Orlando Sentinel, FL
06-24-07
Increase ethanol production?
Kernel of a bad idea
Lynn Edward Weaver
Due to a political bandwagon for ethanol, Americans are hurtling down a road
they should have serious doubts about following. Ethanol was originally intended
to be used as a fuel additive to meet air-quality standards, but it already
consumes so much corn that it is inflating the price of fuel and food.
And the financial impact will multiply if Congress approves a Bush administration
plan to mandate a fivefold increase in renewable-fuels production. It is a fiscally
irresponsible scheme requiring large government subsidies that has implications
that could touch pocketbooks and change the daily lives of Americans.
The administration approved the plan without considering the heavy cost to
consumers or the impact on businesses. Even though ethanol policy is a
complicated issue about which Congress is divided, the administration wants to
increase its production in an incredibly short time, from 6 billion gallons this year
to 35 billion gallons of renewable and alternative motor fuels by 2017.
What must be recognized is that the administration plan is no small step. If the
current tax credits, grants and loan guarantees for ethanol production are
extended, it would cost taxpayers an estimated $140 billion over the next 15
years and increase the federal budget deficit. The single biggest expense would
be extension of the 51-cent-a-gallon ethanol tax credit that's scheduled to expire
in 2010. Budget experts say that subsidy alone would cost taxpayers $131 billion
through 2022.
Some proposals in Congress would take us even further down this road.
The Senate has passed a bill that would require the production of 36 billion
gallons of renewable and alternative-motor fuels by 2022. Two ethanol boosters
from the cornbelt, Sen Richard Lugar, R-Ind., and Sen. Tom Harkin, D-Iowa, are
backing a measure that would push that to 60 billion gallons by 2030. Subsidies
under the congressional proposals could run as high as $205 billion over the next
15 years.
However, even today's extraordinary growth in ethanol production has barely
made a dent in the nation's dependence on foreign oil. About 20 percent of
today's corn crop is used to produce ethanol, yet ethanol now amounts to less
than 5 percent of gasoline sold. If ethanol production were tripled, it would
replace about 10 percent of the gasoline. And because ethanol contains onethird less energy than gasoline, it would replace only 7.2 percent by energy
content.
There's a limit to how much corn can be used for ethanol, since it is used as feed
for cattle and in a wide variety of food products ranging from corn meal to soda
pop. In fact, researchers at Iowa State University recently predicted that profits
could disappear from corn ethanol by the end of this year, in large part due to
rising prices of corn feedstock and increased production of the fuel.
Those who support the administration plan for a fivefold increase in the use of
alternative fuels say that the balance of the supply would come from a mix of
cellulosic sources and other fuels. As yet there is no cost-effective technology for
producing ethanol from prairie grasses, straw and wood chips; further research
and development is needed and should be supported. And a high tariff on sugarbased ethanol from Brazil severely limits its availability.
In addition to further raising the price of food, the frenzy for ethanol has its
environmental consequences, too. Increased corn production will drain scarce
groundwater supplies, require more fertilizer and pesticide use, exacerbate
problems from soil erosion, and result in increased emission of global warming
gases. The Congressional Research Service has warned of the economic
consequences we face due to price volatility if a prolonged drought should occur.
Americans should not be fooled into thinking that increasing the government
mandate for ethanol will have much effect on foreign-oil dependence. First, we
should recognize that the best way to achieve energy security is through a
combination of moderate use of ethanol, increased conservation and fuel
efficiency, increased funding for energy research and a more reliable mix of oil
imports from different regions of the world.
Spending huge sums on government subsidies for greater ethanol production
would detract from these legitimate efforts. The administration and Congress
should focus on ensuring that policy actions meet the needs of the American
people. Instead of hobbling the economy with costly new mandates and
subsidies for ethanol, we should pursue a balanced strategy that makes far more
sense for our economy and consumers alike.