Will Improvements In Ethanol Production Undo Political Support?

Michael Giberson

An editorial in today’s Washington Post hints at trouble on the horizon for ethanol. Ethanol has long been the product of Midwestern corn, Washington D.C. style pork, and a questionable environmental heritage, with the middle element of that troika propping up the enterprise. Now, however, the long-awaited “next generation” of ethanol, ethanol produced from grasses or other raw materials, may help take the enthanol-production business nationwide.

But if ethanol can be produced from Washington state wheat stalks or New England biomass or Lousiana sugar cane wastes, it is no longer a way to pander to corn-state politicians. The new technology threatens to undo the political calculus of concentrated benefits and diffuse costs that energizes pork-barrel politics. The question is, will the next generation of ethanol be good enough to succeed despite the forthcoming loss of political interest?


13 thoughts on “Will Improvements In Ethanol Production Undo Political Support?

  1. For the life of me, I cannot see how NOT taxing Ethanol is a subsidy, pork etc. It is a tax break, not a subsidy. I have very little reason to think that the federal government needs to tax much more of anything.

    Doesn’t it make some sense to NOT tax renewable energy sources in the USA? Given that the USA is paying something like $100 Billion per year to provide logistical security for Mideast Oil, why not let the consumers who want that oil, pay for it?

    JBP

  2. It’s a subsidy because certain taxes are not just forgiven on the ethanol fraction, they’re forgiven on the entire amount of a 10% ethanol blend.

    Further, ethanol isn’t produced renewably.  Each BTU of ethanol is produced with about 0.8 BTU of fossil fuel, according to its proponents.  It’s planted, cultivated and harvested with petroleum diesel and distilled with propane (petroleum) or natural gas (also in short supply).

    I forget the exact amount of the subsidy, but the figure 86 cents/gallon (8.6 cents / 10%) sticks in my mind.  If that’s true, we’re paying about $4.30/gallon in subsidies for the energy actually created; the rest is just transformed fossil energy.

    If we want to promote renewable motor fuels, there are much better ways to do it.  Ethanol isn’t about energy, it’s about pork.

  3. It’s a subsidy because certain taxes are not just forgiven on the ethanol fraction, they’re forgiven on the entire amount of a 10% ethanol blend.

    Further, ethanol isn’t produced renewably.  Each BTU of ethanol is produced with about 0.8 BTU of fossil fuel, according to its proponents.  It’s planted, cultivated and harvested with petroleum diesel and distilled with propane (petroleum) or natural gas (also in short supply).

    I forget the exact amount of the subsidy, but the figure 86 cents/gallon (8.6 cents / 10%) sticks in my mind.  If that’s true, we’re paying about $4.30/gallon in subsidies for the energy actually created; the rest is just transformed fossil energy.

    If we want to promote renewable motor fuels, there are much better ways to do it.  Ethanol isn’t about energy, it’s about pork.

  4. So again, a tax break is being characterized as a subsidy. For the life of me, witholding money from the Federal Government must be one of the best economic growth measures anyone could imagine.

    If all this stuff is in short supply, wouldn’t the price of fuel go up?

    It is rather simple to take total number of gallons of fuel produced from an acre of land and divide it by the total number of gallons of fuel required to farm an acre of land. The net result is about 40 gallons output fuel per gallon of input fuel. The input figures are a bit fuzzy, but the math is really simple.

    Pork is providing multi billion $ logistics support for Mideast Oil. Not taxing renewable fuels is good economic policy.

    JBP

  5. So again, a tax break is being characterized as a subsidy. For the life of me, witholding money from the Federal Government must be one of the best economic growth measures anyone could imagine.

    If all this stuff is in short supply, wouldn’t the price of fuel go up?

    It is rather simple to take total number of gallons of fuel produced from an acre of land and divide it by the total number of gallons of fuel required to farm an acre of land. The net result is about 40 gallons output fuel per gallon of input fuel. The input figures are a bit fuzzy, but the math is really simple.

    Pork is providing multi billion $ logistics support for Mideast Oil. Not taxing renewable fuels is good economic policy.

    JBP

  6. Since you seem to be actively attempting to misunderstand this, I’ll try to illustrate with a better example.

    Suppose I make ethanol using corn.  In the process of making a gallon-equivalent of ethanol, I use a half-gallon of diesel fuel and three-tenths of a gallon-equivalent of natural gas.  For this I am rewarded with a tax cut of 86 cents per gallon-equivalent of my product, over four dollars per gallon-equivalent of energy I actually created.

    Suppose instead that I make fuel blend of heating oil and “bio-oil” from pryolized waste wood, a 50:50 mix which happens to be the highest fraction that runs well in an engine.  For putting un-taxed diesel into a road vehicle I’d incur heavy fines and possible jail time for tax evasion.

    If we are going to give breaks to renewable fuel producers, we should give breaks to ALL of them and ONLY on their net productivity rather than their “laundered” fossil fuels.

  7. Your argument is completely plausible. The numbers are more like 40 gallons of output :1 gallon of input, but I understand your argument.

    Just don’t mix tax breaks and subsidies. They are two different things. Subsidies cost the government. Tax breaks save people money. Completely different concepts.

    JBP

  8. Well, I have checked it.

    I called two farmers I know, and asked for them to compute their total input of fuel vs. fuel equivalent of corn produced.

    The calculation is really easy. The number came out to 40:1 and 42:1. So I called it 40:1, to be on the conservative side.

    I am not convinced that the USDA can perform short division, without a multi million $ grant to study the workings of a calculator.

    I would be happy to give you the raw data from a few farmers, or you could gather it yourself.

    JBP

  9. Would JBP be, perhaps? a winger in full standing? Anuway, WE have elected to pay for our roads thru gas taxes. We ARE falling behind (seemingly since Reagan went on the military spending binge) and now have some half trillion of long delayed maintenance to be done.

    As an aside it is a shame that Bushy did not use some of “the surplus” to address this problem as it creates jobs at all levels and across the nation. Once done “WE” then have on OUR asset ledger serviceable roads in good condition which will pay dividends from expediting freight to, one hopes, lessening the 45,000 who are killed each year on them and gawd only knows how many are injured or maimed for life to further burden our medical and social services.

    Now I DO understand that the Winger simply thinks that any money taken by taxation is money wasted, or that “WE” can just add a bit more to our HUGE and Soaring D E B T. But….. for a moment try to imagine that ethanol is NOT an Archer Daniels Midland scam aided by hungry farmers who get less than $2 for a bushel of corn. Let’s imagine that it was actually viable and were ALL of our suitable farmland planted with corn and it powered our cars “tax free” WHERE do you “feel” you would get the funds to make any road repairs or upgrades?

    Cheers! and if you’ve time please give me some idea of how the wingie mind works, OK? Jack

  10. Would JBP be, perhaps? a winger in full standing? Anuway, WE have elected to pay for our roads thru gas taxes. We ARE falling behind (seemingly since Reagan went on the military spending binge) and now have some half trillion of long delayed maintenance to be done.

    As an aside it is a shame that Bushy did not use some of “the surplus” to address this problem as it creates jobs at all levels and across the nation. Once done “WE” then have on OUR asset ledger serviceable roads in good condition which will pay dividends from expediting freight to, one hopes, lessening the 45,000 who are killed each year on them and gawd only knows how many are injured or maimed for life to further burden our medical and social services.

    Now I DO understand that the Winger simply thinks that any money taken by taxation is money wasted, or that “WE” can just add a bit more to our HUGE and Soaring D E B T. But….. for a moment try to imagine that ethanol is NOT an Archer Daniels Midland scam aided by hungry farmers who get less than $2 for a bushel of corn. Let’s imagine that it was actually viable and were ALL of our suitable farmland planted with corn and it powered our cars “tax free” WHERE do you “feel” you would get the funds to make any road repairs or upgrades?

    Cheers! and if you’ve time please give me some idea of how the wingie mind works, OK? Jack

  11. Would JBP be, perhaps? a winger in full standing? Anuway, WE have elected to pay for our roads thru gas taxes. We ARE falling behind (seemingly since Reagan went on the military spending binge) and now have some half trillion of long delayed maintenance to be done.

    As an aside it is a shame that Bushy did not use some of “the surplus” to address this problem as it creates jobs at all levels and across the nation. Once done “WE” then have on OUR asset ledger serviceable roads in good condition which will pay dividends from expediting freight to, one hopes, lessening the 45,000 who are killed each year on them and gawd only knows how many are injured or maimed for life to further burden our medical and social services.

    Now I DO understand that the Winger simply thinks that any money taken by taxation is money wasted, or that “WE” can just add a bit more to our HUGE and Soaring D E B T. But….. for a moment try to imagine that ethanol is NOT an Archer Daniels Midland scam aided by hungry farmers who get less than $2 for a bushel of corn. Let’s imagine that it was actually viable and were ALL of our suitable farmland planted with corn and it powered our cars “tax free” WHERE do you “feel” you would get the funds to make any road repairs or upgrades?

    Cheers! and if you’ve time please give me some idea of how the wingie mind works, OK? Jack

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