Biofuels Bailout?

Ronald Bailey | December 17, 2008

The U.S. biofuels industry already receives taxpayer subsidies worth more than $7 billion annually, but it still can't make a profit. So what to do? Well, everybody is looking for a bailout, so why not biofuels?

According to the Wall Street Journal, the biofuels lobbyists may now be looking for more handouts: 

The Renewable Fuels Association, a trade group for the U.S. ethanol industry, has spoken with staff members from Capitol Hill and President-elect Barack Obama’s team and “provided them with some ideas on how to craft the language of” an economic recovery package, said Matt Hartwig, a spokesman for the RFA.

Hartwig said RFA has suggested a number of steps including setting up a $1 billion short-term credit facility so ethanol producers could finance current operations; a $50 billion federal loan guarantee program to finance investment in new renewable fuel production capacity and supporting infrastructure; and a requirement that any auto maker receiving federal aid only produce new vehicles that can run on any blend up to 85% ethanol, beginning with the 2010 model season.

Apparently, the biofuels lobbyists insist that they are just offering ideas, not actually lobbying. Well, that's certainly a relief. 

Nevertheless, food and environmental groups are worried that these "ideas" might morph into a bailout. For example, environmentalist Lester Brown, (someone with whom I rarely agree) warns:

"The ethanol industry's claim that a bailout for their industry is justified by the creation of "green jobs" is truly a case of "green wash." The net energy yield of corn-based ethanol is marginal at best."

Andrew Moylan from the National Taxpayers Union agrees:

"Since corn ethanol boosters have never known a day when they weren't benefiting from government largesse, it's sadly predictable that their response to times of economic distress is to push for more handouts rather than consider reality-based business models. Ethanol lobbyists won't call their latest loan and mandate schemes 'bailouts,' but after seeing so many other interests line up for federal cash recently, taxpayers know when they're being shaken down. Americans should be outraged that yet another industry, especially one that is already dependent on the government, has the gall to ask them for even more of their hard-earned money."

Amen.

See press release featuring statements against a biofuels bailout here. 

Comments

spoiled, rotten|12.17.08 @ 2:52PM|#

I WANT MY BAILOUT ! ! ! ! ! !

fyodor|12.17.08 @ 2:52PM|#

For example, environmentalist Lester Brown, (someone with whom I rarely agree) warns:

"The ethanol industry's claim that a bailout for their industry is justified by the creation of "green jobs" is truly a case of "green wash." The net energy yield of corn-based ethanol is marginal at best."

Probably not surprising since ethanol has fallen out of favor with environmentalists.

|12.17.08 @ 3:02PM|#

Oddly enough, now the National Review is on the bandwagon. It's almost as if you can tell what someone believes by saying what their political opponents oppose.

|12.17.08 @ 3:19PM|#

Oddly enough, now the National Review is on the bandwagon.

National Review has a contributor who wrote a column favoring Flex-Fuel mandates today, yes. And then several people on the Corner blog immediately disagreed with it.

National Review frequently publishes contributors who disagree with each other and with the editorial line.

|12.17.08 @ 3:19PM|#

a $50 billion federal loan guarantee program to finance investment in new renewable fuel production capacity and supporting infrastructure;

Haven't they heard? Overcapacity is driving producers into bankruptcy, as we "speak".

|12.17.08 @ 3:20PM|#

So, Tom Vilsack, Democratic Governor of Iowa, for Agriculture Secretary? Hopefully he doesn't live up to his state's ethanol obsession reputation.

|12.17.08 @ 3:21PM|#

Probably not surprising since ethanol has fallen out of favor with environmentalists.

Ethanol was NEVER about energy or the environment. Ethanol is about the Iowa caucuses.

It's kinda like the counterproductive trade embargo with Cuba. That one is about 27 electoral votes in Florida. It has absolutely nothing to do with rational foreigh policy.

I expect both policies to continue in the Obama administration.

|12.17.08 @ 3:33PM|#

J sub,

The Cuba embargo is becoming less popular among the younger generation of Cubans, that never lived under Castro. There may be sanity yet re: the embargo.

|12.17.08 @ 3:46PM|#

The Cuba embargo is becoming less popular among the younger generation of Cubans, that never lived under Castro. There may be sanity yet re: the embargo.

Maybe. It's coming up on it's golden anniversary, isn't it?

|12.17.08 @ 3:46PM|#

Ethanol was NEVER about energy or the environment. Ethanol is about the Iowa caucuses.

It's not just about the caucuses, and not just about Iowa. I mean, sure, the Senate could've voted for the Energy Bill (though not McCain) because they're all future Presidential candidates, but the House? There are corn farmers to briber in other states as well, you know, such as downstate Illinois.

|12.17.08 @ 3:56PM|#

An added bonus: Alcohol fuels have environmental benefits compared with gasoline. And wouldn't you rather be buying your fuel from hard-working farmers, rather than indolent sheiks, terrorist-sponsoring mullahs, and tin-pot tyrants?
-National Review

That guy is a fucking imbecile. That's a horrible article, even for NR.

|12.17.08 @ 3:59PM|#

Ethanol was NEVER about energy or the environment.

Hah! You young whippersnapper can't remember, but I do. Environmentalists used to blather on and on and on about alternate fuels. Back in my day they used to get all misty eyed talking about growing fuel to put in cars.

Sure the corn farmers may have lobbied for it, but it was the environmentalists who sold the idea to the public.

|12.17.08 @ 4:04PM|#

Ethanol was NEVER about energy or the environment.

Actually, it started out as an enviro initiative, I believe to cut smog or replace lead additives or somesuch.

It has since, of course, become the sine qua non of Untouchable/Indefensible Giveaways. Due 100% to the bizarre insistence on the Iowa caucuses being the first Presidential nominating event.

|12.17.08 @ 4:41PM|#

Please, no.

Publilius|12.17.08 @ 6:06PM|#

I don't think these bailouts mean much to the average citizen. They will be financed by borrowing or increasing the money supply. This will eventually cause massive inflation, but that'll be some years down the road. And most people think that inflation is caused by greedy store owners.

If Congress actually increased income tax rates (say maybe adding five points to each bracket) at the same time as the bailouts to pay for it, then there would be mobs of people tarring and feathering their Congresspersons.

|12.17.08 @ 6:21PM|#

Publilius
I think your comment is what's making my teeth itch?

Are you giving the bailouts a pass because they won't have an effect for years? Or are you saying that the average American has no clue how screwed we are? And to your second comment, I have a better solution than increasing tax rates. Don't bail anyone out! Let the system work!

Meddling with a cyclical system doesn't prevent the cycle. All it does is make higher highs and lower lows.

|12.18.08 @ 12:38PM|#

I have a suggestion:

Instead of fermenting corn, let's just eat it. Oh, and one other suggestion, let's eat the RFA lobbyists too.

Hacha Cha|12.18.08 @ 12:44PM|#

remove the sugar subsidies and taxes. anyone can make moonshine. and almost anyone can make biodiesel.
considering there are reverse trikes (basically a three wheel car) that get 235mpg when using a diesel hybrid engine, diesel could be the future. WW2 submarines used diesel-electric for energy and the nukes still have diesel-electric backups. legalize hemp and make biodiesel from it.
the market should be moving to diesel-electric, at least if energy efficiency is what they are looking for. but maybe these things are just ahead of its time, look at the geo metro lol

|12.18.08 @ 5:32PM|#

Due 100% to the bizarre insistence on the Iowa caucuses being the first Presidential nominating event.

No, because McCain even went to the caucuses (when the oil price was high) and said, "While I think ethanol might be a good alternative when oil is $140/barrel, I'm still against subsidies for it."

The reason it's protected 100% is that no one who opposes it cares enough. You've got a bunch of people whose livelihood absolutely depends on that program, and, on the other side, a bunch of people who may hate it but absolutely wouldn't base their vote for, say, President, entirely on that issue.

Was there anyone who said, "Well, I've going to vote for McCain, and the issue that swung me was ag subsidies?" Almost certainly not. But did sugar farmers and corn farmers vote for Obama over McCain because of ag subsidies? Absolutely.

Equitel|12.19.08 @ 8:11PM|#

Since the RFA and other lobbyists supported the OBAMA campaign and in some cases provided staff papers during the election...perfectly okay in my opinion, I'm not surprised, and I sort of welcome some of the emphasis out of the new ADM. But, let's not go overboard with the corn thing. The footprint just isn't there.