Wednesday, April 09, 2008

Paul Krugman Comes Out Against "Demon Ethanol" in the NY Times. It's Now Official: Ethanol is a Scam

Paul Krugman in the NY Times, "Grains Gone Wild"

Where the effects of bad policy are clearest, however, is in the rise of demon ethanol and other biofuels. The subsidized conversion of crops into fuel was supposed to promote energy independence and help limit global warming. But this promise was, as Time magazine bluntly put it, a “scam.”

This is especially true of corn ethanol: even on optimistic estimates, producing a gallon of ethanol from corn uses most of the energy the gallon contains. But it turns out that even seemingly “good” biofuel policies, like Brazil’s use of ethanol from sugar cane, accelerate the pace of climate change by promoting deforestation.

And meanwhile, land used to grow biofuel feedstock is land not available to grow food, so subsidies to biofuels are a major factor in the food crisis. You might put it this way: people are starving in Africa so that American politicians can court votes in farm states.

OK, now that Paul Krugman's on board by coming out against ethanol, it's now official: Ethanol is a complete and total scam.

Anytime you have Paul Krugman agreeing on ethanol with such a diverse group as the
WSJ, Reason Magazine, the Cato Institute, Investor's Business Daily, Rollingstone Magazine, Christian Science Monitor, the New York Times, John Stossel, The Ecological Society of America, the American Enterprise and Brookings Institution, the Heritage Foundation, George Will, and Time Magazine, you know that ethanol has to be one of the most misguided public policies in U.S. history.

So who is left out there supporting ethanol? You sure won't find very many scientists, economists, policy groups, or editorial page contributors. But, ethanol has been very, very good to corn farmers and ethanol producers like Archer-Daniels-Midland (ADM), the largest producer of ethanol in the United States. ADM stock has quadrupled over the last five years, from about $10 to about $40 per share, and increase of 300%, while the S&P has only increased by about 50% during the same period (see chart above).


At 4/09/2008 10:25 AM, Anonymous Anonymous said...

Imagine common sense on ethanol from Paul Krugman!

The Chinese have a saying that if you wait by the river long enough, the body of your enemy will float by.

At 4/09/2008 2:54 PM, Blogger bobble said...

"So who is left out there supporting ethanol?"

george w bush. ethanol is the lone result of 7 years of bush/cheny energy independence "stategery".

At 4/09/2008 4:14 PM, Blogger thomasblair said...

Now's the time to start shorting ADM.

At 4/09/2008 5:44 PM, Anonymous Anonymous said...

ADM is one of the world's largest agricultural processors. Currently, there is a great deal of volume due to rumors about a takeover. Not exactly a good time to short sell.


Although GWB advocated ethanol in the name of oil independence, many jumped on the bandwagon. Only a handful of agricultural economists warned about the problems with using a food crop to produce fuel while everyone else was gung, environmentalists, farmers, politicians, etc. Both Obama & Clinton have voted FOR ethanol subsidies.

This blog has consistently had ardent ethanol supporters who have refused to acknowledge ethanol's adverse impact on food prices (see posting last thanksgiving on turkey prices for example), its lack of fuel efficiency, its use of water, and its overall negative impact on climate.

Even Paul Krugman came out in support of ethanol derived from sugar cane in 2007 which he now asserts causes environmental degradation.

At 4/10/2008 8:42 AM, Anonymous Anonymous said...

Sigh. Look, this isn't exactly news. He may not have made a big deal of it, but he came out against ethanol subsidies a year or two ago. Take a look at his archives. It was partially a crack at the Bush admin, but it was there.

At 4/10/2008 10:31 AM, Anonymous Anonymous said...

Yes, I know Krugman came out against subsidies for corn based ethanol. He also asserted in 2007 that ethanol made sense in the "tropics" and on this, he has changed his mind.

If I go back to the pre-Bush days, Krugman's earlier work was far more promising. Like many, Krugman seems to suffer from BDS, Bush Derangement Syndrome. Hopefully, he will recover once there is a change in administration.


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