This Thanksgiving season, the American public is being treated to the spectacle of the Federal government, both the executive and legislative branches, going on a spending binge the likes of which has not been seen in decades. Even the Washington Post's editorial page is horrified at the double digit increases in "discretionary" federal spending. But rather than take on the whole horror, let's just look at one small but telling example of "pork" spending: the subsidies for the production of ethanol from corn that are salted away in the new 1,100 page energy bill. The bill mandates a doubling of the production of ethanol fuel made from corn. Current ethanol subsidies total around $1.4 billion annually. As Illinois Senator Everett Dirksen famously quipped: "A billion here, a billion there, and pretty soon you're talking real money."
The new subsidies to produce ethanol from corn are a classic example of "log-rolling." They are designed to bribe important Democratic lawmakers into voting for the whole energy bill. And it's apparently working—Senator Thomas Daschle (D-SD) and Senator Byron Dorgan (D-ND), both of whom hail from corn producing states, say they will vote for it . But perhaps one can make the case that ethanol is a good deal for the economy and the environment? After all ethanol is a "renewable fuel" that displaces oil imported from the unstable Middle East and helps clear the air, right?
On the pro-ethanol side, a 2002 U.S. Department of Agriculture study found, "Production of corn-ethanol is energy efficient, in that it yields 34 percent more energy than it takes to produce it, including growing the corn, harvesting it, transporting it, and distilling it into ethanol." Of course, one might suspect that USDA may have an interest in finding that agricultural subsidies of any sort are a good thing.
What do other experts have to say? Cornell University biologist and fierce ideological environmentalist (and no friend of this author), David Pimentel offers a different analysis. In an article in the June 2003 issue of Natural Resources Research entitled "Ethanol Fuels: Energy Balance, Economics and Environmental Impacts are Negative," Pimentel finds that "about 29 percent more energy is used to produce a gallon of ethanol than the energy in a gallon of ethanol."
Both studies try to take into account inputs like the energy used to produce fertilizer, fuel for tractors to till the fields and transport of the corn, fuel for distilling the corn, and so forth. Their estimates differ and need to be resolved. But Pimentel, unlike the USDA study, also considers the effects of growing more corn on the natural environment. For example, he estimates, "To produce 1.7 billion gallons of gasoline equivalents (only 0.8 percent of total gasoline) using ethanol we must use about 2.2 million hectares of land; if we produced 10 percent of U.S. gasoline, the land requirement would be 22 million hectares." In other words, today about 5 million acres of land that might otherwise revert to nature is being used to grow corn to produce ethanol. The new ethanol mandate could raise this to 10 million acres. It is a fair question whether or not that really is the environmentally friendly thing to do.
Pimentel also claims that the demand for corn as a feedstock for ethanol raises the price of corn, which means that beef producers must pay more for their feed. Therefore, more expensive corn raises the price of beef to consumers by about $1 billion dollars.
One justification for adding ethanol to gasoline is that it boosts octane ratings and causes it to burn cleaner, thus preventing air pollution. But does adding ethanol to gasoline prevent smog? It may have done so at one time, according to Ed Stork, former director of Mobile Source Pollution for the Environmental Protection Agency; but now, says Stork, "There is no point in pouring ethanol into the fuel mix anymore." Why? Because modern automobiles burn modern reformulated gasoline much more cleanly.
The bottom line is simple. No matter which of the dueling studies one finds persuasive, one may well ask: If ethanol from corn is so cost effective, why does its production need federal subsidies?