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Ethanol Subsidies Considered Bad

by: Robert McIntosh   posted: 2009-04-10 13:55:00
Viewed 457 times. 4 Comments.

No surprise here, the Congressional Budget Office has determined that ethanol subsidies cause a rise in food prices. Now it doesn't take a genius to see this happening as farmers are going to sell their crop to the highest bidder. An ethanol production facility backed with government dollars can and will outbid food companies for the same crop. A shortage of said crop will make the cost of producing food go up and that gets transferred to the consumer.

There is also a spiraling side effect of this. Those same farmers are going to grow the most profitable crop they can. If that crop is corn for ethanol then that means other crops will not get grown, such as wheat, soybeans, etc. causing yet more shortages.

What the government and the environmentalists also won't tell you is that ethanol alone isn't going to help all that much in replacing gasoline. Why? Well, it would take 30% of the current farmable land in the U.S. to replace a mere 2% of gasoline. Think about that.

Now, it is true that there are other, higher yielding crops that can be used for ethanol production. Problem is no one yet grows enough of them and you still have a finite amount of farm land to utilize. There are other sources such as mulch that can be turned into ethanol as well, but at the moment these techniques are still in the experimental stage.

Here is what the CBO said according to the Washington Times:

Federal ethanol-fuel policies forced consumers to pay an extra 0.5 percent to 0.8 percent in increased food prices in 2008, and the government itself could end up paying nearly $1 billion more this year for food stamps because of ethanol use, according to a new government report.

The report by the Congressional Budget Office helps answer questions raised by Congress last year as food prices shot up, and some lawmakers questioned the effects of government policies, such as the ethanol mandate.

“Producing ethanol for use in motor fuels increases the demand for corn, which ultimately raises the prices that consumers pay for a wide variety of foods at the grocery store, ranging from corn-syrup sweeteners found in soft drinks to meat, dairy and poultry products,” the CBO said.

Also, government-sponsored subsidies and mandates for ethanol to be mixed with gasoline are supposed to help foster U.S. energy independence and to cut down on greenhouse-gas emissions, but only have reduced greenhouse-gas emissions by less than one-third of 1 percent.

h/t HotAir

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Comments 4

sil on 2009-04-10 15:57:09

if they're smart enough to figure out ethanol subsidies increase food prices, why aren't they smart enough to figure out subsidies anywhere increase the prices. From education, health, car industry etc


mamapajamas on 2009-04-11 16:43:23

re: "An ethanol production facility backed with government dollars can and will outbid food companies for the same crop."

Great article, but there's one tiny item wrong with it: Ethanol corn is a very specific type of corn that doesn't qualify as "food"-- it's development history selected in favor of fuel-producing factors instead of nutritive and/or flavor factors. Ethanol corn can't be sold as food even if the farmer changed his mind about it.

So a field that a farmer commits to ethanol corn is fuel from the start, and not food. The farmer plants the ethanol corn in the first place because he knows he'll get a better price for it than for food corn (whether for people or animal feed). A field committed to ethanol is NOT committed to food, and therefore the number of acres planted for food is reduced, which is also driving up the price of food corn. Also, shortage of feed corn is driving up the prices of meat, poultry, and dairy products.

However, the thrust of the article is dead on. From the very start, it was a BAD idea to try to put a staple of our food production into our gas tanks. The results of this were 100% predictable. Except to enviromentalists, I mean!


robert on 2009-04-11 20:17:32

Perhaps you took it too literally. I didn't mean to imply that food corn is the same as other corn. I know there are several types of corn, even "pop" corn is different than what we normally eat. The competition I was referring to was growing the crop in general. If farmers can grow corn for ethanol and make more than growing food corn, they will.

I'm not against ethanol in principle. As a car guy I rather like the idea of keeping my internal combustion engine and ethanol is great high octane fuel. However I don't like the government subsidies nor do I think that ethanol can replace all of our fossil fuel usage. Many point to Brazil and say "look, they did it". Great for them, but even they had high food prices because of it.

Thanks for the comment, we appreciate it!


Chas Morgan on 2009-04-12 22:22:55

Last Spring I watched a farmer buldoze a forrest (and then burn the piled up trees to get rid of them) next to his field so he could plant more corn...so oil or natural gas could be burned to distill ethanol, to make some self-rightous idiots feel good about themselves about saving the world by putting 85% ethanol fuel in their car. Whenever I see one of those "Powered by Ethanol" bumper stickers I wonder if it refers to the car or the driver.


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