mandate

NPR Covers Corn Ethanol Boondoggle

by Fran Smith on December 22, 2010 · 4 comments

in Energy, Ethanol

NPR’s “Morning Edition” has finally caught on to the ethanol boondoggle. It’s doing a three-part series on ethanol that started yesterday. And it gets into some of the real issues, especially relating to corn ethanol. CEI has been pointing out that the ethanol program involves a mandate setting the amount of ethanol that must be blended with gasoline, a tax credit that goes to blenders of ethanol, and a steep tariff on imported ethanol. (See CEI video, “The Insanity of Ethanol Policy.”)

NPR got this issue right:

The question is: Does it deserve a multibillion-dollar tax credit, on top of a tariff, on top of a huge and growing mandate to use it?

NPR’s second installment brought up the food vs. fuel issue, that is, all the incentives to grow corn for ethanol production are decreasing the supply of corn available for food and for feed and driving up those costs.

Here’s what a prominent agricultural economist said to NPR:

“I don’t see why we can really justify subsidies, when all that does is raises cost of producing food,” says economics professor Bruce Babcock, of Iowa State University.

Ethanol policies increase the cost of food at least 1.5 percent, Babcock says. And the impact on meat prices is significantly greater.

It’s economics 101, he says. Ethanol plants increase the demand for corn, driving up the prices for other buyers – like livestock producers. International demand is up, too – and we’re exporting more ethanol than ever before. Many grain farmers are seeing record incomes this year.

Yet how did policymakers deal with ethanol in the lame-duck Congress? In the omnibus tax bill, they voted to extend the ethanol tax credit and the tariff on ethanol imports for one year. Ducks and pork are a tasty treat for politicians.

HT: Iain Murray

Regulation of the Day 141: Mandatory Fire Sprinklers

by Ryan Young on June 14, 2010 · 2 comments

in Deregulate to Stimulate, Economy, Nanny State, Personal Liberty, Regulation, Regulation of the Day

Politicians love it when housing prices go up. They think it’s a sign of a vibrant and growing economy. That high-price fetish is partially to blame for the housing crisis of 2008.

Officials in Cumberland, Maryland have not learned their lesson. They are doing all they can to boost local housing prices. For example, the city council is currently mulling requiring all new homes to install fire sprinkler systems. For a 2,000 square foot home, that would add $3,000 to $9,000 to the price of the home.

Potential homebuyers are questioning the wisdom of the idea; high and rising prices reduce demand for housing. It’s basic economics. If this mandate passes, fewer Cumberlanders will be able to afford a new home. For a city complaining about its aging housing stock, this is not wise policy.

But this isn’t just an economic issue. It’s a personal freedom issue. As one man told the Cumberland Times-News,

Cumberland resident Don Bohrer suggested that more — and louder — smoke detectors, and not sprinklers, are a reasonable solution. Bohrer cautioned against “Big Brother” government infiltrating private homes any more than already is done.

“We’re losing more of our freedoms every time you pass one of these silly things,”?Bohrer said.

He’s right. One mandate isn’t that big of a deal, though this one is rather expensive. But when you add them all up – federal regulations alone add up to 157,000 pages – you see that regulators have created a monster.

(Hat tip to Megan McLaughlin)

Does the ethanol mandate increase CO2 emissions?

by Marlo Lewis on May 27, 2009

in Ethanol, Global Warming, Odds & Ends

That may seem counter-intuitive, because burning ethanol merely puts back into the air the carbon dioxide (CO2) that corn crops recently pulled out of it, whereas burning gasoline liberates carbon that had been stored in geologic deposits for millions of years.

But other factors come into play, such as the fossil energy inputs required to produce the corn, turn it into ethanol, and deliver the ethanol to market. 

In addition, as EPA argues in its proposed rule to implement the renewable fuel standard program established by the 2007 Energy Independence and Security Act (EISA), expanding corn production into forest and grass lands can release substantial amounts of carbon stored in soils and trees.

Similarly, when U.S. farmers grow corn in areas previously used to produce soy beans, for example, farmers in Brazil have an incentive to convert forest land into soy plantations.

As you might expect, EPA’s use of life-cycle analysis, although required by EISA, drives the ethanol lobby and its congressional allies up the wall. They claim it is ridiculous to link increased corn production here to increased CO2 emissions in developing countries.

But, as my colleague, agricultural commodity analyst Dave Juday, demonstrates, the numbers paint a very clear picture. With Dave’s permission, I reproduce below an email he sent around earlier today.

*  *  *

With regard to GHG and the EPA’s RFS [renewable fuel standard] 2 rule, … the concept of “indirect land use changes” (ILUC) get criticized for being faulty, but it actually is pretty sound.  

Consider, if ethanol drives up US corn  plantings (which it did) and drives down US soybean plantings and production (which it did, because the US – the largest producer and exporter – has only so much farm land and not much tillable acreage to expand) and thereby raises the world price of soybeans, it raises the incentives to grow soybeans elsewhere in the world.  It just so happens Brazil – which is the world’s second largest producer and exporter – is the most likely place where additional soybeans will be grown on virgin land because that is where the virgin land is. 

The real weak link in this GHG lifecycle emissions concept is the ability to measure and value the carbon emissions and sequestration and the process by which “value” gets assigned to practices and manufacturing processes.  Yet, as might be expected from ethanol advocates, it is the simple, fundamental, and rational economic concept that is argued against.    Consider the perspectives shared by a lobbyist and a US Senator on the issue of “indirect land use changes” driven by US biofuel policy:

  •  Basically, the EPA has determined that the production of ethanol in America is forcing land use changes in Brazil and other foreign countries to destroy their valuable rain forests to produce farm commodities to make up for reduced exports of these commodities from the United States. Mr. Chairman, I have been in Washington for a long time, but I have never heard of a more bizarre concept. – Tom Buis, CEO, Growth Energy
  •  Every chance I get, I’m going to bring this issue up. It’s so obvious that the EPA’s rationale doesn’t meet the common sense test.  It’s ridiculous to think that Brazilian farmers are looking to see what Iowa farmers are doing to determine how they run their own business, and quite frankly it’s plain unfair to farmers. –  Honorable Charles Grassley, US Senator (R-IA)

Addressing these comments above is one of those cases where a picture is indeed worth 1,000 words:

corn-and-soy-us-and-brazil

SOURCE: USDA, Foreign Agricultural Service: Production, Supply, and Distribution Online

Added: May 29, 2009

Lisa Lerer delves into the ”life cycle analysis” controversy in the May 26 issue of Politico.  Farm state Democrats are threatening to oppose the Waxman-Markey bill if, as required by EISA, EPA considers the indirect impacts on land-use changes abroad when determining the life-cycle CO2 emissions of domestic ethanol production. 

The same lawmakers enthusiastically supported the EISA renewable fuel program as a global warming policy when they thought it would rig the market in favor of corn farmers. Now they’re threatening to derail Obama’s cap-and-trade initiative if EPA follows the law they helped enact. 

Obama campaigned on a platform of CHANGE, but he may find that in Washington still, Pork Rules and Corn Is King.