COLUMN: Ethanol wastes energy and taxpayer’s money
August 30, 2004
The government is trying to solve a big problem. We’re addicted to oil and sometime, sooner or later, the oil fields are going to dry up. When that happens, we’ll have to be prepared with alternate energy sources, or there are going to be problems, such as the end of the world as we know it.
So the government is using subsidies to encourage development of renewable sources of energy that won’t run out. There are a lot of options, and one the government has supported is ethanol from corn. Unfortunately, it looks increasingly like the powers that be are using these subsidies as a cover for political payoffs.
Getting ethanol from corn sounds great. The corn is renewable, and Iowa is on track to becoming the next Saudi Arabia. However, there is one small problem. Sorry — make that a big problem. Several studies by Cornell researchers David and Marcia Pimentel have questioned whether or not the process of converting corn to ethanol actually has a net gain in energy. If it doesn’t, then converting corn to ethanol will hasten the looming oil crisis instead of alleviating it.
You might be saying to yourself, “Now, wait a minute here. If ethanol from corn uses more energy than it produces, why is the gas with ethanol cheaper at the pump?”
Simple. Government subsidies.
Subsidies from our federal government have helped ethanol production stay in the black in order to promote its growth, and they have also forced prices of gasoline with added ethanol lower than what they normally would be. The Cato Institute showed that ethanol is more costly to produce than gasoline and reduces the mileage of cars. Just think of the old line, “There’s no such thing as a free lunch.” It costs you less at the pump, but more in taxes.
Of course, it would be wrong to say no one benefits from these subsidies. One very big beneficiary is the Archer Daniels Midland Corporation. ADM is one of the largest grain producers in the world, and it also produces a large percentage of the ethanol from corn in the United States. Thus, it receives a very hefty amount of ethanol subsidies from our government. Interestingly, some of that money ends up back in Washington as campaign donations to both Democrats and Republicans.
This seems like a perfect situation for the unscrupulous politician. Push “ethanol subsidies” that will be seen as opening up another market for family farmers and combating our dependence on foreign oil but will mostly go to a large corporation, which will show its appreciation by donating money to your campaign. But is that the case, or is ethanol from corn really a good idea?
The USDA in a 2002 report concluded that its “conservative” estimate was a 34 percent energy payoff from that inputted to make ethanol. It also outlined the benefits of converting coal and natural gas to ethanol, which relieves our dependence on foreign oil, and increasing the profits of farmers, which would decrease subsidies to farmers.
Although the former might be the only reason to convert corn to ethanol, it still requires a non-renewable source of energy.
The latter idea that subsidizing ethanol will reduce farm subsidies is laughable. Especially since farm subsidies have generally ballooned since the early ’90s regardless of ethanol subsidies.
What is truly odd about this debate is that either way, subsidies should be removed. If making ethanol is an energy drain, it should not be promoted. If ethanol from corn, which is now an established industry, does produce energy, there is no need to subsidize it. The only discernible reason to subsidize ethanol anymore is simply so powerful senators and presidential candidates can pander to the sacred cow of family farmers and bolster their campaign budgets.
Considering our addiction to oil, it is critical that politicians wake up and spend this money on some serious energy research.