In an op-ed in the Washington Post, Lester Brown and Jonathan Lewis seem overly generous in their interpretation of the motivations for the now-obvious-failure of ethanol policy in the United States:
Food-to-fuel mandates were created for the right reasons. The hope of using American-grown crops to fuel our cars seemed like a win-win-win scenario: Our farmers would enjoy the benefit of crop-price stability. Our national security would be enhanced by having a new domestic energy source. Our environment would be protected by a cleaner fuel. But the likelihood of these outcomes was never seriously tested, and new evidence has shown that the justifications for these mandates were inaccurate.
I must have missed the analysis indicating that ethanol was intended to create crop price stability. I thought the hope was always that the policy would push food prices up. Isn’t that how increases in demand work?
Also, the national security argument for ethanol always struck me as false. We import most of our oil from Canada and Mexico, and with oil a fungible product in an international market, it is hard to see just how some other nation might wield oil-withholding as an offensive threat.
Possibly the move to increased ethanol could have lead to environmental improvements, but biofuel mandates are a bad way to implement policy even if it were true that they produced benefits. As a practical matter, the environmental arguments for ethanol have always been mostly a smokescreen. Ethanol policies were never popular in Iowa because of their potential for improving air quality in Los Angeles or New York City. “Food-to-fuel mandates” always smelled like political pork to me, so I guess I’ve never had a generous opinion of the motives of its political supporters.
(In fact, there is some danger that all ethanol technologies will be unfairly tainted by an association with current failed policies mostly intended to drive up corn prices. Supporters of non-corn-based alternatives for making ethanol may want to distance themselves from the pork-barrel politicking of the agribusiness lobby.)
Of course, Brown and Lewis are promoting a change in policy, for which the support of politicians is needed. I suppose, purely as a rhetorical device, it is useful to not describe the targets of your appeal as a bunch of …. Well, it is probably useful not to finish that sentence.
The Brown and Lewis editorial does bother me in parts. Does most of the energy used to make ethanol actually come from coal? I would have guessed oil for fuel and natural gas for fertilizer. Also, like many people (myself included), Brown and Lewis are eager to blame world-wide high food prices on ethanol policy, but most of the analysis I’ve seen in the newspapers is thin. The argument makes a lot of sense, but there are other obvious factors (high fuel costs, increasing world demand for meat consumption, increasing world demand for food generally), so it would be nice to see a careful sorting out of the contributing factors.
The conclusion, however, is good:
[I]t is impossible to avoid the conclusion that food-to-fuel mandates have failed. Congress took a big chance on biofuels that, unfortunately, has not worked out. Now, in the spirit of progress, let us learn the appropriate lessons from this setback, and let us act quickly to mitigate the damage and set upon a new course that holds greater promise for meeting the challenges ahead.
(HT to Tim Haab at Environmental Economics)