
The aforementioned coalition members
Hugo Chavez
Mahmoud Ahmadinejad

The heroes
David Blume & Tom Harvey
Ted Chipner & Ohio Biosystems
American Coalition for Ethanol
Growth Energy
Ethanol Today Magazine
Renewable Fuel Association
Anne Korin & the Institute for the Analysis of Global Security
Dave & Steve Vander Griend & ICM, Inc.
POET
Tom Waterman and Ethanol Monitor Magazine
Edwin Black
My business partner Bob Gordon, me and everyone at The Auto Channel

Ethanol Mandates Meet Reality

by Brian McGraw on November 4, 2010

in Energy, Ethanol

The EPA again lowered its projection in meeting the 2011 “mandate” on cellulosic ethanol. (Is it really a mandate when the end result meets 1.5 percent of its goal?) The original mandate was revised from 250 million gallons to 5-17 million gallons this summer. This week brought even lower projections: 3.94 million gallons, about 1.5 percent of the original target. Rather than scrapping a bad idea, the RFA is clamoring for more and more money.

Many of the problems with bringing cellulosic ethanol relate to a lack of demand, the recession, large capital costs for new ethanol plants, regulatory uncertainty, etc., but apparently the DOE has been very slow and ineffective in handing out free taxpayer money guaranteed loans. Note the irony — an incompetent federal bureaucracy is inhibiting the government’s ability to damage the economy.

In other ethanol news, Growth Energy is optimistic about the new Congress’ attitude towards ethanol. Bob Dineen writes:

Ethanol is not now, nor has it ever been a partisan issue,” RFA President and CEO Bob Dinneen said. “There were strong ethanol proponents lost last night, but there were many more ethanol advocates that won last night, too. And, more importantly, for the most part those that may have been defeated were replaced with equally strong advocates for value-added agriculture and ethanol.”

It’s more appropriate to call ethanol a regional issue, where congressmen whose constituents benefit from federal biofuel policy show strong support for the status quo and the rest of Congress doesn’t pay much attention to such a remote issue. If ethanol tax policy is extended, it’s easy to see the public choice explanation of what happens when costs are spread across the entire nation and benefits are concentrated with a small, vocal minority.

It is appropriate for ethanol opponents to be cautiously optimistic. As noted in the link above, there isn’t much time for Congress to pass legislation before the tax credit expires, and there are certainly many more important issues that will occupy the majority of the remaining time.

Ethanol in The Wall Street Journal

by Brian McGraw on October 26, 2010 · 1 comment

in Energy, Ethanol

The editorial staff at The Wall Street Journal have not been kind to ethanol over the past months. They ran two editorials (one in July — “Survival of the Fattest“, one last week — “The Ethanol Bailout“) criticizing U.S. biofuel policy.

The most recent editorial sparked a letter to the editor from Agriculture Secretary Tom Vilsack. The letter reiterates many of the talking points Vilsack made in his recent address. The title, “Ethanol is a Step to More Biofuels,” almost implicitly acknowledges that corn ethanol itself is not the tell-tale solution the ethanol industry markets it as. Though his letter isn’t as bad as much of the propaganda put forth by the industry recently, his ending comment is misleading:

Don’t forget, the petroleum industry receives billions of dollars in tax breaks each year from the federal government.

I don’t think anyone has forgotten that. But two wrongs don’t make a right. Furthermore, a significant portion of the tax breaks received by the petroleum industry are part of a larger portion of the tax code that is not industry specific. You can credibly argue about the inefficiencies created by the U.S. tax code, but you can’t demonize the petroleum industry for taking advantage of credits available to a large portion of businesses in the U.S. (though there are also petroleum specific subsidies).

Additionally, as summarized (.pdf) by the EIA in 2007, while petroleum subsidies look BIG, on a BTU (subsidy per unit of energy provided) basis they’re miniscule in comparison to biofuel subsidies. The report calculates subsidies at $0.03 per million BTU’s for natural gas/petroleum compared to $5.72 per million BTU’s for ethanol/biofuels. Biofuel subsidies are 190 times larger than natural gas/petroleum subsidies on a per unit of energy basis (not sure why they couldn’t separate these out).

And then onto the commentators. Commentators on the Internet are generally known for their thoughtfulness and accuracy. Just kidding. But the WSJ letter includes comments from real live employee’s of the ethanol industry.

Ben Butterfield writes:

I work for Growth Energy, the coalition of ethanol supporters that filed the E15 waiver with the EPA. I agree with Secretary Vilsack that the EPA’s decision is the right step in the right direction. Moving to E15 is the first crack the blend wall – that artificial limit on the ethanol market. It is the one step we can take today to reduce our dependence on foreign oil, create jobs here in the US and improve our environment.

These types of comments are frustrating because they’re so incredibly misleading. The ethanol industry as a whole relies on government mandated biofuel production. Are they being “artificially limited” by restrictions on the amount of ethanol that can be blended into fuel? In a way, yes. But they also artificially exist, and will artificially grow, because of the EISA mandates on biofuel production. So they aren’t allowed to complain about all these unfair restrictions the government has placed on their industry. I’m willing to bet they wouldn’t trade unfettered market access (via tossing out the EPA and allowing fuel stations to sell ethanol blends as they desire) in exchange for killing the Renewable Fuel Standard.

Another, from Scott Miller — a bio-blogger:

Growth Energy (and their chief spokesman, Gen. Wesley Clark) champions the Fueling Freedom Plan ( see http://bit.ly/bZho2I ) which promotes the phasing out of ethanol subsidies to invest in the build-out of flexible fuel infrastructure – primarily the installation of blender pumps and ethanol pipelines – to provide a level playing field for market entry. Part of the problem of market entry of ethanol of all types has been that there are few blender pumps, so people have little reason to buy flexible fuel vehicles (FFVs). Conversely, there is little reason to install pumps if there are no FFVs

This isn’t the “phasing out of ethanol subsidies.” It’s the changing of ethanol subsidies from tax credits on production to subsidizing infrastructure and creating yet another artificial market by mandating FFVs. How can anyone take the “level playing field” stuff seriously? The real problem for the market entry of ethanol is that there isn’t any real demand for it because it isn’t consistently price competitive with gasoline. If oil prices rise back to previous highs ethanol will be price competitive again, and individuals will demand FFVs on their own. Though don’t forget the price of corn ethanol is also volatile and heavily tied to the price of corn and natural gas.

Miller was offended that the integrity of the ethanol industry was called into question. I’m not here to assault their integrity, maybe they genuinely believe ethanol is the fuel of the future. But its fair to attack their actions when they’re benefiting from taxpayer money and are fighting like hell to keep Brazilian sugarcane ethanol from reaching the United States.

Ethanol and Energy Efficiency

by Brian McGraw on October 21, 2010

in Energy, Ethanol

The U.S. Agriculture Secretary Tom Vilsack spoke today at the National Press Club on the future of biofuels in the United States. His remarks contained the expected boilerplate that the White House had previously blogged about here.

Growth Energy, the cheerleader of the ethanol industry, were very supportive of his remarks. But both Vilsack and Growth Energy got one thing wrong — the efficiency of ethanol production.

Growth Energy wrote:

During the Secretary’s speech, he mentioned that there have been efficiency gains in ethanol production. In fact, according to a new report out of the Office of Energy Policy and New Uses at the USDA, there have been significant net energy gains from converting corn into ethanol over the last two decades that have made ethanol one of the cleanest burning fuels on the market. For every Btu put into creating ethanol, we get 2.3 Btu’s in return—a significant increase from the 1.76 BTUs produced in 2004.

Robert Rapier, who writes an excellent energy related blog, explained the creative accounting employed by the USDA in these efficiency “gains” in a post titled “Fun With Numbers: The New USDA Report on Corn Ethanol. Incidentally, Rapier is the CTO of a bioenergy holding company and has a healthy respect for biofuels, but is quick to call BS when he sees it.

The post is long (worth the read if you’re interested in things like the methodology used by the USDA to calculate the amount of energy it takes to produce ethanol), but the cliff notes are that the USDA takes residuals from ethanol production, mainly grain, and subtracts that energy from the denominator of the energy return on energy invested equation. This is a misleading metric , it subtracts residual energy from the input rather than counting it as an output. It’s especially misleading as this wasn’t the methodology they used in some earlier reports, so the casual reader might believe that huge efficiency gains were achieved when most of these gains came from changing the methodology used to calculate the energy return.

Two excerpts from his post:

Imagine if financial returns were calculated in this manner. Say you invested $100, and got a return of $35 cash plus goods (byproduct) that you valued at $30. What is the return on investment? Most people would say that you got a total return of $65 on the investment of $100, for a total return of 65%. Or we could say the cash return is 35%. But if we utilize the USDA’s ethanol accounting, we would use the $30 co-credit to offset our initial investment. We could then argue that we only “really” invested $70 to get a cash return of $35, for a cash return of 50%. So, the answer to the question – “When can a $35 return on a $100 investment amount to a 50% return on investment?” – is “Whenever we apply the rules the USDA uses for ethanol accounting.”

That’s not to say it’s the “wrong” way to do it, but it is certainly a method that inflates the energy returns for ethanol. In the example above, the $35 cash return is analogous to ethanol production, and you can see how a 35% return gets inflated to 50%.

And

So if we keep the accounting methodologies consistent, here are the ethanol-only energy returns (ethanol output/total energy input) from the raw data in the USDA reports:

2002 – 1.09
2004 – 1.06
2010 – 1.42

Here are the ethanol plus byproduct energy returns (ethanol plus byproduct output/total energy input):

2002 – 1.27
2004 – 1.26
2010 – 1.69

Here are the ratios from utilizing the USDA’s 2002 methodology (subtracting byproducts from the inputs) across all three reports:

2002 – 1.34
2004 – 1.32
2010 – 1.93

Finally, the ratios that the USDA highlighted and reported across all three reports:

2002 – 1.34
2004 – 1.67
2010 – 2.34

Yes, the ethanol industry has made efficiency gains, but not nearly to the extent that they’d like you to believe.

Food vs. Fuel? Part Deux

by Brian McGraw on October 15, 2010

in Agriculture, Energy, Environment, Ethanol

Last week, the U.S. Department of Agriculture lowered its estimate on yields from 2010 corn crops to 12.7 billion bushels for 2010 from the previous September estimate of 13.2 billion bushels. In 2009, 13.1 billion bushels were produced. The lowered estimate led to the largest daily corn spike since 1973 (Financial Times, free registration required). A rise in corn prices raises the price of food products that use corn, most red meats, and ethanol.

Reuters, Salon, and the Financial Times covered the price spike, explaining that estimated supply reductions can have severe consequences due to increasing global demand for corn. Adbolreza Abbassian, a grain economist with the UN, noted, “We need a record crop every year. If not, we are in trouble.” The U.S. produces 40 percent of the world’s corn supply, while 30 percent of that goes towards ethanol — meaning that over 10 percent of global corn production is being used for fuel. The Financial Times also secured an interview with Tom Vilsack, U.S. Agriculture Secretary, who does not believe we will see a repeat of the 2007-2008 food crisis.

The ethanol industry, hoping to contain the damage, immediately blogged about these reports: “As Before, ‘Food vs. Fuels’ Arguments Strike Out.”

Geoff Cooper, of the Renewable Fuels Association, writes:

Last Friday’s USDA Crop Production and WASDE reports, which slashed estimates for the 2010 corn crop and average yield, sent the anti-biofuels crowd scurrying to find their trusty “Food vs. Fuel” playbooks. The alarmist rhetoric over the past several days seems virtually cut and pasted from the raft of doomsday press releases and manufactured “studies” that cluttered the media channels in 2008 when record oil prices and rampant speculation pushed grain prices to unprecedented levels and food prices to the highest levels in recent memory. For opponents of ethanol and beneficiaries of cheap corn, pointing the finger at biofuels has become the reflexive knee-jerk response any time grain prices start to rise.

But this time, the Malthusians are failing to gain any traction.

What a bombshell! This post is an excellent example of Propaganda 101. Notice the language Cooper employs, referring to “alarmist rhetoric,” “doomsday press releases,” “manufactured studies,” “rampant speculation,” and the worst: “Malthusians.” He frames the debate as a bunch of wackos making false claims, attacks Wall Street, and implies that the opponents of ethanol paid for misleading studies to be created. That’s a pretty damning accusation. Unfortunately for Mr. Cooper, the wide consensus among academics at the time was that the increase in biofuel usage did play a significant role in the 2007-2008 food crisis.

Indeed, as Cooper acknowledges:

The World Bank, which in 2008 hastily suggested biofuels was playing a large role in higher food prices, released an mia culpa analysis just a few months ago that found …the effect of biofuels on food prices has not been as large as originally thought…

Apparently, when you don’t agree with the corn ethanol industry your academic work is sloppy and was completed hastily, even when you’re the World Bank. It’s also appropriate to call into question their academic integrity by suggesting that groups with a financial interest in the outcome of the study paid for the results. On the other hand, when the World Bank reverses course and completes a study vindicating the ethanol industry, it is seen as a mea culpa (I’m not confident the World Bank cares much about offending a relatively small U.S. industry) and should be taken as gospel.

It is important to note that the World Bank did mostly vindicate the diversion of corn towards ethanol from playing a large role in the food crisis, as they had previously thought. However, they didn’t completely vindicate the industry, and the price of corn has doubled in the last ten years. Furthermore, it is worth pointing out that even a small jump in the price of corn can have a devastating effect on people living in poverty. The increased demand for corn to be converted to fuel will raise the price of corn in the short term, as long run adjustments are made to plant more (at the expense of other crops or previously unused farmland).

Ethanol: Following the E10 to E15 Debate

by Brian McGraw on September 29, 2010 · 1 comment

in Energy, Ethanol

The ethanol industry was patiently waiting for the EPA to approve an increase from 10 percent ethanol blends to 15 percent in gasoline. They are still waiting, but no longer patiently.

Numerous groups have voiced their opinion to keep the blend wall at 10 percent, or at least not to approve the increase until further testing is done. Despite the fact that the opposition comes from organizations such as the National Council of Chain Restaurants (this one is admittedly confusing), the Engine Manufacturers Association, and the Motorcycle Industry Association, the domestic ethanol industry is convinced this is an enormous big-oil conspiracy to keep the ethanol industry from succeeding. Did they just finish watching JFK?

From the reading I’ve done, it looks like 15 percent blends of ethanol aren’t going to have any negative effects on newer car engines — and EPA statements have hinted that the industry will get their 5 percent increase this year. But there is evidence that it can cause harm in non-automobile engines — like outboard engines used in boating, which explains why ESPN ran an article covering the issue.

Why is this confusing the ethanol industry? As the ESPN article says:

The lack of general public understanding of the differences between E10 and E15 increases the risk that boaters may misfuel their engines once E15 becomes readily available at gas stations.

The average citizen has no idea what E10 or E15 or E85 are. They might buy E15 rather than E10 and use it, potentially damaging very expensive equipment.

The underlying issue here is that the Renewable Fuel Standard is mandating huge blends of ethanol into our fuel supply, but the EPA isn’t permitting a high enough blend that will allow the mandate to be met. This highlights the absurdity of government energy policy. One government organization mandates a policy and another government organization sets policy making the original initiative impossible to obtain. This is one of the many reasons why consumers, not governments, should decide what they want going into their fuel.

And yes, the oil companies oppose the increase — as they should. They have absolutely nothing to gain from this, and will lose money as each gallon of gasoline sold now contains less refined oil and more ethanol. To some, it is downright shocking that a company would oppose policies that would have the direct effect of making their industry less profitable.

Obama adminstration enlarges ethanol industry trough

by Michael Fumento on February 5, 2010

in Ethanol

I’ve been writing about the ethanol scam since before you were born – well, if you were born after 1987 at least. I need to stop, because the more I write the bigger and richer the industry gets and more the rest of us pay the price.

Now the Obama administration has allowed vastly more money to be poured down the gullet of this insatiable creature, with the EPA making an official finding that corn-based ethanol and biodiesel made using other stocks produce vastly less greenhouse gas emissions displacing conventional gasoline or diesel fuel.

That’s news to some outside researchers, who find quite the opposite; that these fuels require far more energy (carbon-based energy) to produce than they create.

For example, Cornell agricultural ecologist David Pimental and colleagues in a paper last year concluded that no crop produced more fuel than the energy used to grow it and convert it to ethanol or biodiesel. They found a negative energy return of 46 percent for corn ethanol, 50 percent for switchgrass, 63 percent for soybean biodiesel and 58 percent for rapeseed. Even the most promising palm oil production results in a minus 8 percent net energy return.

I’ll be writing more on this, but suffice now to say that the real “science” behind the EPA’s findings is that this is an election year, with Pres. Obama’s party looking to be in a hurt come November, and support from those farm states is absolutely necessary. Hard to argue against that, isn’t it?

Stimulus to Hunger

by Iain Murray on January 27, 2009 · 4 comments

in Agriculture, Economy, Energy, Environment, International, Sanctimony, Stimulus to Nowhere

Great. Now USDA head Tom Vilsack is saying the US ethanol industry needs to be protected in the borrow-and-spend bill, and beyond:

“The ethanol industry is under particular strain,” Vilsack said in a
conference call with reporters.

Loan guarantees for the industry, distributed by the USDA as part of the
2008 Farm Bill, “can help more of these companies stay in business,” Vilsack
said, though he warned that “there will be a premium on ethanol producers who
can stay efficient,” a clear warning that there is overcapacity in the US
industry.

Vilsack expected more aid to the industry would be forthcoming in a later
energy package, though he said that aid from the Farm Bill provisions for the
ethanol industry “would be the first step in stimulating the economy.” The
grant program guarantees loans up to $250 million, the USDA said.

Hang on, if there’s overcapacity, doesn’t that mean that some firms need to go under or all firms need to cut back? So there should be less spending, not more, on ethanol. It’s not as if they haven’t got a bundle of mandates subsidies already.

But the stark fact is that every bit of public money that goes into supporting the ethanol industry artificially raises the price of corn, which in turn artificially raises the price of food around the world, which in turn artificially raises the level of hunger in the world. This isn’t stimulus, it is close to murder.

UPDATE: Note also Jonathan Tolman’s post below about taking farmland out of production, and his noting that the bill also includes relief to the elderly on account of rising food prices. There is plainly no “joined-up thinking” going on in the drafting of this pathetic bill.