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March 12, 2007

The Ethanol Boondoggle Takes Food From Poor Mexicans' Mouths; Appropriators Larding Up Defense Spending Bill With Agricultural Subsidies

$20 billion in a must-pass defense appropriations bill has nothing at all to do with defense, unless there's some Al Qaeda threat against the storage of peanuts and similar concerns.

How bad a boondoggle is ethanol? Well, the most charitable analysis suggests that it 75% of the energy of a litre of ethanol is consumed in just making the stuff. And some analysts think it's more than 100% -- that is, it takes more energy to create a litre of ethanol than is actually present in the finished product of a litre of ethanol.

Horrid, world-rending gasoline, on the other hand, consumes only 6% of the energy in the finished product in order to produce the stuff.

And of course corn used for ethnol production is corn not used for food production. Even at the minor levels of ethanol production we have now, that's causing some perfectly-predictable unintended consequences:

Making ethanol is profitable when oil is costly and corn is cheap. And the 51 cent-a-gallon federal subsidy doesn't hurt. But oil prices are off from last year's peaks and corn has doubled in price over the past year, from about $2 to $4 a bushel, thanks mostly to demand from ethanol producers.

High corn prices are causing social unrest in Mexico, where the government has tried to mollify angry consumers by slapping price controls on tortillas. Lester R. Brown, president of the Earth Policy Institute, predicts food riots in other major corn-importing countries if something isn't done.

Slightly more energy-efficient than corn-based ethanol is sugar-cane based ethnol, but the moronic US subsidy system keeps cane sugar too expensive to be used as fuel. Latin American countries are using sugar for fuel, but, in a typical governmental Catch-22, such fuel is slapped with a 54-cent-per-gallon tarrif, making it, once again, too expensive as a fuel.

Condi Rice just signed an agreement with Brazil making cane ethanol an internationally traded commodity, which may be a first step to permitting cheaper (though not cheap) cane ethanol to begin being purchased in America.

The Economist sees this entirely as win-win-win. Cheaper fuel for America, less dependence on foreign sources of fuel (well, less dependence on the foreign suppliers we're most tweaked by), an explosion of wealth in Latin America, and even less illegal immigration to America, as Latin American laborers find decent-paying jobs nearer to home. (To be fair, however, the Economist always sees increased international trade as win-win-win.)

Thanks to Larwyn for all of that. Who knew she was such a bear about agricultural subsidies and ethanol policy?

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posted by Ace at 04:05 PM

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