When Does an Infant Industry Stop Needing Its Taxpayer Allowance?

Federal bioethanol subsidies are 30 years old this month. As reason has documented time after time after time after time, those subsidies to corn ethanol have had deleterious effects on the environment and the price of food around world.

It's way past time for the industry to stand or fall on its own economic merits. Food Before Fuel, a broad coalition of environmental, farming, taxpayer, consumer and other groups, is calling on the feds to drop counterproductive bioethanol subsidies:

“On many issues, these groups gathered here today do not see eye to eye.  But we have come together because we all can agree that the government’s subsidization of the corn ethanol industry is a flawed policy that pits rural industries against one another, raises food prices for everyone and has failed to yield promised environmental benefits,” Brandenberger said.

Duane Parde, president of the National Taxpayers Union, was critical of the ethanol industry as a “demonstrative waste of taxpayer money in a time of economic hardship.”

"President-elect Obama and the 111th Congress have an opportunity to protect taxpayers and end business as usual,” Parde said. “We have spent 30 years and billions of taxpayer dollars subsidizing the production of ethanol with little to show for it. Despite the subsidies, ethanol is not competitive in the marketplace and the industry only survives because politicians shovel our money into their pockets. We must end the bailouts and subsidies for industries that are unable or unwilling to stand on their own."

Craig Cox, Midwest vice president of the Environmental Working Group, said that, "After 30 years of subsidies, ethanol is displacing only 3 percent of the gasoline we use each year, is likely increasing rather than decreasing greenhouse gas emissions, and is threatening our soil,  water and wildlife. Yet ethanol gets $3 out of every $4 of tax credits the federal government gives to all renewable alternatives including wind, solar and geothermal. It is time we direct our tax dollars to renewable alternatives, including biofuels, based on how well they protect our climate, our environment and our energy security."

Jason Clay, senior vice president for market transformation at the World Wildlife Fund, noted, “In its work with local communities and habitats across the globe, the World Wildlife Fund has seen the negative impacts of the biofuel policy not only on the environment, but on vulnerable populations throughout the world.”

As Competitive Enterprise Institute senior fellow Marlo Lewis notes:

"After 30 years of government coddling, it's time for this infant industry to grow up and succeed or fail on its own merits. If ethanol is commercially viable then no government support is needed; if it is not commercially viable, no amount of government support can make it so."

Whole anti-subsidy coalition press release here

Disclosure: I am an adjunct fellow at the Competitive Enterprise Institute. 

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  • Alan Vanneman||

    "Disclosure: I am an adjunct fellow at the Competitive Enterprise Institute."

    The shame, Ron, the shame!

  • Lefiti||

    Most people named Ronald shorten it to Ron.

  • the innominate one||

    I saw E.O. Wilson, a prominent biologist and environmental conservationist, give a talk last week, and he roundly condemned biofuels.

  • Silentz||

    Hey, here's an idea! Shift the subsidies from the ethanol industry to the car industry! Problem solved. I'll be waiting for my call from Barack about my cabinet position.

  • ||

    People using the handle of Lefiti should shorten it to 'Tard.

  • ||

    President-elect Obama and the 111th Congress have an opportunity to protect taxpayers and end business as usual.

    It would be nice, and I suppose there's a marginally higher chance that all that new blood Obama's bringing to Washington will be responsive to this appeal, but I predict, to a pretty high level of certainty:

    Ain't. Gonna. Happen.

  • ||

    Praise Jesus Amen!

  • Lefiti||

    Robert Zubrin:

    Many people feel that the increasing demand for biofuels plays a major role in driving up food prices. Is this a major factor, or has the competition between food and fuel been overblown?
    It's completely false. Over the past year, food prices have risen 4% internationally, while fuel prices have risen 40%. These higher fuel prices impose increased costs on both farmers and fishing fleets, as well as adding to the cost of transporting their products to market. So in fact, it is rigged up fuel prices that are driving up food prices, as well as the prices of many other types of goods.

    People need to understand this: OPEC's price rigging amounts to a huge extremely regressive tax on the entire world economy. Setting oil prices at $100/bbl is harmful to the advanced industrial countries, but it is brutally destructive to the third world. It is one thing to pay $100/bbl for oil when you live in a country where the average worker makes $45,000 per year. It is quite another when you make $1000 per year. Effectively, the high oil price amounts to taking hundreds of billions of dollars away from the world's poorest people and giving it to the world's richest people.

    Think about this: In 2006, Saudi Arabia, with a population of 24 million people (15% of whom work) raked in $200 billion in foreign exchange from its oil exports. In the same year, Kenya, with a population of 36 million people (the majority of whom work) earned $2.5 billion in foreign exchange in exports of all categories combined. Distributed elsewhere, the $200 billion taken by the Saudis for their overpriced oil would double the foreign exchange of 80 countries comparable to Kenya.

    By switching to an open source fuel economy, we could make such redistribution possible. Instead of paying out to buy their oil from OPEC, tropical third world countries could grow their own fuel, and not only that, gain precious income by exporting ethanol to the US, Europe, and Japan, where huge markets for such produce would exist. Effectively, we could take something like a trillion dollars a year now going to the oil cartel, and redirect it to the world agricultural sector instead -- without about half going to advanced sector farmers and then other half going to the third world. This would create a huge financial engine for world development, and allow hundreds of millions of people to be lifted out of poverty. They would then become customers for our industry, and create jobs and economic growth here. Instead of selling controlly blocks of stock of our banks and media organizations to Saudi princes, we could be selling tractors to Africa. That is the way forward for achieving a just and prosperous world.

  • ||

    Won't someone think of the multi-billion dollar agricultural conglomerate?

  • ||

    Most people named Ronald shorten it to Ron.

    Not Ronald McDonald. Think about that for a minute.

    The question becomes, will buying some votes in Iowa continue to be a smart move if ethanol subsidies piss more and more people off in the rest of the country?

  • ||

    Lefiti doesn't care about the environment or starving people!

  • Nigel Watt||

    Nope. He wouldn't be able to count on Iowa's votes then.

  • ||

    well played, Ron

  • Neu Mejican||

    After 30 years of government coddling, it's time for this infant industry to grow up and succeed or fail on its own merits. If ethanol is commercially viable then no government support is needed; if it is not commercially viable, no amount of government support can make it so."

    Wait, are we talking about ethanol?
    Oil?
    Coal?
    Nuclear?
    Automobile?

    Change that 30 years of coddling to the appropriate number for the appropriate industry.

  • ||

    Zubrin, with all due respect, is monomaniacal on his proposed solution to any problem. He's hung heretics who've wanted to alter his laudable Mars-Direct plan (or, God forbid, preferred a return to the Moon, first).

    That said, my substantive objection to what he's saying above is that the clear "open source" fuel option isn't biofuels. It's electric motors. We can generate electricity in any number of ways, so the underlying energy source--oil, nuclear, solar, coal, biofuels, Mr. Fusion--doesn't matter so much. Build the electric infrastructure, then we can absorb a fundamental shift in energy production without as much trouble. He probably addresses this and dismisses it out of hand in his book (to be fair, I haven't read it), but it sounds like he took the Brazilian example and stopped there.

    I don't want to mandate the electric solution, either, by the way. But it does make some sense, and we're getting close to the point where batteries are efficient enough to make this feasible.

  • ||

    Neu: I am not aware of anyone at Reason who supports any government subsidies to any energy sector, are you?

  • Neu Mejican||

    Pro Lib,

    Indeed.
    Electricity can be generated on site in a variety of ways making solutions distributed and local depending upon local resources. Sun when you've got it, wind when you've got it, waves when you've got 'em, geothermal when you've got it.

    Paired with efficient designs that capture waste heat, use natural lighting, a move to distributed solutions for generating electricity will be more sustainable in the long run than combustion of fuel to generate the energy.

    Yadda Yadda.

  • Neu Mejican||

    Ron...

    No.

    Why so defensive?

  • Citizen Nothing||

    If you back ethanol subsidies, Neu, come out and say it.
    Wait, actually taking a stand isn't your style, is it?

  • Neu Mejican||

    Citizen Nothing,

    I don't back ethanol subsidies, oil industry subsidies, coal subsidies or nuclear power subsidies.

    I think a restructured tax plan that taxes material throughput including carbon rather than labor is a better idea.

    I do support government supports/incentives/ and activities aimed a new more sustainable energy technologies and designs.

    As for the taking a stand thing...this is a discussion board. Conversations are about construction understanding, not winning battles.

  • NM Copy editor||

    construction = constructing

  • libertarian democrat||

    Conversations are about construction understanding, not winning battles.

    I disagree. Take that!

  • Neu Mejican||

    libdem,

    Thanks, that helps me understand.

  • ||

    OPEC's price rigging
    ....
    Setting oil prices at $100/bbl



    That's a pretty successful program, these days.

    ------


    Serious question, Ron:

    I'm guessing there's plenty of government funded research into alternative energy technologies- batteries, magnets for generators/ motors, and whatever else. How good is the dissemination of research results? Do individual programs treat the knowledge they gain as proprietary, or is it available on the open market (so to speak)?

  • ||

    I want my research in to a car that runs on soft-core pornography and orphan blood funded by the government.

    It makes at least as much sense as corn.

  • Neu Mejican||

    P Brooks,

    An example: http://www.sandia.gov/bus-ops/partnerships/index.html

    Sandia works closely with industry, small business, universities, and government agencies to bring new technologies to the marketplace. Discover how to leverage the resources of a national laboratory for your benefit. Sandia has been transferring technology to external partners for more than three decades, especially where such agreements benefit Sandia's primary mission for the Department of Energy.

    For questions or comments, contact partnerships@sandia.gov, or call (505) 284-2001.

  • Citizen Nothing||

    You've been posting here a long time, Neu. If you don't know by now that libertarians are against subsidies for all of those industries you mention, I don't know what more we can do to construct your understanding.

  • ||

    I want my research in to a car that runs on soft-core pornography and orphan blood funded by the government.

    Oh sure, you just want to start a tweakers industry, filled with scheisse films and BDSM leather goods so they can soup up their cars and waste even more of our precious resources.

  • ||

    Thanks, N M.

  • Neu Mejican||

    Citizen Nothing,

    WTF are you talking about?

    Folks are crazy around H&R lately.

    The other day JsubD kept attacking me for taking the same position as him on the Bush proposal regarding health care workers...

  • ||

    Don't forgot about the high-octane orphan blood. Russian is the best, I hear.

  • Neu Mejican||

    Sugarfree,

    I want to hear you say it outloud...VAMPIRE.

  • Citizen Nothing||

    Apparently my understanding is in need of more construction. Maybe I can get a subsidy.

  • ||

    high-octane orphan blood. Russian is the best, I hear.


    I don't know about quality, but our friends in the Democratic Republic of Congo have got the taps running full bore.

  • Citizen Nothing||

    Neu, Jsub probably thought you were constructing some understanding and couldn't parse out your point.

  • ||

    You will never stop paying for making a Twilight joke. Ever.

  • ||

    Screw that noise. The best comes from China and abandoned female orphans. It's like slamming a 6-pack of latex dildos and stainless ben-wa balls into the intake manifold.

  • Lefiti||

    -Folks are crazy around H&R lately.-

    You take that back, motherfucker!!!!

  • ||

    I never pictured Neu as an Emo kid. Who knew?

  • ||

    What's interesting to me is how many of these subsidies are tied to preserving jobs. Energy subsidies, military spending, the space program, auto manufacturer bailouts, etc., etc. Government involvement in the economy is so deep that it's hard to know where we actually have a free market in operation.

  • ||

    I want to hear you say it outloud...VAMPIRE.

    Night Watch, dude! NutraSweet is Anton!

    You will never stop paying for making a Twilight joke. Ever.

    Who are you talking to?

  • ||

    Free market? Try China.

  • ||

    Residents of the past. Preparing for a harrowing vision of... The Future Of Trolling!

    I can't believe you libtards. You're a bunch of zorknaks! Have you stopped draining orphans of their blood, morons?

    In the future EVERYTHING WILL BE BOLDED AND OFTEN SHOUTED!

  • SpongePaul||

    A cheap efficient biofuel with little to no waste, is non edible, grows fast and requires little to no nutrients whilst actually improving the soil nutrients. it is HEMP! the original all purpose fuel.

  • ||

    Epi,

    Neu Mejican of course. Unless he's changed his name to Wampyr.

    Don't drink the Clamato juice. You'll change!

  • ||

    I don't back ethanol subsidies, oil industry subsidies, coal subsidies or nuclear power subsidies.

    And who could argue?

    Depending on what you count as "subsidies", of course. We have had people seriously arguing that roads, the post office, and even the legal corporation are "subsidies," after all, to industries that use them.

  • ||

    The all electricity chimera ain't gonna happen. Everybody here (make that most here) are aware that conversion of any energy form into another involves significant losses. Most are also aware that price and form of energy varies by location.depending on location. Unfortunately, some, (thankfully very few here) also seem to believe that the best way to determine the optimal energy mix is to let a bunch of politicians in DC plan it out.

    My building is heated by piped in steam. Probably wouldn't work too well in Minot, ND but is the most efficient heating method in this case. It's cheaper than producing our own or ggoing with natural gas or )GASP!) coal.

  • ||

    I want my research in to a car that runs on soft-core pornography and orphan blood funded by the government.

    It makes at least as much sense as corn.


    Brilliant! And it shouldn't be too hard to increase the supply of either

  • ||

    Neu: With regard to the efficacy of Federal energy R&D you may want to take a look at "From Energy Wish Lists to Technological Realities" in Issues in Technology.

    Relevant quote from article:

    Finally, the reason for government to intervene in private-sector innovation is to remove obstacles to meeting national energy policy goals. The private sector can serve energy policy without help from government, as shown by the NRC report discussed earlier. But there are cases, often important ones, when national policy requires inducing the private sector to innovate in areas that would otherwise lie fallow. Knowing when and how to intervene is thus a crucial policy judgment.

    To drive home this point, consider another conclusion of the NRC report. It calculated the economic, environmental, and security benefits produced by 39 applied research projects in DOE's fossil energy and energy efficiency programs. Overall, the report estimated that DOE generated some $40 billion in economic benefits for the roughly $13 billion it spent on these programs between 1978 and 2000. (The report also identified environmental and security benefits that are harder to quantify.) But what is most interesting for policy is the highly skewed way in which this generally positive result was achieved. A handful of programs produced most of the benefit, whereas most of the investment resulted in very little:

    * A mere 0.1% of the expenditure accounted for three-quarters of the benefit. Three programs on refrigerator efficiency, electronic ballasts for fluorescent lighting, and low-emissivity windows created $30 billion in economic benefit for a total expenditure of $13 million.
    * Three-quarters of the expenditure-a little over $9 billion-produced no quantifiable economic benefit. Half of this money was applied to synthetic fuel projects that turned out to be at least a couple of decades premature. Developing synfuels technology may have been a reasonable goal at the time, but as will be discussed later, it could have been approached more modestly.

    No one who has run an applied research program will be surprised by a few unexpected home runs or inevitable failures. But the DOE experience does suggest that there are lessons to be learned about how the government spends taxpayer money to influence technology innovation.

  • ||

    Everybody here (make that most here) are aware that conversion of any energy form into another involves significant losses.



    J sub D,

    Indeed. That's why I oppose mandates or even subsidies in making that sort of conversion. However, I could see us moving mostly that way, particularly with cars. Besides, we're all going to have nuclear reactors in our backyards any day now ☢

  • DADIODADDY||

    Has the Federal Government ever ended a subsidy?

  • ||

    Hey! What happened to special characters in Firefox 3? My radioactive symbol has decayed into a box with numbers in it. You blew my character up! Damn you, Mozilla! Damn you to hell!

  • D.A. Ridgely||

    The relevant point here, entirely overlooked by both Mr. Bailey and the CEI, is that the ethanol industry is not an infant but a young adult. Infants do not need allowances. Young adults who having toyed with the idea of independence and found that it involves work and risk never move away from their parents, they need an allowance.

    So let's face it, as long as Uncle Sam and Aunt Nanny are willing to let their 30-something offspring live in the basement taking tax subsided cash-bong hits all day, that's exactly what it's going to do.

  • ||

    Hey! What happened to special characters in Firefox 3?

    Works for me...are you running 3.0.4?

  • ||

    JW,

    I am. Can't figure it out.

  • ||

    Three-quarters of the expenditure-a little over $9 billion-produced no quantifiable economic benefit.

    I think the economic benefit to the recipients is fairly obvious. Of course, if the real goal of a research project is to generate revenue from federal research grants, the utility of their "product" is pretty much irrelevant.

  • ||

    Neu,
    The other day I was actaully agreeing with you. I was merely expressing exasperation at the huge discussion on a topic that to me is so simple a slow 6th grader should be able to dope it out.

    Rereading my past my bedtime post, I admit I didn't make it clear that I was bitching to you and not at you.

    The lesson here is don't post after the before bed toddy.

  • ||

    We all know that: oil,coal,natural gas work well.O.P.E.C has failed to control prices due to the world market.Buying oil from those who have it is not a transfer of wealth but a willing buyer and seller with,in this case,the buyer creating more wealth with the product he buys.Ending subsidies for all industry would be the best course of action.

  • ||

    Sugar Free "I want my research in to a car that runs on soft-core pornography and orphan blood funded by the government."
    As long as it is lesbian porn. and Asian. Actually, I like interracial lesbian porn, so put in some blacks and latinas...and a blonde...and a redhead. and a couple of plump ones too.

  • ||

    fresno dan,

    You are why design-by-committee is such a bad idea.

  • Citizen Nothing||

    fresno dan, as Secretary of Porn, will establish standards and regulations to ensure that our Asian lesbian porn workers are never outsourced to Asia or Lesbos.

  • ||

    Porn Czar? Sounds a lot like Porn Star, doesn't it?

  • Neu Mejican||

    SugarFree | November 20, 2008, 11:41am | #
    You will never stop paying for making a Twilight joke. Ever.


    And what does it say about you that you knew the source of the quote?

    FWIW, I couldn't have come up with the name of the film without some googling.


    * A mere 0.1% of the expenditure accounted for three-quarters of the benefit. Three programs on refrigerator efficiency, electronic ballasts for fluorescent lighting, and low-emissivity windows created $30 billion in economic benefit for a total expenditure of $13 million.
    * Three-quarters of the expenditure-a little over $9 billion-produced no quantifiable economic benefit. Half of this money was applied to synthetic fuel projects that turned out to be at least a couple of decades premature. Developing synfuels technology may have been a reasonable goal at the time, but as will be discussed later, it could have been approached more modestly.


    Are you saying the government should have known ahead of time which project would end up being profitable?

    BTW, the fuel research that was abandoned when oil prices dropped may have produced viable alternative fuels by now had funding been less tied to the current need, and more tied to long-term goals. This is one point on which Obama has shown some wisdom. Price fluctuation in oil are not what should be driving the research into sustainable energy solutions because price fluctuations are not the problem...the long term political, economic, and environmental consequences are the issue that motivates a switch away from oil.

    Yadda yadda.

  • economist||

    Why should this infant industry lose it's protections? Well, it has some examples from modern culture. Lots of 30-year-olds are not self-sufficient.

  • db||

    PL: That said, my substantive objection to what he's saying above is that the clear "open source" fuel option isn't biofuels.

    What you have to understand about Zubrin is that he thinks he's an expert in chemistry, chemical engineering, nuclear engineering, and just about any technical discipline you can think of. He's got degrees in mathematics, nuclear engineering, and aerospace engineering, but he's not a chemical engineer. He worked on pilot tests of the Sabatier Process (making fuel in situ on the Mars surface from atmospheric CO2 and H2 electrolyzed from water), so he has some chemical experience, but he's not really a ChE. NucE has some similarities to ChE, but it's not the same.

    Anyway, I did a lot of book research into ethanol fuels about 10-15 years ago (it actually spurred me to get my ChE degree). But I know when to let a bad idea go based on engineering realities. Zubrin has shown time and time again that he can't. He is too heavily invested in his own ideas and rabidly attacks any "not invented here" ideas--typical of NASA culture. I drank his Kool-Aid for a while on Mars Direct, but there are some real holes in it.

  • It\'s not killing poor people,||

    I do support government supports/incentives/ and activities aimed a new more sustainable energy technologies and designs.

    So you believe in subsidies but are too chicken shit to actually use the word "subsidies" and instead play euphemistic games.

  • Neu Mejican||

    I do support government supports/incentives/ and activities aimed a new more sustainable energy technologies and designs.

    So you believe in subsidies but are too chicken shit to actually use the word "subsidies" and instead play euphemistic games.


    Since my comment was meant to express support for research, I guess you could say I favor subsidies for the development of FUTURE industries, but not for the support of those industries once they exist...their development might need a boost, but if they can't survive without the subsidies, they should be allowed to die.

  • Neu Mejican||

    J sub D | November 20, 2008, 12:34pm | #
    Neu,
    The other day I was actaully agreeing with you. I was merely expressing exasperation at the huge discussion on a topic that to me is so simple a slow 6th grader should be able to dope it out.

    Rereading my past my bedtime post, I admit I didn't make it clear that I was bitching to you and not at you.

    The lesson here is don't post after the before bed toddy.


    Well then, a common "the-trouble-with-print" miscommunication. It seemed odd at the time, but it certainly happens enough in this kind of discourse.

    Like above, I tried to extend the conversation to include energy industries outside of ethanol and end up being accused of supporting ethanol subsidies.

  • ||

    Traditionally, there have been two arguments for government subsidies to business: The "infant industry" argument (new industries need a boost!) and the "dinosaur industry" argument (old industries need to be preserved!) Ironic that we're getting the "dinosaur" argument for automakers while we get the "infant" argument for biofuels to feed the dinosaurs.

  • Neu Mejican||

    I think I was making the "fetal industry" argument...so, non-traditional?

    Bob Weber,

    Do you see a difference between the two traditional arguments?

  • ||

    I'm with you 100%.
    It's high time we let private industry pay for its own security for the "free flow of oil at market prices."
    Every other US business has to hire its own security guards, or pay for alarm systems, or get some dobermans to guard the place. Certainly Exxon/Mobil can do that - or maybe all of those Middle Eastern folks can hire their own fleet of water police to keep the oil flowing - but I'm guessing the cost of defending that "free" flow will increase the cost at the pump a bunch . . .
    Maybe we need to keep that Big Oil defense subsidy in place.
    Or maybe that ethanol "subsidy" (which is money we pay to oil companies when they use ethanol, not money that goes to ethanol makers, by the way) isn't such a bad deal compared to the oil handouts.

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