April 18, 2008

April 18, 2008 | Commentary on Energy and Environment

Ethanol: The political fuel

Can it be that not everything green is good? Take ethanol. It's now under attack from its old buddies, the environmentalists. Some other former friends are also forsaking it.

This could portend a crash of a high-flyer. Once upon a time, ethanol was small business. Thanks to ever-growing government subsidies, it's become super-sized. The runt of the energy litter has grown into a corn-fed Goliath, crushing assaults from those who opposed the multi-billion dollar ethanol subsidy on principle.

But now this giant may be taken down … not by a sling-bearing shepherd, but by one of the Four Horsemen of the Apocalypse - Famine.

Ethanol has diverted so much corn from the world food supply that it has produced hunger and even food riots where food is no longer available or affordable. And some now say that ethanol is actually (gasp!) contributing to global warming.

It's been interesting to watch others "discover" the issue that many of us have long understood ("Ethanol policy - what a turkey!" and "Ethanol policy threatens to starve the world").

Even the New York Times wrote this week:

... a reaction is building against policies in the United States and Europe to promote ethanol and similar fuels, with political leaders from poor countries contending that these fuels are driving up food prices and starving poor people. Biofuels are fast becoming a new flash point in global diplomacy, putting pressure on Western politicians to reconsider their policies.

The all-powerful ethanol lobby also wasn't happy when Time magazine's recent cover labeled their efforts "The Clean Energy Scam." Time, however, emphasized another consequence of biofuels even above the food issue, namely the rain forests:

An explosion in demand for farm-grown fuels has raised global crop prices to record highs, which is spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon at an increasingly alarming rate.

Then TIME discussed the other negatives:

... several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: It's dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline.

Meanwhile, by diverting grain and oilseed crops from dinner plates to fuel tanks, biofuels are jacking up world food prices and endangering the hungry. The grain it takes to fill an SUV tank with ethanol could feed a person for a year. Harvests are being plucked to fuel our cars instead of ourselves.

As more and more reporters pounce on the story of food vs. fuel, apologists for ethanol highlight other reasons why food prices are undergoing the biggest increase in 17 years and reaching all-time highs. Even while admitting that ethanol will require at least one-fourth of this year's U.S. corn crop, Agriculture Secretary Ed Schafer told CNBC that energy costs are a bigger factor than ethanol.

Many disagree. An advisory panel to the European Union echoes recent statements from the World Bank, the United Nations' commission on hunger and many others that the diversion of food to ethanol is causing world hunger, as illustrated by recent food riots across the globe.

Some in Congress are repenting of their recent fivefold increase in the ethanol subsidy. Rep. Jim McGovern, D- Mass., said he now realizes that the new law is a mistake, because Congress did not anticipate the impact on food costs. Congress should reconsider the new law, he suggested.

Ethanol decisions have always been based mostly on politics, not economics. What began as a farm subsidy has been an American success story - of political maneuvering. The money from taxpayer subsidies was plowed back into the hiring of more lobbyists and clout in Washington, plus campaign contributions for friends. This enabled a push for larger subsidies, which provided the means to hire more lobbyists, more clout and make larger contributions, and so forth.

Starting with incentives created in 1978 after the Arab oil embargo, the U.S. subsidy grew to $3.75 billion a year, until last December's new energy law raised it fivefold to over $18 billion (51 cents a gallon for 36 billion gallons of ethanol).

The subsidy effort has been strongly bipartisan. Congressional leaders of both parties have gladly raked in cash from the ethanol lobby. The primacy of Iowa's caucus for picking a president also cowed many candidates into backing ethanol, lest they lose votes in that major corn-growing state.

Until now, those who spoke against ethanol were often accused of suspect motives themselves. The pro-ethanol Renewable Fuels Association expressed prompt outrage at a speaker who told last week's International Oil Summit in Paris:

Staple food crops such as soybeans, sugar and corn are being produced not to feed humans but to fuel cars, trucks and now even airplanes. As a result, the price of food has been soaring; for example, corn prices went from under $2 per bushel in 2005 to $6 in 2008 and rising. But despite the ethanol boom, petroleum prices remain high and energy consumers are no more secure than they were before.

... biofuel production is not contributing positively to environmental protection, nor is it reducing global emissions of greenhouse gases as anticipated. In fact, the opposite might be the case. Forests in many parts of the world, which play a major role in reducing CO2 by acting as carbon sinks, are being cleared to produce biofuel crops, which have a far smaller capacity to absorb carbon.

Who said that? It was Saudi Arabia's oil minister, Ali Al-Naimi.

But so long as ethanol requires a 51-cents a gallon subsidy (which is $28 a barrel) just to compete with $113 a barrel oil, there's little prospect that the Saudis are afraid of the competition. The ethanol lobby generates far more power in Washington than it does on the nation's highways. Compared to Saudi oil, its energy production remains a drop in the barrel.

And a mighty expensive drop, too!

Ernest Istook is recovering from serving 14 years in Congress and is now a distinguished fellow at The Heritage Foundation.

About the Author

Ernest Istook Distinguished Fellow
Government Studies

Related Issues: Energy and Environment

First appeared in World Net Daily