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The Ethanol Boondoggle
by Pete Geddes
The Ethanol Producers and Consumers met this week in Whitefish. If you had
attended you would have seen the political equivalent to the law of gravity at work. Here it is: Well-off, well-organized groups use government to transfer
wealth and opportunities from the poorly organized and less well off to
themselves.
Both Republicans and Democrats use government as an engine of plunder to
reward constituents and perpetuate incumbency. Indeed, UCLA economist Walter Williams considers most federal government activities legalized theft.
If you think this is too harsh consider this test, proposed by French
economist Frederic Bastiat (1801-1850). In his book The Law, Bastiat wrote:
“See if the law takes from some persons what belongs to them, and gives it
to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”
The ethanol lobby perfectly illustrates Bastiat’s principle. The Senate recently passed an energy bill that mandates nationwide ethanol use as an “oxygenated” fuel additive. The Clean Air Act requires additives to gasoline to reduce air pollution problems. MTBE, the current additive, is being phased out because it pollutes drinking water.
Ethanol is the only legal alternative. The ethanol lobby manipulated the political process to their favor. The result will hurt the environment and American taxpayers. Here’s how:
Most ethanol is made from Midwest corn. Hence, it’s not surprising the region’s congressmen and their agribusiness constituents support this mandate. Ethanol producers, led by Archer Daniels Midland, would have us believe ethanol will increase U.S. energy independence, clean up the environment, and provide new markets for farmers. These are lies.
Both the Environmental Protection Agency and the National Academy of Sciences reported that adding ethanol to gasoline at best will have no effect on air quality and could even make it worse.
Pollutants in automobile emissions have been dropping for decades and are
now only 5 percent of their 1960s levels. Most of the improvement is due to
technological innovations, i.e., better emissions equipment and cleaner-burning engines. Further, fuel-injection systems (standard equipment since the early 1980s) eliminate the need for oxygenated fuels.
Adding oxygenators to gas to reduce carbon monoxide made sense 30 years ago.
However, for cars built since 1983, oxygenated fuels are obsolete and pointless.
A study last year by Cornell University scientist David Pimentel highlighted
another problem. Most replacements for gas—including ethanol—have to be
manufactured. It turns out this process is both energy-intensive and expensive. Pimentel’s analysis showed that it takes about 70 percent more energy to produce ethanol than the resultant ethanol yields. The additional energy comes from, you guessed it, fossil fuels.
Pimentel found it costs $1.74 to produce a gallon of ethanol, twice that for
gasoline. He notes that’s why “fossil fuels—not ethanol—are used to produce ethanol.... Growers and processors can’t afford to burn ethanol to make ethanol.”
Unfortunately, taxpayers will make up the difference in the form of subsidies and higher fuel prices of 4 to 10 cents per gallon. Further, since ethanol can’t be sent through pipelines, transportation costs will make it even costlier on the East and West coasts.
There are huge payoffs for finding the “miracle fuel” (i.e., one that is both clean and cheap). As yet, no one, nowhere has found it. We should be highly skeptical of the ability of government-funded research to pick winners in the quest for cleaner energy.
Indeed, the track record of federal R&D spending is so bad that the liberal
Brookings Institution published a study titled “The Technology Pork Barrel.”
Federal “investments” in synthetically produced petroleum, nuclear power, and alternative fuels all suffer from the same pathologies.
A former President of MSU had a red and white bumper sticker prominently
displayed on the wall behind his desk. Its message was simple—”Help Montana
Agriculture: Eat an Economist.”
This is because 30 years ago an MSU economist demonstrated it would take
well over $1.00 in subsidies to increase the price of a bushel of Montana wheat by less than a dime. The Ethanol Producers and Consumers of course, have not invited a competent, independent economist to their program.
is Executive Vice President of FREE.