Editorial Comment

	Vol. 225 No. 6
PERRY A. FISCHER, EDITOR

Pandering, pork and payola. Ethanol is the miracle transportation fuel substitute that is supposed to help economies grow, benefit the family farm, help the environment and lessen the need for oil imports. In the past few years, the political move to produce more of it has risen to a furor.

The economics of ethanol are lousy at best, and making it would not be profitable without the huge government subsidy it receives, amounting to about one-third its market cost. It requires cheap corn (or similar) and coal to produce.

Perhaps the biggest myth is that ethanol is environmentally beneficial. This is an extremely complex issue, but the net net (yes, two nets – it's that complex) effect is likely to be environmentally detrimental. First, the feedstock, which is primarily corn, is grown on prime soil, suitable for food and feed production. This creates competition for land and, depending on the amount of land used for fuel production – which, in the US, could grow from its current 10% of all corn production, to 20% – will put an upward pressure on food prices. Second, since this crop production occurs in areas of good rainfall/ irrigation, runoff into rivers and estuaries, with the resulting pollution and siltation (already serious problems) will only get worse.

The driving force behind ethanol is supposed to be improved automobile exhaust emissions, but there are at least two credible studies that cast doubt on that, partly because it depends on which particular pollutant is being measured. Also, using the best refining methods can result in gasoline that burns at least as “clean” as ethanol blends. In addition, ethanol produces large amounts of carbon dioxide that must be captured, sequestered or used, or else it will be released to the atmosphere. And don't forget, coal is the fuel of choice in ethanol production, since burning the alcohol, itself, would be far too expensive. Thus, all of the problems and expense of coal emissions, including mercury, carbon dioxide and so on must be dealt with. 

On a positive note, domestic ethanol production will help reduce imported fuels, but only by about 3 to 5%. Much more than that would require increasingly absurd amounts of land, especially considering the ongoing growth rate of fuel consumption. For example, if the “ethanites” in Brazil and the US achieve their near-term goals (~5 billion gal/yr, each), an area of good arable land about the size of England (~130,000 sq km) will be used just to grow ethanol crops.

Although production of ethanol from food crops is a mature technology that is not likely to see significant reductions in production costs, this does not mean that ethanol has no future. Ongoing research into ways to produce this fuel cheaper and at a better environmental balance should continue, with increased funding. But future solutions should come from non-food crops, genetically modified if necessary, and grown on marginal land, as well as from municipal solid waste and agricultural residues such as rice straw. In addition, new strains of genetically modified yeast and bacteria must be developed to allow the use of high-cellulose and woody plants. If such research produces the needed breakthroughs, then ethanol could stand on its own merits.

Europe has its own ethanol mania, with a system of tax incentives, subsidies and research funding that is even more complex than in the US, owing to the individual countries' politics. Nevertheless, the situation in the EU and US is roughly analogous; both, for instance, have a goal of about 5% ethanol as motor fuel within the next decade or so.

In the US, with the leadership of both parties, including the President, in favor of huge ethanol subsidies totaling hundreds of billions of dollars, it's a wonder that anyone has been able to even slow the ethanol juggernaut. But there's been growing opposition to ethanol legislation recently. Maybe it's because it's an election year, and maybe because commodity prices – led by energy – are way up, and corn and coal are no exceptions. Perhaps the anti-ethanol forces are making politicians fearful of a backlash at the fall elections, if the ethanites can be painted as somehow contributing to higher gasoline prices.

Further firepower can be had by reminding voters that, by exempting ethanol from some taxes, it weakens the Highway Tax Fund by about $20 billion over the next eight years; the fund is used to maintain roads and bridges. In other words, ethanol can help them feel the potholes when they drive. The ethanol issue is becoming another war between the states, only this time it's the corn-growing states, mainly in the Midwest, versus the East and West Coasts.

Last month, the Senate effectively blocked a drive, led by Senators Tom Daschle (Dem.-South Dakota) and Pete Domenici (Rep.-New Mexico), to piggyback ethanol expansion legislation onto a fast-moving bill that prevents Internet taxation. With a vote of 59 – 40, the Senate shelved ethanol (as well as the larger energy bill) for later consideration.

Frustrated but undeterred from that setback, pro-ethanol forces tried another sneaky attempt: to attach ethanol expansion provisions to the Foreign Sales Extraterritorial Income Act, or S.1637. This bill is likely to pass because it is important for compliance with recent WTO rulings. The outcome, i.e., whether the ethanol rider survived, was not known as this went to press.

Now, we all understand self-interest. And there's probably some farmer out there who grows corn on land that overlies oil reservoirs and coalbed methane seams, into which he pumps CO₂ from a homemade ethanol plant because it enhances production from both oil sands and coalbeds, as well as pays him in carbon credits, all in the shadow of huge windmills. Such a man thinks he has died and gone to government-handout heaven. But unlike some subsidies, ethanol doesn't have much upside potential, with a host of negatives that probably outweigh the benefits.

The reason for ramming through pro-ethanol legislation has nothing to do with the merits of the alcohol fuel. Rather, it is old-fashioned, save-the-planet, support the plight-of-the-family-farm pandering by politicians. And those things are simply not true, nor is it in the best interests of any nation or even the planet. Like most “pork,” it serves to enrich a few large corporations and even fewer farmers and, in return, allows politicians to receive political contributions and votes. It is payola: taxpayer money that finds its way into politicians' hands above, around and under the table. A pox on all of them.