It looks like the President and the Lame Duck Democrats have cut a deal with Republicans. The country can breathe a sigh of relief that taxes won’t go up across the board on January 1st. Another sigh of relief is coming from the ethanol industry. From the Washington Post:
The White House and key lawmakers cleared the way Thursday night for swift Senate action to avert a Jan. 1 spike in income taxes for nearly all Americans, agreeing to extend breaks for ethanol and other forms of alternative energy as part of the deal.
I don’t find a lot to cheer in this. It is widely assumed that a significant tax increase would be another shock to an already weak economy. That might well be true, but maybe it would have done more good for Congress to show that it was serious about getting our fiscal house in order.
As for extending the ethanol subsides, I’m all for it. I live in South Dakota and work for the state. We have a lot more ethanol plants than beach volleyball courts. I figure what floats the state economy floats me, and I am worried about the sinking of fiscal real estate hereabouts.
Of course, ethanol subsidies make no sense on any other grounds. Ethanol production doesn’t increase our “energy independence”, whatever that might mean. It takes more energy to produce a gallon of ethanol than the gallon actually contains. That extra energy isn’t coming from wind towers. Over the next five years, these subsides will cost us over $25 billion dollars.
Ethanol production doesn’t yield any environmental benefit and certainly none at a reasonable cost. From Forbes:
Australian academic Robert Niven found that ethanol gasoline lets out more harmful air toxins than regular gasoline. The Congressional Budget Office finds that taxpayers are shelling out $750 for every metric ton (2,205 pounds) of carbon kept out of our atmosphere. To put that in perspective, the carbon-offset company Terrapass values the reduction of 1,000 pounds of emissions at a mere $5.95.
When you add up the environmental costs of corn production, the equation looks much worse. Virgin prairie has been plowed up to produce corn for fuel. The machines that work the fields aren’t solar powered. From Pajamas Media:
A gallon of ethanol emits less carbon dioxide (CO2) than a gallon of gasoline when combusted. However, CO2-emitting fossil fuels are used to make fertilizer, operate farm equipment, power ethanol distilleries, and transport the ethanol to market. In addition, when farmers plow grasslands and clear forests to expand corn acreage, or to grow food crops displaced elsewhere by energy crop production, they release carbon previously locked up in soils and trees. For several decades, such land use changes can generate more CO2 than is avoided by substituting ethanol for gasoline.
Ethanol production raises the price of gasoline and it raises the price of food. Tariffs keep cheaper ethanol produced south of the border out of the U.S. market, which makes the system all the more expensive but is probably an act of Christian charity. Diverting corn to ethanol production raises the price of tortillas which results in hungrier children.
But hey, as long as it brings money to the Dakotas and Barry’s own Illinois, why should I complain? The issue has made odd bedfellows of conservatives and environmentalists, who have united in opposing the subsidies. That’s amusing, since it was the green lobby that gave us ethanol in the first place.
I can’t help pointing out that subsidies for wind and solar power differ from the above only in so far as they currently do much less damage. But they are no more economically or environmentally advantageous.
The ethanol regime is what you get when you base your energy on beautiful ideas like “renewable energy” or “green jobs,” and not on any rational estimate of the costs and benefits of energy technologies.