Lose-Lose on Biofuels?

The American Magazine features an update on misguided ethanol and biofuel mandates, from a recent EPA report:

While the Environmental Protection Agency (EPA) analysis suggests that the switch toward renewables will decrease ammonia, carbon monoxide, and benzene, it also predicts “significant increases in ethanol and acetaldehyde emissions” and “more modest increases in nitrogen oxides, formaldehyde, particulate matter, hydrocarbons, acrolein, and sulfur dioxide.” Citing time constraints, the EPA did not do a full analysis of the net health effects of these emission profiles, but a reasonable assumption is that the detrimental health impacts from increased particulate matter will at least offset the health improvements from the predicted reductions in the other pollutants.

Supporters of the Energy Independence and Security Act of 2007 (EISA) also claimed that it will reduce greenhouse gases. Both Speaker Pelosi and then-President Bush said the bill will help reverse global warming. Indeed, much of the early enthusiasm for biofuels was based on the belief that their use would reduce greenhouse gases. It is true that burning biofuels results in less tailpipe emissions of greenhouse gases relative to burning petroleum. Yet this ignores the increase in emissions that results from the production of biofuels, especially the land use changes as farmers convert forest and grassland into cropland for biofuel production. An article published in Sciencemagazinein 2008 found that “corn-based ethanol nearly doubles greenhouse gas emissions over 30 years and increases greenhouse gases for 167 years.” Another article in Scienceconcluded that crop-based biofuels create a “biofuel carbon debt of 17 to 420 times more carbon dioxide than the greenhouse gas reductions that these biofuels would provide by displacing fossil fuels.”

Silly Senator, Corn is for Food!

ReasonTV video looks at the ethanol craze:

Ethanol, especially the corn-based variety, is bad for taxpayers, bad for consumers, bad for the environment, and horrible for the world's poor. In fact, even environmentalists are critical of ethanol subsidies these days. The ethanol craze has distorted markets and increased the price of food worldwide. The only people who still support ethanol subsidies are the ethanol producers—and politicians from both sides of the aisle. Together, they make sure the subsidies keep coming.

Texas Is Fed Up With Corn Ethanol

Texas Governor Rick Perry in the Wall Street Journal on why the EPA needs to suspend the mandate to produce more ethanol - which is, according to Perry and others, partly to blame for the spike in food prices (and economic losses tied to that).

Ethanol has also been shown to add to global warming, increase smog, and lead to water shortages.

State Personal Income and Ethanol Policy

The BEA issued their quarterly update of state personal income. Normally, my comments on these reports are limited to how Pennsylvania is lagging behind the national average (true again this time).

But another major finding stand out - dramatic changes in personal income from farming. The news release points out:

The unusually wide range of state growth rates is largely a consequence of rising grain prices. Corn prices jumped 22 percent in the first quarter, while wheat prices rose 18 percent and soybean prices 17 percent. This added 6.4 percentage points to personal income growth in North Dakota where the farm sector is predominantly crop production. At the same time, the higher grain prices, which raised expenses for livestock growers, reduced personal income by 1.0 percentage point in Arkansas where the farm sector is predominantly poultry.

The trend is even more obvious when looking at the state data by industry. Farm income declined 7.55% nationally and 15.43% in Pennsylvania. The change ranged from 240% growth in farm income in North Dakota to a 334% decline in Wyoming (from $58 million in income to $136 million in losses).

I've pointed out before how ethanol mandates and subsidies drive up crop prices - encouraging farmland to be used for fuel, rather than food (the latest BOX program features Andrew Moylan talking about this as well). Now we see what the consequences are for the overall economy and especially the farm community.

Biofuels Are Indefensible

Scathing editorial by the chairman of Nestle in the Wall Street Journal on the push for biofuels (including massive subsidies and mandates from government)

If there's one certainty, it is this: The production of biofuels has stimulated a massive, and destructive, reorientation of the world's agriculture markets. The U.S. Department of Energy calculates that every 10,000 liters of water produces as little as five liters of ethanol, or one to two liters of biodiesel. Biofuels are economical nonsense, ecologically useless and ethically
indefensible. This year, the U.S. will use around 130 million tons of corn for biofuels. This corn was not available as human food, nor as fodder to animals. Is this the right strategy, for a product that won't satisfy even a small percentage of our energy needs?

Who Gets Federal Energy Subsidies?

The Wall Street Journal has an article on who gets federal energy subsidies, based on a EIA report. The WSJ focuses most of the attention on electricity subsidies; as their headline notes the difference in subsidy per megawatthour - Wind ($23.37) v. Gas (25 Cents).

The discrepancy between ethanol and gasoline is equally disparate and fascinating, and given the role of ethanol in the global food price spike, the demonizing of subsidies for "Big Oil", and the call of Governor Rendell for state subsidies and mandates for ethanol. (Data can be found in the Executive Summary of the EIA report):

Big Farm whips Big Oil

Great editorial on how "Big Farm" companies dominate "Big Oil" as a special interest, having both "record profits" and government subsidies for ethanol in the wake of a global food crisis.

NRO Online has an article on ethanol mandates and subsidies, and why they are bad public policy.

And Insider Online adds Don’t Forget the Other Reasons Ethanol Is a Bad Idea.

Ethanol and Rendell

Many are calling for an end to ethanol mandates because of how they drive up food costs:

Aid workers and others contend diverting more than a a quarter of the U.S. corn harvest to make ethanol is making food much more expensive the world's poor. A leading agriculture research group said a moratorium on grain- and oilseed-based biofuels would help cut crop prices substantially.

"Our models analysis suggest that if a moratorium on biofuels would be issued in 2008, we could expect a price decline of maize by about 20 percent and for wheat by about 10 percent in 2009-10. So it's this significant," Joachim von Braun, heads of the International Food Policy Research Institute, told reporters in a briefing.

Meanwhile, Governor Rendell is calling on more mandates for ethanol use and taxpayer subsidies for producers. He also calls them "more cost-effective" - yet they need taxpayer subsidies to compete.

Read John Lott's commentary on ethanol, and check out our Policy Point on energy.

The Truth About Oil and Gasoline

API has produced a nifty primer on oil, gasoline, and other energy sources.

Among the interesting graphs: where does each dollar spent on gasoline go (pg 9 in the PDF file); who owns "big oil" (pg. 13); and where does US corn go (pg 26). On the latter, I was suprise not only at the percentage going to fuel alcohol (25%) but how little corn makes it to the dinner table as corn (less than 2% goes into "cereals and other").

Big Oil vs. Big Ethanol

Everyone in Pennsylvania (save the Amish, who are also unlikely to be reading this blog) must have heard or seen the Barack Obama, anti-"Big Oil" ad dozens of times (including the Tribune-Review who editorialized on it today).

Obama claims that he doesn't take money from oil companies, which is true because no one does. It is illegal for corporations to contribute to political campaigns, though FactCheck.org points out that Obama takes plenty from oil company employees. And as the Tribune-Review rightly points out, Obama's windfall profits tax won't reduce the cost of fuel or make us "energy independent", but would rather increase the price of gasoline and make us more reliant on foreign gasoline producers (we have written more on this issue here).

But Obama's frequent citation that he opposes tax cuts for oil companies but supports subsidies for "alternative fuels" is what really needs responding to. The 2005 energy bill did provide some tax credits for oil companies, but according to the CBO report (see page 17), was more than offset by tax increases on refineries. In contrast, the lion's share of tax credits went to "Renewable Energy and Alternative Fuels". In fact, the total taxpayer subsidy for ethanol in the US is estimated to be between $9 and $11 billion dollars.

As readers of this blog should be well aware by now, ethanol is bad for air quality, increases the cost of food and gasoline, increases water shortages, won't make us energy independent, and is a bad deal for taxpayers.

So which candidate will start denouncing "Big Ethanol"?

The Clean Energy Scam

Time Magazine blasts the ethanol craze that has politicians (including Governor Rendell) demanding more subsidies and mandates for biofuels than they already get (HT: Carpe Diem):

But 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. The U.N.'s World Food Program says it needs $500 million in additional funding and supplies, calling the rising costs for food nothing less than a global emergency. Soaring corn prices have sparked tortilla riots in Mexico City, and skyrocketing flour prices have destabilized Pakistan, which wasn't exactly tranquil when flour was affordable.

More on Ethanol.

How government makes things worse

Boston Globe piece by Jeff Jacoby covers the "Law of Unintended Consequences" of government intervention. Jacoby takes on government mandates and subsidies for ethanol:

But now comes word that expanding ethanol use is likely to mean not less CO2 in the atmosphere, but more. Instead of reducing greenhouse gas emissions from gasoline by 20 percent - the estimate Congress relied on in requiring the huge increase in production - ethanol use will cause such emissions to nearly double over the next 30 years. ...

Actually, that's not quite the bottom line. Jacking up ethanol production causes other problems, too. Deforestation. Loss of biodiversity. Depletion of aquifers. More ethanol even means more hunger: As more of the US corn crop goes for ethanol, the price of corn has been soaring, a calamity for Third World countries in which corn is a major dietary staple.

Jacoby is also critical of government's role in causing the subprime mortgage collapse:

The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent "redlining" - denying mortgages to black borrowers - by pressuring banks to make home loans in "low- and moderate-income neighborhoods." ...

Banks nationwide thus ended up making more and more subprime loans and agreeing to dangerously lax underwriting standards - no down payment, no verification of income, interest-only payment plans, weak credit history. If they tried to compensate for the higher risks they were taking by charging higher interest rates, they were accused of unfairly steering borrowers into "predatory" loans they couldn't afford.

Trapped in a no-win situation entirely of the government's making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.

Bio-Foolish Behavior

IBD Editorial on the lack of common sense in pushing for additional bio-fuel mandates and taxpayer subsidy:

In 2005, America used 15% of its corn crop to replace just 2% of its gasoline. Two new studies say use of biofuels will leave the world a warmer and hungrier place.

Ethanol: Another dose of snake oil?

Another article, from the Star-Tribune, on the hype of ethanol, which summarizes the issue pretty well:

1)Ethanol results in more carbon emissions - "By clearing forests and grasslands [to produce ethanol], they are releasing far more carbon dioxide than is saved by biofuels' lower emissions."
2)"Ethanol production also threatens our underground water aquifers"
3)"Ethanol production is contributing to a steep rise in global food prices"
4)Ethanol does not reduce dependence on foreign oil: "Ethanol production consumes nearly as much energy as it produces."
5)'James Eaves and Stephen Eaves, writing in Regulation quarterly, observe that "if we devoted 100 percent of all corn grown in the United States to producing ethanol, we could displace only about 3.5 percent of current gasoline consumption."'

So why does Governor Rendell continue to push subsidies and mandates for ethanol: "It's is an economic boon for corn farmers and ethanol producers. "

Study: Ethanol may add to global warming

Another study finds that ethanol and biofuels are not "green" and will only increase greenhouse gasses:

The study said that after taking into account expected worldwide land-use changes, corn-based ethanol, instead of reducing greenhouse gases by 20 percent, will increases it by 93 percent compared to using gasoline over a 30-year period. Biofuels from switchgrass, if they replace croplands and other carbon-absorbing lands, would result in 50 percent more greenhouse gas
emissions, the researchers concluded.

Not all ethanol would be affected by the land-use changes, the study said.

"We should be focusing on our use of biofuels from waste products" such as garbage, which would not result in changes in agricultural land use, Searchinger said in an interview. "And you have to be careful how much you require. Use the right biofuels, but don't require too much too fast. Right now we're making almost exclusively the wrong biofuels."

For some reason, Gov. Rendell continues to push more mandates on ethanol use and more taxpayer subsidies for ethanol produces.

HT: Tax Foundation Blog

The Ethanol Fallacy

Popular Mechanics on The Ethanol Fallacy:

So what should the government do? First off: no harm. Instead of trying to mandate specific technologies—and risk locking us into using the wrong one—Washington should create incentives to help the market choose the best approaches. One step would be to reward consumers for conservation: There are vast opportunities to make our homes, businesses and vehicles more efficient, and to make our economy stronger in the process.

Sounds reasonable enough (maybe because it sounds like what we've been saying). So what's the problem?

The idea is so appealing: We can reduce our dependence on oil—stop sending U.S. dollars to corrupt petro-dictators, stop spewing megatons of carbon into the atmosphere—by replacing it with clean, home-grown, all-American corn. It sounds too good to be true.

Sadly, it is. ...

Perhaps someday corn ethanol will prove itself a viable part of our energy mix. But corn liquor is powerful stuff, and it can make people do strange things. Let’s keep it out of Washington’s hands.

Leading Bioenergy Crops Bad for the Environment

An analysis in Science Magazine of a finds that the environmental impact of biofuels from corn, soy and other crops may be worse than fossil fuels. More from Reason Hit & Run.

I am curious as to whether Governor Rendell will not drop his push for ethanol mandates and his Energy Independence Fund borrowing - not because of this report, but because of other recent developments. His energy program and Cover All Pennsylvanians really are tailored to get him a cabinet appointed under Hillary Clinton; he might need a totally new set of policy proposals to fit into an Obama administration.

Ethanol Backlash

Wall Street Journal article on how Congress is rethinking the negative effects of subsidizing and mandating use of ethanol.

I don't usually call on the PA General Assembly to act more like Congress, but in this case, considering the costs and effects proposed ethanol mandates and taxpayer grants might be a good idea.

Biofuels Report: "No more Subsidies!"

Earth Track has released a report titled Biofuels - At What Cost? Government support for ethanol and biodiesel in the United States: 2007 Update.

The first recommendation of their study:

More public money is not the solution. Stop compounding the problem with ever more subsidies.

For those looking for another opinion, read the OECD Report on Biofuels - but the conclusions were largely the same.

Ethanol's Water Shortage

Wall Street Journal piece with more on the problems with ethanol mandates and subsidies:

Writing in Science magazine, Renton Righelato and Dominick Spracklen estimate that in order to replace just 10% of gasoline and diesel consumption, the U.S. would need to convert a full 43% of its cropland to ethanol production. The alternative approach -- clearing wilderness -- would mean more greenhouse gases in the atmosphere than simply sticking with gasoline, because the CO2-munching trees cut down to make way for King Ethanol absorb more emissions than ethanol saves.

Slowly but surely, these problems are beginning to alert public opinion to the huge costs of force-feeding corn ethanol as an energy savior. The ethanol lobby is still hoping it can keep all of this under wraps long enough to shove one more big mandate through Congress, but the Members need to know the problems they'll be creating.