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Ethanol - The Perfect Boondoggle

Federal ethanol requirements are the ultimate taxpayer scam.

By Petrarch  |  August 9, 2007

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!