Ethanol Misdirection

If you’ve read this site for more any length of time, you probably know where I stand on ag-based ethanol: Firmly against propping up the industry with government my money. In the latest development Jeff Broin (via The Daily Republic) is, understandably, leaving out a bit of information in his support for increasing the commonly available blend from 10% to 15%:

America has a real opportunity to create more than 130,000 new jobs and pump billions of dollars into our economy at no cost to taxpayers.

So we will not have to increase any of those subsidies for ethanol that you talked about with Forbes? That was about $4 billion or so per year, if I recall correctly.

Continuing from the article:

America would reap significant environmental benefits from the change. Ethanol produced from corn reduces greenhouse gas emissions by as much as 59 percent over gasoline, according to University of Nebraska, Lincoln, researchers. Producers over a recent fiveyear period increased ethanol production per bushel of corn while reducing the energy consumed in production by more than 20 percent and water use by more than 25 percent, thanks to technological breakthroughs that continue today.

Does this percentage include the greenhouse gas emissions which are produced by the ag equipment necessary to prep, plant, tend, and harvest the corn? After all, that is part overall emissions package–and should be included in the total if one is to provide a, shall we say, corn to corn comparison.

2 thoughts on “Ethanol Misdirection

  1. Everyone has a right to their own opinion – but the facts should be clear first.

    First, there is no federal subsidy provided ethanol producers. The tax credit (not payment) is provided to the blender – not the ethanol producer. And, just because you tax something differently – does not mean it’s a subsidy. It’s a tax credit. By your logic – in SD – we must ‘subsidize’ residential property because its taxed less than commercial property or maybe we subsidize those that invest in IRA’s because they’re sheltering their income from taxes?

    If you remove a tax credit – the net effect is a tax increase. That same tax credit helped account for $4B in taxes paid, $50B+/- in net consumer savings at the pump, $8B less in farm subsidy payments because farmers made money….farming, and about $46B added to the U.S. GDP. That is good policy. It is not a subsidy.

    Corn ethanol produces 51% less GHG emissions compared to gasoline. Life Cycle Analysis would include your question posed.

    http://www3.interscience.wiley.com/journal/121647166/abstract?CRETRY=1&SRETRY=0

    As far as mandates go – the U.S. government currently mandates 90% oil based fuel. The vast portion of that comes from Saudi Arabia and Venezuela.

  2. RTS,

    Thank you for adding some information to the discussion.

    With regards to “tax credits” for the blenders, I do view them as a subsidy–because without it those folks would be unable to absorb the cost of making ethanol available to the market. I am hardly alone in this understanding as many other people (including Mr. Broin) view these payments as subsidies.

    Applying the same logic to residential vs commercial property is rather different. People are (generally) not convinced to purchase residential property because of the lower tax rate.

    As far as the numbers you cite, a few things are missing: tariff on ethanol coming in from other countries (which negatively affects our balance of trade), increased cost of food products made from corn (because ethanol must compete for resources with everything else). The New York Times recently wrote a piece, commented on here by Clusterstock, which speaks to a number of reasons the ethanol industry is struggling to be viable: http://www.businessinsider.com/its-time-to-stop-the-ethanol-charade-2009-2

    I cannot get the link to wiley.com to work (keeps giving me an error) but here is the article which I was thinking about with reference to the total pollution cost of ethanol production and use: http://www.startribune.com/local/38839542.html?page=1&c=y

    Whether subsidies or mandates, I am not in favor of the government (federal, state or local) deciding which industries should receive favors and which ones should not.

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