Published: August 21, 2008 12:41 pm      

Ethanol not good for the planet

In a series of articles, a chemical engineer from Michigan State University attempts to defend the government’s energy policy of promoting ethanol as fuel. He does this by acting as a one-man truth squad correcting the errors of those critical of government policy.

In turn, however, many of Bruce Dale’s own statements deserve scrutiny. We will take a look at several of them.

Some critics of ethanol argue that even if all our farmlands are used to produce corn for ethanol, we will replace only about 10 percent of our fuel consumption. His response: “but 10 percent is huge.”

If we are worried about food used as fuel, we need not be. “Very little U.S. corn (about 10 percent) is fed directly to people.” But 10 percent cannot be “huge” and “very little” at the same time. Using absolute numbers does not help either. In 2007, 10percent of our oil consumption came to 6.8 million barrels and 10percent of our corn production came to 1.3 billion bushels. Why is 6.8 million “huge” and 1.3 billion “very little?”

He says, “in regard to the subsidies, the ethanol blenders’ credit of 51 cents per gallon cost tax payers about $3 billion last year, but it reduced price crop supports by about $6 billion and our oil import bill by another $15 billion. Some of that $15 billion for oil would surely end up in the bank accounts of America’s enemies.”

There is a lot going on here. We reduced our import bill by $15 billion. But the oil import bill went up by $13.5 billion, adjusting for inflation.

We socked it to our enemies. Who? He names no one. If Dale can’t name who was injured, how does he know we didn’t harm friendly nations?

If ethanol production is such a potent weapon against our enemies, perhaps we should remove our troops from Afghanistan and redeploy them in Iowa to produce more corn for ethanol.

He concludes that ethanol subsidies save us money by lowering farm subsidies. However, as corn prices go up or down farm subsidies vary inversely. Therefore, whatever caused the price of corn to increase caused the farm subsidies to go down. If ethanol caused farm prices to increase, then ethanol caused the farm subsidies to go down.

However, he denies that ethanol caused a rise in prices, and attributes it to the cost of energy. But he cannot have it both ways. If the cost of energy caused prices to increase, as he says, then it and not the ethanol subsidies caused the fall in farm subsidies and then the total amount of subsidies actually increased by the amount of the ethanol subsidies.

Also, look at how he determines how much we have saved. As a cost, he includes only the 51 cent tax credit, and even this he underestimates. He does not include the production income tax credit, or state subsidies, or favorable state fuel taxes, or tax breaks for infrastructure investment. What about higher food costs? What about the tax on imported ethanol? What about higher domestic ethanol prices due to the tariff preventing competition? His analysis is severely flawed.

The point is that there should be no ethanol subsidies and there should be no farm subsidies. We will be making payments to farmers that have incomes up to $1.5 million as a result of the new farm bill. This is atrocious.

Dale writes about the run-up of food prices as of late and attributes it to oil prices rather than ethanol subsidies, as previously noted. He uses an example showing that the cost of corn comprises a small amount of the total cost of a box of corn flakes and concludes that therefore corn prices do not affect food prices. The example, I believe, originates with Robert Dinneen the president of the Renewable Fuels Association though Dale does not attribute it to him. Dinneen’s presentation can be found on Youtube.

Regarding the corn flakes example, please note that the Department of Agriculture (DOA) says “products that require more processing and packaging are usually less directly linked to changes in farm prices, while the price of less processed foods more closely follow the changes in farm prices.” This example is highly misleading in regard to less processed food.

In the final remark we will look at, he says, “by any measure, ethanol is better for the planet than gasoline.” He says this knowing full well that at least a month earlier two studies came out in Science showing just the opposite.

Though Dale has set out to correct the facts, his statements seem unreliable.

As he notes, there are many critics of ethanol. Paul Krugman, The Princeton University professor of economics and New York Times columnist, calls ethanol the “demon alcohol.”

Dale is perplexed by all the criticism of ethanol. He says it “is a puzzling spectacle.” He adds that “it doesn’t make sense.” Despite his bewilderment, as Krugman notes, the mounting evidence indicates that ethanol is “bad for the economy, bad for consumers, bad for the planet.”

Calvin M. Hoy, Ph.D.

Professor of economics

County College of Morris,

East Stroudsburg University,

Drew University