The Palmetto Insider

The blog of the South Carolina Policy Council

Ethanol is a Waste of Energy, Land and Money

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It’s difficult to tell what was more troubling about the pro-ethanol opinion piece The Myrtle Beach Sun-Times ran recently: that there are groups such as Americans for Democratic Action still pushing this propaganda or that one of South Carolina’s largest newspapers felt it was worthy of space in its pages.
 
While the Washington, D.C.-based organization does trot out several time-honored canards, such as the use of ethanol as a gasoline supplement reduces the cost by 40 cents per gallon (that difference is the result of subsidies because a gallon of ethanol costs far more to produce than a gallon of conventional gasoline), it also employs a new tactic, saying we need to continue this subsidy sinkhole because it’s “good for the economy.”

Don Kusler of Americans for Democratic Action, argues that we should continue throwing good money after bad because ethanol is a growing industry that’s producing secure domestic jobs.

If the ethanol industry is growing, it’s because it’s received tens of billions of dollars in subsidies over the past 30 years. With that kind of government support, what industry wouldn’t be producing “secure” domestic jobs?

If the ethanol industry is growing, it’s because it’s received tens of billions of dollars in subsidies over the past 30 years. With that kind of government support, what industry wouldn’t be producing “secure” domestic jobs?

And how is this any different than the old Soviet model of sucking money from society’s producers in order to find a job for everyone, even if there’s no need? The only difference is that instead of giving individuals jobs pushing buttons on elevators, we’ve got them involved in boondoggles such as ethanol.

Either way, it’s nothing more than wealth distribution: The government takes a chunk of money earned by taxpayers and, in this case, diverts it to businesses involved with corn ethanol production, which can then sell it at below-market cost because of the subsidy.

As The Milken Institute Review noted in 2007, ‘If ethanol had economic merit, no government assistance would be needed. Investors would pour money into the ethanol business and profits would be made… If ethanol lacks economic merit, however, no amount of subsidy is likely to provide it.”

Here are some other realities the pro-ethanol crowd isn’t eager to make known:

  • For corn ethanol to completely displace gasoline consumption in this country, we would need to appropriate all U.S. cropland, turn it completely over to corn-ethanol production, and then find 20 percent more land for cultivation on top of that, according to The Cato Institute;
  • Ethanol exhaust generates more than twice the amount of ozone as gasoline exhaust, according to the Clean Fuels Report comparison of fuel emissions; and
  • The rush to produce more corn for fuel has had a global environmental impact as forests and other vegetation have been cleared to make way for cropland.

Something else ethanol enthusiasts won’t tell you is that increased ethanol production has led to a significant increase in corn prices. When corn prices spike, that can make everything from cereal to soft drinks more expensive since corn is used by itself or as a sweetener in so many products.

A recent Congressional Budget Office study found that increased ethanol production was responsible for 10-15 percent of last year’s increased U.S. food costs, which hurts all Americans, but especially the poor.

Higher prices also mean fewer goods purchased, which, contrary to Mr. Kusler’s assertion, translates to fewer jobs, something to consider in South Carolina, where our unemployment rate is more than 11 percent.

Ultimately, the problem with ethanol is that it not only ends up costing Americans more money, it’s wasteful. To dress up this corporate welfare as economic development is disingenuous.

The fact is, merely creating jobs does not produce wealth. The U.S. government could put unemployed people to work digging a ditch from Myrtle Beach to Los Angeles. After they finished, it could have them fill it in, then start all over again. Nothing would be accomplished, but we would have full employment.

All we’re doing by subsidizing ethanol is impoverishing Americans as a whole by taking their tax dollars to benefit businesses involved in ethanol production.

It’s not unlike what’s currently going on in South Carolina, where we’ve funneled tens of millions in tax dollars to hydrogen research, even though it’s unclear if the technology will be viable in terms of offsetting U.S. reliance of foreign oil or reducing carbon emissions.

If all the money that has been directed toward ethanol and hydrogen over the years had instead remained with businesses and taxpayers, those private businesses and individuals would been much more effective at creating jobs.

And that capital could have been used to give consumers something they really wanted, rather than the failed technologies that have been rammed down their throats by the alternative energy industry and government for decades.

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Written by Cotton Boll Conspiracy

June 29, 2009 at 9:49 am

Posted in Alternative energy, Economics

Tagged with ,

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