Sunday, October 08, 2006

Ethanol: A Subsidy-Fueled Gold Mine

How do you make ethanol? By mixing corn with our tax dollars.

From an article in the
St. Paul Pioneer Press:

The ethanol industry wasn't born, it was built, one government act at a time.

During the 1970s energy crisis, turning corn into fuel seemed like a cool idea, but it wasn't economical. So the subsidies began. Then protection from foreign imports.

During the 1980s farm crisis, Minnesota officials hoped ethanol could lead a rural revival and offered subsidies so generous that farmers could build ethanol plants practically for free.

Still, ethanol struggled. So the 1990s brought laws encouraging ethanol use. Then laws requiring it. Then more laws, requiring more ethanol.

Today, at long last, ethanol has entered its golden age, thanks to three decades of government subsidies and the more recent run-up of oil prices. But if ethanol's fortunes have dramatically changed, ethanol politics have not. All across the Corn Belt, there's scant debate about whether ethanol needs more government help — only how much more to give.

"Ethanol was always seen as an 8-year-old kid that needed to be taken care of, but now it's a 27-year-old graduate student with a Ph.D. from Harvard that wants to live at home with mom and dad," said Michael Swanson, vice president and agricultural economist at Wells Fargo.


At 10/14/2006 12:47 AM, Anonymous Anonymous said...

The president of VeraSun recently claimed his company could make ethanol for $1.33/gallon. Brazil makes ethanol from sugar cane for $.90/gallon. There is a $.54/gallon tariff on ethanol imported from Brazil. Comparative advantage would lead us to buy Brazilian ethanol.

The original justification/rational/excuse for adding ethanol to gas was that it was an oxygenate and would reduce air pollution. That made a little sense, at least, when cars had carburetors.

Cars today have oxygen sensors, throttle body fuel injection, and computers. The oxygen balance no longer requires an oxygenate in gas but, of course, it's still there. Government mandates never keep up with technology.

Ethanol is a terrible thing to put in a car. It is corrosive, attracts water, and produces formic acid and formaldehyde, among other nasty pollutants when burned. Mileage is reduced because it has less energy than gas. Yuck.



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