EDITORIAL: On Ethanol: Enough Already
July 26, 2010
Congress finally is starting to recognize the high cost of filling up gas tanks with ethanol, the motor fuel made from corn. Billions of dollars in federal subsidies are on the chopping block.
It's about time. With the national debt soaring, the government needs to wean the biofuel industry from its dependence on federal subsidies. Biofuels have always sounded better during the Iowa caucuses than they have performed in reality.
Taxpayers have bankrolled biofuel research and a boom in ethanol production. Aggressive mandates have hiked the amounts of ethanol blended into the gasoline supply, and the industry is pushing for even higher levels of the corn-based fuel in each gallon. At the same time, trade barriers have kept out cheaper ethanol produced from sugar in Brazil and other countries.
Those heavy-handed government policies were intended to develop a big new domestic industry that would reduce American dependence on oil, improve the environment and bring jobs to rural communities. The goals are worthy, but for all the expensive coddling, American taxpayers have little to show for their money.
Consider corn: When ethanol factories were popping up all over the heartland four or five years ago, livestock producers and food processors warned that using grain to make fuel would raise grocery prices. Not to worry, the biofuel industry responded, since corn would be phased out and inedible cellulose would be used instead. But the industry failed to deliver. "Cellulosic" ethanol, as it's called, looks like it may never roll out on a commercial scale, despite Uncle Sam bending over to make it happen.
Last week, the Congressional Budget Office calculated how much taxpayers provide in biofuel subsidies to reduce gasoline consumption. The bottom line: $1.78 for every gallon when the biofuel is made from corn. (That includes tax credits for petroleum blenders, plus lost revenues from excise taxes that otherwise would be collected.) Ethanol from cellulose costs a beyond-belief $3 a gallon in subsidies.
When President Barack Obama took office, the biofuel industry cheered. Here, after all, was a resident of the Corn Belt who had visited ethanol plants and understood the industry's allure for farm-state politicians.
But with the economy down and government spending up, some key Democrats are finding it impossible to make the case for the whopping subsidies. At the end of last year, a subsidy for the pint-sized biodiesel industry was allowed to expire. Now the House Ways and Means Committee is talking about slashing ethanol tax credits. Democratic Sen. Jeff Bingaman of New Mexico earlier this month urged Congress to weigh "the credit's very high cost to taxpayers."
Wasn't Congress supposed to be doing that all along?
It's time to eliminate the tax credit. And before Congress even considers mixing more biofuel into the gasoline supply beyond the current 10 percent in each gallon, it needs to lift the protectionist barriers so ethanol brewed from foreign sugar can compete. Lawmakers also need to resist the biofuel industry's efforts to redirect funding into self-serving infrastructure projects.
Yes, the nation needs to reduce its reliance on foreign oil. There are many ways to do that through conservation, new supplies and alternative sources. When it comes to ethanol, heavy subsidies and protectionism have proved to be a bad mix.
Source: Chicago Tribune
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