Ethanol for Grown-ups

Michael Giberson

For a long time in the United States, ethanol has been a fringe act, a political plaything, a way for Congress to subsidize the income of well-connected agribusinesses without thinking too hard. Now, ethanol has become a member of a small cluster of “ideas” that are supposed to help us get on down the road into a future in which the petro-terrors of global warming and lack of energy independence threaten us at every turn. It’s time for the grown-ups to take a look at ethanol policy.

I don’t mean to insult all the folks out there doing real work with ethanol, whether it is engineering biofuels or scouring the data to figure out the net impact on carbon emissions, or what have you. The grown-ups have been out there, but so long as ethanol was a fringe act no one had to pay attention.

As Bush travels to Brazil this week, it is widely assumed the topic of the U.S. tariff on ethanol imports will come up. A (high) tariff is a no brainer if ethanol is just a Senator’s political slop for donors in the home district. And a zero tariff is a no brainer if, like me, you tend toward free trade. But a high tariff on imports while subsidizing agribusiness seems like the kind of political silliness that should be left behind now that ethanol is center stage.

A New Scientist article provides more of the goods on ethanol for grown-ups: research on the carbon footprint, prospects for genetically engineered yeast to boost yeilds, the food vs. fuel arguments. Things grown up policy people should know about.

By the way, it isn’t just federal policymakers that need to grow up. All this state buffoonary about making Washington state energy independent, or North Dakota, or where ever. I say start small. When Seattle can manage to become “coffee independent”, then maybe I’ll trust Washington state politicians to successfully tackle the harder and more important question of managing energy supplies.

A prime exhibit of the need for local politicals to wake up and stop smelling the grain alcohol comes from Cumberland County, North Carolina, which has awarded $875,000 to build a ethanol plant to what appears to be no more than a shell company operated out of a couple’s house who have no particular experience in building anything. (See this article, via WSJ’s Energy Roundup and R-Squared Energy Blog.)

2 thoughts on “Ethanol for Grown-ups

  1. Mike,

    Love this blog. The Cumberland County story is a peach. And I totally agree with the general drift of this post.

    But do you really reckon policy people should concern themselves with trying to calculate hypothetical, generalised carbon-footprints that will never reflect the details of specific circumstances, or should we internalise the carbon externality and leave it to the market to determine the most efficient ways of responding to that cost?

    Should policy-makers be considering what interested parties tell them about the prospects for a particular technology (GE yeast or anything else)? Why would they need to know, if they were going to rely on markets rather than picking winners? It’s for the businessmen to make those judgments, not the politicians, isn’t it?

    Do politicians need to take a position in the food vs fuel debate, other than not skewing the market (apart from internalising externalities)? Isn’t that what the market is for – to discover the balance of people’s preferences?

  2. Bruno, I’m all for internalizing the externalities but implementing the supporting policies does require some understanding of how the world works. You know it is only relatively recently that carbon dioxide emissions were conceived as as contributing to external effects.

    So part of my intent is to suggest that people making policy (or otherwise contributing to policy debates) ought to be aware of these broader considerations. In general I agree that we don’t want government picking winners — i.e. choosing the technologies by which policy goals are attained.

    I mentioned “food vs. fuel” in part because the New Scientist article brought it up, but also because it helps put in perspective the interconnectedness of people through markets and politician ought not think that ethanol policy can be a discrete gift to agribusiness without unintended consequences.

    But here, too, I don’t want politicians to pick winners in the food vs. fuel debate, because it would only lead to stupid rules like “no more than 40 percent of a state’s corn production can be used for ethanol,” and other ad hoc restrictions.

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