Ethanol - The Perfect Boondoggle

Federal ethanol requirements are the ultimate taxpayer scam.

Western society, with its tremendous need for energy, has been primarily petroleum based since at least the Second World War.  If you consider transportation needs alone, dependence on oil goes back further than that, to the 1920s.  As a fuel, oil-based products have so many advantages that it is difficult to imagine any effective replacement.

Electric?  Either you need extremely expensive infrastructure, as with the overhead lines on high-speed railways, or you need heavy, expensive batteries filled with nasty chemicals.

Coal?  Chunks of filthy rock have their place, but in my car isn't one of them, and while there have been experiments with converting coal into something a little easier to use, they haven't been economically successful.

Hydrogen and other gases?  Aside from the question of where you get the hydrogen in the first place, storing high-pressure explosive gas in fast-moving vehicles has its disadvantages.

Now comes a solution which claims to present an answer to all these problems: ethanol.  Since it comes from plants, ethanol is a renewable resource; and since it's a farm product, it can be produced anywhere that farming is feasible.  Ethanol refining results in a liquid, which is far easier to transport and use than solids (coal) and gases (hydrogen).  Ethanol even works with today's existing car technology, if it's mixed with ordinary gasoline; and with fairly minor modifications, an ordinary car can burn straight ethanol.  What's not to like?

Well, there are a couple of technical problems with this approach.  For one thing, it seems to be illegal to convert a normal car to run on ethanol.  Cars are so heavily regulated that any change must be vetted by the government, and this one hasn't been.  (Ethanol is not alone with this problem; bio-diesel falls foul of EPA regs too.)  Another problem is the inherent chemistry of ethanol; it doesn't pack nearly as much of a punch as gasoline, so if you are using ethanol to fuel a car, your mileage goes down accordingly - in some cases, by quite a lot.

Even the environmental benefits of ethanol are somewhat questionable.  Sure, ethanol comes from renewable plants.  But, in the US, almost all ethanol comes from corn, which doesn't exactly grow wild.  A corn farm requires large amounts of (petroleum-based) fertilizers; many miles driven by (petroleum-fueled) farm equipment; and even the conversion of corn into ethanol takes a great deal of energy, almost as much as the ethanol itself can produce.  Studies at MIT conclude that the environmental benefit of ethanol is basically too close to call - that is, corn-based ethanol is so inefficient in other ways, that it's environmentally as harmful as gasoline.  And goodness knows ethanol is not cheaper - in fact, each gallon of ethanol receives a 51-cent subsidy from the federal government, and it's still more expensive than the Saudi stuff!

So the only real reason that ethanol finds its way into our gas tanks, is the one we know to look for whenever something stupid is going on - government interference.  The law requires oil companies to mix ethanol in with their gasoline, and to almost double the amount of it by 2012.  However, this is an exercise in futility.  Even if every last corn-cob grown in the US was lobbed into an ethanol refinery, that would still meet only 10% of our current petroleum consumption.

Are we going to give up our corn-on-the-cob and nacho chips, to fuel our cars?  It's no laughing matter - the famous laws of supply and demand are already at work here.  Every bushel of corn that's turned into ethanol, is a bushel of corn that is not available at the grocery store for you to eat.  That pushes up the price of food.  Of course, the frozen Birdseye is going to get more expensive - but it's surprising just how dependent our entire food chain is on corn.  Perhaps we can afford to pay a little more for food, but the world's poor can't.

A great deal of meat is produced by feeding animals.  Corn products, such as cornflour, are found in most cereals and a great many backed goods.  How about dairy products, which come from corn-fed cows?

Then there's that famously unhealthy sweetener, corn syrup, which shows up in darn near everything.  And therein lies a tale.

Traditionally, sugar has been the most common sweetener used in our food - either cane sugar, or sugar refined from sugar beets.  Everyone is familiar with the white stuff you spoon into your coffee, and years ago food manufacturers did much the same thing on a larger scale, with train cars full of refined sugar.  Then, in the 1970s, corn syrup was developed as a cheaper alternate source of sweetness.  But corn syrup is not naturally cheaper than sugar, for many of the same reasons that ethanol is not naturally cheaper than petroleum - more refining is needed to turn the corn-cob into something useful.  So how is it that corn syrup is cheaper?  Again we find - government interference, through tariffs and subsidies.

The government subsidizes American sugar cane and sugar beet production, and places high tariffs and strict quotas on importing foreign sugar.  The end result is that in the US, sugar costs about double the price paid elsewhere in the world, costing American consumers billions, and benefiting primarily industrial-scale producers such as ADM.  Since the corn is grown in the US, it is not subject to import restrictions, and corn syrup can compete - but only because the price of sugar is twice what it ought to be.

Brazil is one of the world's leading producers of sugar, and is often cited as an example to follow when it comes to ethanol.  Being a tropical country, Brazil has a very easy time growing sugar cane, which is not so easy in Iowa.  And as sugar cane makes cheaper sugar than corn, so does sugar cane make ethanol more easily.  In fact, the comparison is truly astonishing.  An acre of sugar cane can produce 650 gallons of ethanol, as compared to 400 gallons for an acre of corn - but beyond that, 6,500 kcal of energy are required to produce one gallon of ethanol from sugar cane, most of which can be obtained by burning the sugar stalks.  To get one gallon of ethanol from corn, it takes 28,000 kcal of energy - more than four times as much!

Why on earth are we attempting to grow the ethanol ourselves, when we have available a large, friendly country with 30 years of experience in producing ethanol, from an inherently more efficient source?  Why don't we see ethanol tankers from Brazil pulling up to our docks every day?

By now, you can probably guess the answer already.  Sure enough, the US has a 54-cent-per-gallon tariff on imported Brazilian ethanol, enough to price it out of the market.  The combination of tariffs on ethanol and other farm products, and our farm subsidies, has led to a great many problems in free trade agreements - if we won't lower our tariffs, other countries won't lower theirs, making it more difficult for American companies to export American products, as well as more expensive for us to buy things domestically.

So let's review for a moment.  How are we robbed?

We are robbed at the gas pump, because of the government requirements for overpriced ethanol, a gift to factory farms and industrial agriculture.

We are robbed at the grocery store, because anything with corn in it is going up in price, as the corn is needlessly converted to ethanol by government decree, instead of being sold as food.

We are robbed again at the grocery store, because we are paying twice as much as we should for sugar, again a gift to big sugar corporations.

And we're robbed in our taxes, because we pay subsidies, both to farmers for growing corn and sugar, and to ethanol producers who must make ethanol inefficiently from corn, when Brazil can do it more efficiently and cheaply from sugar cane.

Anything else?  Oh, yes, we are starving the poor by driving up world food prices, and damaging the environment in so doing.

A more perfectly destructive boondoggle would be hard to imagine.  Our government at its finest!

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Environment.
Reader Comments

What do you expect?  The legislative branch has ALWAYS been more interested in being reelected than in governing.  The corn growing states have a lot of votes.  Is this a surprise?

The only surprise is that a few magazines are beginning to report on this particular boondoggle.  They usually ignore such things.  Be glad that a few magazines are picking up on it.

September 1, 2007 11:44 PM

I like my Swiss cheese with lots of holes in it, but this post is so holy I am surprised the Holy Father hasn't blessed it.

Lets look at the conclusions one by one, shall we?

<I>We are robbed at the gas pump, because of the government requirements for overpriced ethanol, a gift to factory farms and industrial agriculture.</I>

The same could be said for mandating computers in schools.  Not only does it dumb down the students, but also is a gift to computer manufacturers and IT folks.  

The government mandated seatbelts, compulsory school through age 16 and unleaded gas.  We managed to live though them all, even though they cost us money.  

I didn't realize that ethanol was overpriced.  What is the current price and what should it be?   A few numbers would give credibility.

"Factory farms" is cute, but inappropriate here.  I would suggest the word "corporation farms."  Factory farming implies close, intense farming where everything is packed together.  Large grain farms are not close packed, they are extensive.   Your audience won't know the difference, but might as well be correct.

Is there a reason why large <I>factory</I> farmers would gain as opposed to medium and smaller sized ones in this case?  Don't they all get the same price.  When the price goes up due to the weather, do only the <I>factory farms</I> get the gift of a better price?

<I>We are robbed at the grocery store, because anything with corn in it is going up in price, as the corn is needlessly converted to ethanol by government decree, instead of being sold as food.</I>

Do you know that they sell corn stoves?  They are like wood or oil stoves, except they burn corn.  It beats heating your house with oil.  Corn is so cheap that if one raises the stuff and has to pay for oil heat, it makes sense to convert.   However, if Americans are <B> entitled</B> to cheap food, then this ought to be prohibited, not?

You may have noticed a dramatic decrease in the price of corn-based food in the past several months.  Then again, maybe not.  However, according to the above point, that is just what should have happened.  If an increased price of corn causes a dramatic increase in the price of food, then when corn goes down, there should be a dramatic decrease.  Well, there was a dramatic decrease in the price of corn, from around Chicago $4.40 to Chicago $3.23. (Thursday's closing price) That's a drop of around 25%!!  Have a look see:,,1213+chart,00.html  

Let's do some math here.  Corn weighs 56 lbs per bushel. At $3.23, that makes it worth about 5.75 cents per pound.  Corn in the past several years has averaged somewhere in the $2.20 to $2.40 range at this time of year.  That is roughly 4.25 cents per pound.  I've got a biggg box of cornflakes in the cupboard.  It weighs 18 ounces.  Therefore, we know when corn is in the $2.20 to $2.40 range, it has about 4.78 cents of corn in the box.  At today's prices, it has 6.47 cents of corn in the box.  That's and increase of 1.69 cents.   Wow, what an increase.  Moreover, that's for a product primarily made of corn.

I've heard it said that the packaging for cereal costs more than the grain in box.  When you get down to it, there are multitudes of costs involved in that box of corn flakes.  There is the manufacturing overhead, manufacturing labor, trucking, accounting, legal fees and advice, utilities, fuel, bag boys, checkout people, IT folks, computer costs, heating cooling, health benefits for labor, plus many more.  And all these costs go generally in one direction, up.   That is the reason corn flakes go up every year.

Wouldn't it take Chutzpah to go up to an accountant or an IT person, or a bag boy and tell them they have to take less for their work because it would slow down the increase in the price of food.  Silly of course.  

BTW, corn in the $3 - $4 range is not without precedence.  Corn was over $3 in 70's, 80's and periodically in the 90's.  It was over $5 in '88-89.  There wasn't as much complaining then as there is now, with a much inflated dollar.  It's interesting that in '05-06, corn was in the toilet because Katrina shut down the Mississippi for so long.  Yet, that box of Corn Flakes didn't go down in price, did it.

I want to comment on the last couple of points, but that will wait till later.

September 7, 2007 12:51 PM

If you have a login account for ICE (Intercontinental Exchange, formerly the New York Board of Trade), you can see prices for ethanol in Brazil, and in New York.  Generally they are a great deal higher in New York.

As of January 2006 (admittedly a little out of date), according to the World Bank, Brazil could manufacture ethanol for around $1 per gallon.  At the time, gasoline on the world market sold for $1.50 per gallon.  Ethanol in the United States is (slightly) more expensive than gasoline, so there is a clear margin there between the two.

Concerning corn stoves, what do they actually burn?  The ones I've seen don't burn corn at all - they burn cornCOBS.  Big difference.  You can't eat corncobs unless you are a ruminant, and at the moment you cannot make ethanol out of them either.  They are a waste product.

Factory farms (or corporation farms, as you prefer) will gain more than family farms, simply because they are larger.  If you sell ten times as much of a subsidized product, you will naturally receive ten times as big of a subsidy, in dollar amount.  (There are certain regulations to attempt to limit this, but generally they can be avoided.)  As a result, the top 10% of farm subsidy recipients received 73% of the total subsidy value, for example, in 2001, whereas the bottom 80% of subsidized farmers (the smaller, most likely family farms) received 12% of the total.

Oh, and concerning cornflakes, how much corn is actually in a box of those?  One cob's worth, maybe?  The whole big box weighs, what, one pound?  They are mostly air.  Try a product containing a little more corn, such as corn syrup.  The increase is worrying even Coca-Cola.

September 7, 2007 2:25 PM

Coca Cola isn't the only firm getting worried about corn prices.  The Sept. 6 Wall Street Journal reported on  p. A4 that Tyson's Foods, the firm that gave Hillary her start in commodities trading, is under profit pressure because of increased corn prices.  Their stock price fell 13%; their grain costs are up by $300 MILLION dollars for the year.  The WSJ said that Ethanol production accounts for a lot of the increase and said that overall food costs have gone up by about 4.5%.

Ethanol shafts me 3 ways:

1) I pay tax dollars to subsidize the stuff.

2) I pay more for food because they're taking my food and making auto fuel from it.

3) Ethanol lowers my gas mileage by about 30%, so I pay more at the pump.

Fie.  Coming election, let's throw the rascals out!

September 7, 2007 3:42 PM
Two years later, the stats according to the CBO: "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..."
April 13, 2009 10:22 PM
Business Week has deatiled the scam, finally.
May 17, 2009 8:25 PM
The Times has caught on to the Ethanol scam.

Getting Ethanol Right
The Environmental Protection Agency must do its duty to give an unbiased accounting of biofuels so that eventually they can be produced efficiently.

They say:

This included counting the greenhouse gases released when forests or grasslands are plowed under and planted to make up for the crops used to make ethanol. When the E.P.A.'s scientists counted these indirect effects, corn ethanol emitted more greenhouse gases than gasoline over a 30-year period.

Now they tell us!
May 24, 2009 1:08 PM
Forbes reports that one of the major biodiesel makers is going broke because of lack of demand.

Rebecca Buckman
Hawaii utility commission nixes a green-fuel deal with Imperium Renewables, dealing biodiesel another blow.

Hawaii had allowed their electric utility to build a new power plant which had to be powered by biofuels. The commission would not let the utility sign a contract with Imperium Renewables because the company is in such tough shape due to drop in demand for biodiesel.

Saving the World seems to be difficult.
August 10, 2009 8:29 AM
The Economist

reports that ethanol does NOT reduce carbon overall:

The benchmark paper on this, published in Science in February 2008, argues that, if such changes in land use are taken into account, ethanol is twice as carbon-intensive as petrol in the short run. Making ethanol and burning it in a car (without land changes) emits 20% less carbon dioxide than refining and burning petrol. But planting a hectare of ethanol causes someone to clear land for food crops elsewhere. That ethanol crop must provide that modest 20% reduction for 167 years to achieve a net carbon reduction. By then, of course, it is far too late to mitigate climate change.
August 12, 2009 9:36 AM
The Times is at it again, only stronger this time:

A Growing Disaster
Allowing more ethanol in gas won't help consumers or the environment, and it is time for Congress and the Obama administration to stop propping up this discredited industry.
November 28, 2009 12:28 PM

This really answered my downside, thank you! I look forward to more here at!

April 23, 2011 4:09 PM

It took them a while, but the NY Times finally caught on.

The Great Corn Con
Thanks to Washington, 4 of every 10 ears of corn grown in America are shunted into ethanol.

June 25, 2011 3:01 PM
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