Strange Bedfellows Fight Ethanol Subsidies

Reader Actual Reality sends us to Business Week for a tale of the strangest political coalition to be seen in a while — greens, hippies, libertarians, and livestock producers uniting to get ethanol subsidies reduced or killed. The demand for the alternative fuel is driving up corn prices and having big impacts on other parts of the economy. Not many other issues are capable of getting left-leaning economist Paul Krugman and the Cato Institute on the same side.

Business advice

[91degrees]

But he worries that they'll face mounting pressures in the industry, particularly because of the soaring price for corn, which the business depends on to feed the livestock. In the past year, corn prices have doubled as demand from ethanol producers has surged.

Start growing corn then.

Lobbies not environment

[edwardpickman]

This was never about reducing oil dependence it was about subsidizing one of the most powerful lobbies the corn lobby. Corn alcohol requires large amounts of energy to produce so it actually increases the use of coal and oil. The current administration is also fanatical about hydrogen because most hydrogen is produced from fossil sources. Yes it can be produced by electrolysis from wind or solar but it won't be. It's like "clean coal". Yes coal can be burned more cleanly and the CO2 sequestered but there isn't a single clean coal plant in operation. There are better sources for alcohol but they lack powerful lobbies.

Allow me to explain

[kahei]

Nobody is trying to end fossil-fuel dependence here. Nobody is subsidising ethanol production, except in a rather technical sense. If people wanted to end fossil-fuel dependenence and make ethanol production easier, they could fund, subsidize, and promote any number of solutions.

What IS going on here is another huge subsidy for the very powerful corn industry. This particular subsidy is wearing a paper hat that says 'ethanol', which is enough to fool:

0% of people who know anything about energy markets.
25% of lawmakers
95% of the public
100% of all the libertarian slashdotters who have already jumped in and gone 'OMG teh socialism sux lol!!'

Now, repeat after me: ETHANOL is one thing, ETHANOL FROM NORTH AMERICAN CORN is another thing. You want energy, subsidize the former. You want money for corn growers, subsidize the latter.

Let's not use alternative fuel...

[endersshadow7]

...just because it's alternative. Ethanol has the only advantages that it's not oil and that it's renewable. Environmentally and financially it's foolish, as a previous poster pointed out. But one shouldn't be all that surprised to find us Libertarians aligned with anybody. It's the Party of Principle for a reason: Libertarians do their best to stay out of partisan politics and make public policy about what's actually best (gasp!).

In this case, Libertarians are against any and all forms of government subsidies, and it's rather obvious why if we're absolutely pro-free market. Nobody should read this article and say, "Wow, that's surprising that they're working together!" Rather, they should read it and really wonder why these different groups oppose subsidies for ethanol and whether or not ethanol is a viable choice for an alternative fuel.

After all, alternative != better.

Re:Libertarian speaking here

[Undertaker43017]

Why stop at farm subsidies? Lets get rid of all corporate subsidies. Governments shouldn't be giving tax payer money to any corporations, if corporations can't make it on their own, then maybe their business plan wasn't as good as they thought.

Re:Consumer Reports

[GundamFan]

That's really beside the point isn't it?

I think everyone getting screwed here is entitled to complain, and especially since the US and Brazil seem to be looking to form an ethanol monopoly not to mention use a more expensive and potently more polluting in the way of exhausted farm land and what ever they plan to burn to heat the still.

If we aren't careful we will end up slaves to new masters and little more.

Re:Libertarian speaking here

[dylan_-]

Why not lobby to drop all farm subsidies, not just the ones for ethanol?

Because food is cheaper to import than produce locally so all the farms would go out of business. And you don't want to depend on other, potentially unstable, countries for food.

Re:Business advice

[TykeClone]

Cattle do just fine with distillers grains - the leavings after ethanol is made. Hogs and poultry don't - they like corn.

I think that we may see a shift in the production of livestock in the United States. Much of the existing beef production takes place outside of Iowa, while much of the ethanol production takes place within the state. Iowa is also a major producer of pork - I expect that many of those operations will switch to feeding out cattle instead of hogs - especially if they can get distillers grains at a decent price compared to the corn that hogs require.

Re:Lobbies not environment

[jonwil]

Remember also that an increasing chunk of that corn is Genetically Modified corn.
And even where farmers don't want to grow GM corn, companies like Monsanto are using dirty tricks to get them to grow the GM corn anyway. And if that doesn't work, Monsanto heavies raid the farm and "find" GM corn that the farmer hasn't paid for (some of the things Monsanto heavies do would probably make the BSA look good)

Why do you think the US is the only country in the world that uses corn sweetener instead of sugar (beet or cane) in Coca-Cola?

Re:Allow me to explain

[CapsaicinBoy]

Now, repeat after me: ETHANOL is one thing, ETHANOL FROM NORTH AMERICAN CORN is another thing. You want energy, subsidize the former. You want money for corn growers, subsidize the latter.

Quoted for truth.

This is why a petroleum tax is the way to go. Government sucks at picking the winning technologies whereas markets are quite good at it. The solution? Ditch technology specific subsidies in favor of technology agnostic user fees that incentivize the desired goal, namely reduced petro use.

Now most people don't like taxes, but really it is the fairest way to let the market select the best renewable technology. If you tax petroleum, then biodiesel, ethanol, wind/pv plug-in HEVs, and transit all compete via market forces.

And before the libertarians get their panties in a bunch, we don't have anything close to a free market currently. The market is, and has been, slanted toward petroleum via foreign, domestic and tax policy for the the last 50-75 years. I'm just suggesting we use a petroleum tax to level the field a little.

Re:Libertarian speaking here

[rlp]

And you don't want to depend on other, potentially unstable, countries for food.

Or energy

Deceptive disagreement

[swb]

While I occasionally enjoy Krugman's columns, it's only window dressing that Krugman and the Cato institute are on opposite sides. They really represent a duopoly of opinion that relies on "the other side" to give "their side" some sort of validity.

Periodic ideological alignment is necessary to demonstrate that both "sides" are willing to engage in creative problem solving and aren't just part of an ideological game.

Re:Business advice

[Kohath]

Yeah, because "Ethanol subsidies" are so much different than "farm subsidies".

How about if farmers just get off the welfare?

Re:Business advice

[got2liv4him]

If you really want to fix things, start controlling the number of people on the planet. We're eating up resources at a prodigious rate, technology is helping, but not fixing it.

Brilliant, let's start with you and yours and all the other who feel like this is a good idea!

Re:Uh,...., left leaning Paul Krugman?

[bmajik]

Haha.

I was going to comment on this also.. but in a slightly different way.

Are there any left-leaning economists? Economics is the study of choice, and the left hates choice. Economics is a science, with definite consequences when those who choose to ignore its principles craft policy. Willful igorance of economics is Leftist Politics 101. (Of course, the right has been following their lead for a while now :/)

Don't forget the water

[Anonymous Coward]

Irrigation water and water for production of the ethanol is soon to be in short supply in many of these regions (of the US). Many of them teeter on the edge of drought every year, and the aquifers, stable for many years, are being depleted at a rapid rate once the stills (ethanol plants) are built.

This is on top of the propane used to make the fertilizer (corn is very hard on the soil), the natural gas to cook the mash, the electricity to turn the big drums, the diesel to run the tractors and combines, the diesel or gas to truck the corn to the still and transport (by train usually) the ethanol to (close to) the point of sale (it has to be mixed in locally, not at the refinery).

All in all, it makes slightly more sense than just paying the farmer not to grow the corn. It makes no sense whatsoever compared to bio-diesel (beans fix nitrogen), ethanol from sugar cane, or even burning through the cheap gas now while bringing more nuclear on line.

Re:Uh,...., left leaning Paul Krugman?

[MarkPNeyer]

Krugman changed after bush got elected, and he's now suffering from bush derangement syndrome. He's no longer nearly as reasonable as he once was.

From the wikipedia article you apparently read:

"A November 13, 2003 article in The Economist [2] reads: "A glance through his past columns reveals a growing tendency to attribute all the world's ills to George Bush...Even his economics is sometimes stretched...Overall, the effect is to give lay readers the illusion that Mr Krugman's perfectly respectable personal political beliefs can somehow be derived empirically from economic theory."

"Blogger Ken Waight uses a data analysis methodology at his Lying in Ponds website that ranks Krugman among the most partisan columnists."

Re:Libertarian speaking here

[Red Flayer]

Governments shouldn't be giving tax payer money to any corporations, if corporations can't make it on their own, then maybe their business plan wasn't as good as they thought.

And while we're at it, why don't we make sure that any laws that affect some businesses in different ways than others (thus providing an indirect subsidy) get stricken from the books.

And then, let's get rid of personal rights, since they hamper some businesses more than others.

I agree that most subsidies are not a good thing. However, in order to stimulate economic activity and the general welfare, sometimes it's necessary for government to aid industries. Note that the farm subsidies, for example, were intended to help the small family farmer, during times of low demand when the corporate farm economies of scale were killing them. I won't judge whether it's worth it for government to try to preserve "the American way of life," since that is what was intended.

Re:Consumer Reports

[Emperor Cezar]

Nothing like attacking the person and not the argument.

Sigh...

[CasperIV]

How much money do you think Al Gore made from the "Inconvenient Truth"? I'm not with the right or the left, neither democrat or republican, but all these Gore groupies make the idiots in big business look like rocket scientists. You make claims like "follow the money", but you are unwilling to follow the money when it leads you anywhere other then where you want to go. People in glass houses should not throw stones.

Re:Libertarian speaking here

[Rostin]

If they ever dried up we could always go back to growing our own food.

What an idiotic thing to say.

I grew up on a farm. My dad used to joke that "city people" think that food magically appears in the grocery store. I never realized how close to the truth that statement might be until I read your post and saw that it was modded up as insightful.

Corn's not good for cows

[wytcld]

Cows don't digest corn well - not too surprising since it was never a part of their ancestors' natural diet. They digest it so poorly that they become prone to all sorts of intestinal diseases. The only way to feed cows corn and not have them sicken is to add large amounts of antibiotics to the feed to hold down the diseases that digesting corn makes them prone to. This leads to widespread antibiotic resistance that makes many diseases harder to treat in human beings.

As for human beings, the older among us can recall how much better food tasted when it was all sweetened with sugar rather than corn syrup. There are some pretty strong concerns about corn syrup not being so healthy for you either - although it's probably not as bad for us as corn is for cows.

Ethanol is a boondoggle, and I'll prefer any presidential candidate who stands firmly against subsidizing it. But corn too is subsidized - has been for decades - and that leads to it being used in other ways that are already seriously screwing things up. Plus, agriculture is not infinitely renewable, not the way we practice it. The US has lost something like half its agricultural topsoil, on average, over the last century or so. Long-term viability requires us to take more agricultural land out of production, rather than exploit our land more extensively for short-term gain. Over the long run, in many locations, agriculture is just another form of strip mining - at least until we develop technologies we don't currently have to replace millions of tons of topsoil that current practices have allowed to be washed away and otherwise depleted. Soil is more precious than oil.

There's no easy fix here. And corn shouldn't even be a candidate.

Re:Maybe you should complain

[Hal_Porter]

De massa only beats me when I's a bad slave!

Re:Consumer Reports

[QuantumPion]

Y'see, in the UK we pay approximately $6.40 a gallon of petrol. I don't think you have that much of a right to complain.

Yeah, but how much of that is tax? A quick google search came up with this [bbc.co.uk] (somewhat outdated yet informative) article. From the look at the graphs, the cost of fuel has only increased marginally (due to increased global demand and international conflicts), while the proportion of tax has has increased substantially. Part of the reason for the price increase was "...designed as a means both to raise money and discourage car use on environmental grounds." While you limey's might be content to waste your hard earned money subsidizing bloated socialist government policies, we in the US are not (for the most part).

Re:Business advice

[Kohath]

Seems to me that it's better to pay for our fuel locally, than to give that same money to people in countries which hate us.

When I'm paying, I'll buy from whoever has the best price.

So, hell yes, let's buy the corn or beets or sugarcane or whatever grows locally. Biodiesel is another great use of fallow land.

Go ahead and buy some land and grow whatever you want and sell it on the free market. It's none of your business otherwise. Stealing money from people so that you're happy about the "great use" of some land is approximately the same as stealing money from people to buy yourself a luxury car -- just a little less honest.

Re:Is there intelligent life on Earth?

[DarkDaimon]

So... what are you trying to say, there is no hope for the human race? I personally don't think the future has to be doom and gloom. We decide our own fate and I believe that with a little imagination and a lot of drive, we humans can overcome anything.

Re:Consumer Reports

[spun]

While you limey's might be content to waste your hard earned money subsidizing bloated socialist government policies, we in the US are not (for the most part).

Forcing people to pay for their own externalities is not socialism. Subsidizing certain activities by making others pay for the externalities is.

Re:Consumer Reports

[sumdumass]

In the UK much of that is taxes that go to funding services. Not having a right or much of a right to complain when you are seeing the benefit of higher priced gas is an unfair assessment.

I have alway know gasohol (the old 15% methanol mixture)yielded less fuel economy and performance. People never believe me. Although, the car makers and engine makers have known this too. They have ways to tune the vehicles in order to mitigate these deficiencies. And because Ethanol is considered cleaner burning, they can actually increase performance and economy if the engine is designed to run it specifically.

But then you are talking about something that isn't on the mass market and something only newer cars are able to do.

Re:Libertarian speaking here

[stonecypher]

I don't see anything wrong with using these cheap food sources.

Many countries have learned this lesson the hard way. In recent times, for example 30 years ago, Zaire was Africa's breas basket. They provided nearly a third of all food eaten on the continent. Then their current governmental mess started, Zaire collapsed, and now it can't even feed its own people, let alone the rest of the continent. The primary problem was that as reparations, farms - Zaire's primary export business system - were reposessed from their primarily white invader owners, and given to traditional people. However, the government used a crony system to determine who got the farms, rather than giving them out to those individuals who knew how to run farms, and everything predictably went straight to hell.

Many of the famines in Africa are a direct result of Zaire's collapse, and the policies of other nations leading them to complete external dependency. A government must be able to feed its own people even if every other country on Earth closes their borders, or they can be directly manipulated through sanctions and export treaties.

The United States' major foreign problems right now are a result of our dependancy on certain nations for their fuel reserves. Can you imagine how much worse it would be if it was the food supply?