Sunday, December 5, 2010

Ethanol on the Run

WSJ.com DECEMBER 5, 2010, 7:10 P.M. ET

A left-right coalition is emerging against this energy boondoggle.

The political class inevitably invokes the moon shot or Manhattan Project as a model for every unrealistic energy goal, but for once maybe that hyperbole is apt: A left-right coalition is emerging to end ethanol subsidies.

Last week, no fewer than 17 Senators signed a letter calling ethanol "fiscally indefensible" and "environmentally unwise." Led by Democrat Dianne Feinstein and Republican Jon Kyl, the group said Congress shouldn't extend certain subsidies that expire at the end of the year, including the 45-cent-per-gallon tax credit for blending ethanol into gasoline and tariffs on cheaper imports. Conservatives like Tom Coburn dislike this costly industrial policy, while liberals like Barbara Boxer and Sheldon Whitehouse are turning against the hefty carbon emissions that come with corn fuels.

Even Energy Secretary Steven Chu seems to have found the anti-ethanol religion. Speaking at the National Press Club last Monday, Mr. Chu said that "ethanol is not an ideal transportation fuel" and that the government's focus should be "on ways that we can actually go beyond ethanol." Like most greens, he still supports so-called advanced fuels that aren't made from corn and also aren't commercially viable, but we'll take his partial conversion.

The ethanol industry is responding by predicting disaster if it loses its taxpayer feeding tubes, with the Renewable Fuels Association evoking massive job losses and another Dust Bowl. But what kind of business can't survive without subsidies when government also mandates that consumers buy its products? As the Senators dryly noted, "Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use. We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time."

Sure enough, also last week, the Environmental Protection Agency ruled that under the 2007 energy bill Americans must use at least 13.95 billion gallons of ethanol next year, or about 8% of total U.S. fuel consumption. In protecting its free ride, the ethanol lobby is like Fannie Mae before the crash. But at least now there's a glimmer of political hope for taxpayers.

1 comment:

  1. End this ridiculous subsidy. We can grow different crops in Iowa and the surrounding states. Next up, end the sugar and cotton subsidies.

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