Ethanol and Energy Subsidies: Getting Back on Track

We should all favor an “all of the above” energy policy. The restoration of the manufacturing base in America and energy independence should be ‘Job One” for any president. It’s not a partisan thing.
This weekend, The History Channel replayed the series “America: The Story of Us.” The episode recounting the discovery of oil in Texas in the 1850s and the emergence of America as the largest oil producing country in the world was a story many children have not been told.
We have to start talking about America in terms of being No. 1 again.  If our leaders don’t believe we can be No. 1 in any area we put our minds to, they do not deserve to be there.  American Exceptionalism should be the starting point for anyone pretending to be an American leader.

The environmental lobby and the ethanol promoters have been misrepresenting ethanol’s benefits. In addition,  the federal government’s choice of corn as the best way to create ethanol is an idea that has been debunked by everyone except those in states where “Corn is King.” It is actually an example where bipartisanship on the use of corn from states like Iowa in ethanol is detrimental to the whole economy.

We now know ethanol uses more water and more energy in production. Further, when you add ethanol to gasoline, you raise the price to the consumer and reduce the efficiency a gallon of fuel provides for an automobile engine. That wipes out all the supposed environmental benefits of ethanol. And some say, including a study by researchers at the University of Minnesota, that ethanol is worse for health and the environment than regular gasoline.

The Congressional Budget Office finds that taxpayers are paying $750 for every metric ton (2,205 pounds) of carbon kept out of our atmosphere. According to the carbon-offset company Terrapass, the value of the reduction of 1,000 pounds of emissions is estimated at a mere $5.95. So as we would expect from the inefficient government model of picking winners through the tax code, the government pays more than 100 times the real cost of “carbon savings” by supporting corn to produce ethanol.

The cost of these subsidies is passed onto consumers in the form of higher gas prices at the pump. Since the gas mileage is poor compared to regular gasoline, the Congressional Budget Office finds that ethanol has cost consumers an extra $1.78 per gallon of gasoline. That can add up fast.

It looks like the ethanol subsidies will not expire and will cost taxpayers $25 billion to $30 billion over the next five years. The ethanol lobby is strong-arming lawmakers to extend these subsidies, and the president and Senate Republicans struck a deal to continue the kickback. This is the worst kind of earmark and bad for the economy at every level.  America’s ethanol subsidy experiment has been a costly disaster.

All the market signals from consumers are here for alternative liquid and gas fuels: Internal combustion technology has come further in the last 30 years than it had from the 1860s to 1980. We’ve had more than 100 years to really start perfecting the internal combustion engine. Now that we’re really taking off with it, this certainly is not the time to ditch it!  More so than casting a presidential ballot, people cast their vote with the most powerful ballot: the dollar. For this reason, the automobile manufacturers produce vehicles that are compatible with E85 ethanol.

There is the beautiful melding of factors making the perfect free market scenario, without government intervention. Mark Zoller, Mechanical Engineer, LEED Certified Energy Efficiency Expert and Alternative Fuels expert, says:  “So let’s take a tally at this point: Demand from the people? Check. Unless you have been living under a rock; green is in. Products to utilize all types of fuel? Check. Ford, Chrysler and GM all offer different types of ethanol compatible vehicles. Infrastructure to create fuel? Check. The key is to use everything to make cheap ethanol. From switch grass in Kentucky to sugar cane in Louisiana, we have agriculture in the U.S.A. to support ethanol production. It doesn’t have to be corn.”
Rather than offer a public subsidy for ethanol production or producers of feed stocks used to create ethanol, all taxes on these businesses should be entirely eliminated on the federal and state level. This will put more money in the pockets of these companies to take risks on innovative new processes, research, and to compete. All this will (not maybe or possibly, but will) drive the price down.
But subsidies aren’t out the window just yet if you’re talking free markets. They still should be considered, but only as a decision on the state level. This in itself will entice competition between the states for these jobs and manufacturers to produce in their own states. The last piece of the puzzle is to take the kiddy-gloves off the ethanol producers, put their own cash back in their pockets, and let them jump in the ring to compete.
The all-of-the-above energy policy can be tested in bio-fuels, then let’s move onto drilling everywhere including my back yard if necessary, mining oil shale, opening up the Arctic National Wildlife Refuge (ANWR), clean coal, and on and on.
We can be the Brazil of North America. Funny, they wanted to be the United States of South America. Are we a force for the here and now or are we a force of the past?
The behavior of our leaders and those who will lead us today and in the future will determine that. Passing the FairTax, restoring manufacturing in the United States and energy independence with real world technology, not nebulous “Green Jobs” that no one knows what they are, has to be the core of the next American president and Congress. Before it’s too late.