"Constellation" of government ethanol support only getting brighter
In the U.S. election earlier this month, did you vote for or against corn ethanol? While ethanol may not have been on the ballot in so many words, the shift from Republican to Democratic control of Congress has had a lot of fallout in the green car world. One effect is the change of authorship of the upcoming reauthorization of the 2002 farm bill. As Forbes' Jessica Holzer tells us, the bill was slated to be written by Sen. Saxby Chambliss of Georgia and Rep. Bob Goodlatte of Virginia, "two Republican southerners with soft spots for cotton, peanut and tree farmers," but will now be written by corn belt Midwestern Democrats Rep. Collin Peterson of Minnesota and Sen. Tom Harkin of Iowa. And these two will likely give the ethanol industry everything it wants, even though it gets a lot already. The "constellation" of government support Holzer writes about includes the "tariff on imported ethanol, subsidies for growing corn and blending the fuel, crop insurance and a guaranteed market: The Energy Act of 2005 required refiners to ramp up ethanol use from 2.5 billion gallons last year to 7.5 billion gallons by 2012."
How could the government support an industry even further? A raise in the ethanol subsidy is possible, as is a grant program to help ethanol plants switch to using renewable energy. And funding for cellulosic ethanol research is also possible. This ethanol industry needs all of this government support, Holzer writes, because "Wall Street's support of ethanol would dry up in a flash without all the government support."
That doesn't sound like sustainable energy to me.
[Source: Jessica Holzer / Forbes]
Reader Comments (Page 1 of 1)
DB 10:39PM (11/26/2006)
While ethanol can be good to get us off of foreign oil and potentially put less $$$ in the hands of people who hate the U.S., ethanol is such a loss leader compared to the great potential of diesel. Flex fuel and diesel vehicles both cost a little more than regular gas vehicles, but diesel fuel (including biodiesel) will give over 2X the MPG. Overall, diesel and biodiesel are so much more cost effective, especially if algae grown biodiesel is mass produced. I hope politicians stop pissing away our money that we earned working hard on soybean produced biodiesel. This causes less efficient means of biodiesel being produced- once again govt interference slows down or ruins the marketplace.
All in due time. Biodiesel will really get a boost once 50 state legal diesels arrive from Honda, DCX, GM, Ford.
The downside to the story above is the possibility of even MORE farm subsidies, which are like a boulder when the subsidies going to Big Oil were a pebble. The cut in oil subsidies will have no effect on gas prices really. I commend any cuts from govt waste. I say cut subsidies to all farmers by at least 50%, if not 75%.
Opinions anyone??
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Jimmy 2:19AM (11/27/2006)
DB, I don't agree with your "bolder" vs "pebble" analogy. Are you considering the huge tax breaks given to the petroleum industry ? In general, I think arguing over agricultural subsidies is a red herring. All industrialized nations have them, regardless of biofuels.
I agree that biodiesel is a fantastic fuel and that clean diesel passenger vehicles should be much more widely used. However, the is no reason at all to position ethanol and biodiesel as competitors. Even in the most diesel friendly markets, lots of "gasoline" powered cars are still sold. We need both fuels in greater quantity.
I also agree that we need to move away from corn/soybean as the main feedstock. I suspect that a switch to more productive energy crops would naturally occur as demand for biofuels increased. However, government incentives could certainly speed the process.
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Steamboat 3:12AM (11/27/2006)
Nice article, Sebastian. Jimmy, if by "government incentives" you mean government production incentives (which account for the bulk of subsidies currently going to ethanol and biodiesel), I disagree that "a switch to more productive energy crops would naturally occur as demand for biofuels increased ... [and that] government incentives
could certainly speed the process." First of all, arguments that subsidies to 1st-generation biofuels facilitate a transition to 2nd-generation biofuels (mainly cellulosic ethanol) have little traction. Almost all gasoline-powered cars can use E10, and many can use E20, and all diesel-powered vehicles can use B20. The current shares are far from that, so no advance investments are needed to ensure that a market is there if and when 2nd-generation biofuels
become available in significant uantities. Meanwhile, the federal and state governments are skewing the biofuels market to such an astounding extent that there is a high probability of an overshoot of ethanol capacity. The likely outcome? Yet more billions to bail out the imprudent companies, who can legitimately claim that they were
only doing what their government was encouraging them to do. Tax incentives to petroleum are large, but per gallon they are much, much smaller than those going to biofuels. Worse, the ethanol industry has become so oriented towards corn that many analysts are now predicting that once cellulosic technology reaches commercial scale (don't hold your breath), the likely feedstock will be ... corn stover -- i.e., not switchgrass. Expect yet more nutrient runoff, soil erosion and monoculture landscapes. And all in the name of maintaining the myth that biofuels will reduce gas prices, wean the country off of foreign supplies. Given their low energy quotient, they won't. But, meanwhile, the government is in effect saying: keep buying those Hummers, those SUVs -- we're working to ensure you don't have to change your lifestyle!
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ksmith 8:49AM (11/27/2006)
Another great article by Sebastian, dripping with uninformed bias. Why do I waste my time with this blog, er, aggregator?
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Tim 9:07AM (11/27/2006)
If the new congress wants to make a difference, they should make it mandatory that by 2010 all new engines accept either up to B100 for diesel and up to E50 for Gasoline. They should also raise CAFÉ standards to 40 at least 0-mpg with fewer loopholes for non-commercial use vehicles.
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Solar Power Blog 12:24PM (11/27/2006)
"Another great article by Sebastian, dripping with uninformed bias."
Uninformed bias? Not informed by what? Uninformed by ethanol industry propaganda? (whoops - I mean ethanol industry p.r.). Sebastian reads articles on alternative fuels on a daily basis which makes him much better informed than most journalists whose energy coverage seems confined to unquestioningly reproducing press releases with little or no critical thought.
kmsmith - why not make an argument based on facts & figures rather than ad hominem attacks? Or are the facts not on the side of your bias?
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